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
 
Gavin A. Mohr, Chief Financial Officer, 616.447.3929

INDEPENDENT BANK CORPORATION REPORTS
2020 THIRD QUARTER RESULTS

GRAND RAPIDS, Mich., Oct. 27, 2020 -
Independent Bank Corporation (NASDAQ: IBCP) reported third quarter 2020 net income of $19.6 million, or $0.89 per diluted share, versus net income of $12.4 million, or $0.55 per diluted share, in the prior-year period.  For the nine months ended September 30, 2020, the Company reported net income of $39.2 million, or $1.76 per diluted share, compared to net income of $32.6 million, or $1.40 per diluted share, in the prior-year period.  The increase in third quarter and year-to-date 2020 earnings as compared to 2019 primarily reflects increases in net interest income and non-interest income that were partially offset by increases in the provision for loan losses, non-interest expense and income tax expense.

Third quarter 2020 highlights include:


Increases in net income and diluted earnings per share of  57.4% and 61.8%, respectively, compared to 2019;

Return on average assets and return on average equity of 1.90% and 21.36%, respectively, compared to 1.42% and 14.64%, respectively, in 2019;

Net gains on mortgage loans of $20.2 million (up 255.9% over 2019) and total mortgage loan origination volume of $536.5 million;

Deposit net growth of $112.6 million (or 3.2%);

Continued strong asset quality metrics as evidenced by a low level of early stage (30 to 89 day) loan delinquencies (0.20% at September 30, 2020), net loan recoveries during the quarter, a low level of non-performing loans and non-performing assets and a significant decline in the level of loan forbearances; and

The payment of a 20 cent per share dividend on common stock on August 14, 2020.

Year to date 2020 highlights include:


Increases in net income and diluted earnings per share of  20.3% and 25.7%, respectively, compared to 2019;

Return on average assets and return on average equity of 1.36% and 14.87%, respectively, compared to 1.28% and 12.84%, respectively, in 2019;

Net gains on mortgage loans of $46.7 million (up 243.5% over 2019) and total mortgage loan origination volume of $1.3 billion;

Deposit net growth of $561.0 million (or 18.5%); and

An increase in tangible common equity per share of common stock of 10.4%.

1

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 $1.1 million ($0.04 per diluted share, after taxes) and a negative $9.9 million ($0.35 per diluted share, after taxes) for the three- and nine-months ended September 30, 2020, respectively, as compared to a negative $2.2 million ($0.08 per diluted share, after taxes) and a negative $7.0 million ($0.24 per diluted share, after taxes) for the three- and nine-months ended September 30, 2019, respectively.

Approximately $0.64 million ($0.02 per diluted share, after taxes) and $1.46 million ($0.05 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 nine-months ended September 30, 2020, respectively

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 third quarter of 2020 as we continue to navigate the many challenges brought on by the COVID-19 pandemic.  Our associates continued their amazing efforts during this quarter!  We closed over one-half billion dollars of mortgage loans, helping our customers buy new homes or refinance existing mortgage loans. Total deposit balances grew by over one hundred million dollars. We assisted our customers in completing and submitting PPP forgiveness applications to the SBA, with over 14% of outstanding balances submitted. 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 third quarter of 2020. COVID-19 related loan forbearance balances decreased by 80.0% during the third quarter of 2020. As we look ahead to the last quarter 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.”

COVID-19 Pandemic Update

The Company continues to respond to the challenges arising from the COVID-19 pandemic. 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 2020 to mid-June 2020 we limited our branch lobbies to appointment only and kept drive-through windows open.  In mid-June 2020 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.


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 38% 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 promote the safety of our employees and put both customers and staff at ease.


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. Totals for these programs by loan type are presented in the table below under the caption “Asset Quality”. The level of these loans is down significantly after peaking in mid-June 2020, as many customers’ economic situations have improved, allowing them to pay their loans current or return to their original payment terms.


U.S. Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) – 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 September 30, 2020, we had 2,117 PPP loans outstanding with a total balance of $261.2 million.  The average balance of PPP loans in the third quarter of 2020 was $261.5 million with an average yield of 3.04% (including the accretion of approximately $1.3 million of net fees).  At September 30, 2020, there was $6.5 million of remaining unaccreted net fees related to PPP loans.  These net fees are expected to be accreted into interest income over the next 15 months and the pace of such accretion will depend on payment activity (including loan forgiveness) within the PPP loan portfolio.  As of September 30, 2020, 197 forgiveness applications (totaling $37.2 million) have been submitted to the SBA. Approvals of forgiveness applications by the SBA began to be received in October 2020.


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.  Thus far there have been minimal loan applications and no loan approvals under the MSLP.

2

Operating Results

The Company’s net interest income totaled $32.0 million during the third quarter of 2020, an increase of $1.1 million, or 3.5% from the year-ago period, and up $1.5 million, or 4.9%, from the second quarter of 2020.  The Company’s tax equivalent net interest income as a percent of average interest-earning assets (the “net interest margin”) was 3.31% during the third quarter of 2020, compared to 3.76% in the year-ago period, and 3.36% in the second quarter of 2020.  The year-over-year quarterly increase in net interest income is due to an increase in average interest-earning assets that was partially offset by a decline in the net interest margin.  Average interest-earning assets were $3.89 billion in the third quarter of 2020, compared to $3.29 billion in the year ago quarter and $3.66 billion in the second quarter of 2020.

For the first nine months of 2020, net interest income totaled $92.6 million, an increase of $0.7 million, or 0.8% from the first nine months of 2019.  The Company’s net interest margin for the first nine months of 2020 was 3.42% compared to 3.83% in 2019.  The increase in net interest income for the first nine months of 2020 compared to 2019 is also due to an increase in average interest-earning assets that was partially offset by a decline in the net interest margin.

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

Non-interest income totaled $27.0 million and $58.4 million, respectively, for the third quarter and first nine months of 2020, compared to $12.3 million and $32.1 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 third quarters of 2020 and 2019, were approximately $20.2 million and $5.7 million, respectively.  For the first nine months of 2020, net gains on mortgage loans totaled $46.7 million compared to $13.6 million in 2019.  The increase in net gains on mortgage loans in 2020 was primarily due to a significant increase in mortgage loan sales volume (principally reflecting the rise in mortgage loan refinance levels), as well as improved profit margins on mortgage loan sales and fair value adjustments on the mortgage loan pipeline.

Mortgage loan servicing, net, generated a loss of $0.6 million and $1.6 million in the third quarters of 2020 and 2019, respectively. For the first nine months of 2020 and 2019, mortgage loan servicing, net, generated a loss of $9.0 million and $4.7 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
   
Nine Months Ended
 
   
9/30/2020
   
9/30/2019
   
9/30/2020
   
9/30/2019
 
Mortgage loan servicing, net:
       
(Dollars in thousands)
       
Revenue, net
 
$
1,743
   
$
1,583
   
$
5,062
   
$
4,574
 
Fair value change due to price
   
(1,089
)
   
(2,163
)
   
(9,941
)
   
(7,036
)
Fair value change due to pay-downs
   
(1,298
)
   
(982
)
   
(4,087
)
   
(2,222
)
Total
 
$
(644
)
 
$
(1,562
)
 
$
(8,966
)
 
$
(4,684
)

Non-interest expenses totaled $33.6 million in the third quarter of 2020, compared to $27.8 million in the year-ago period.  For the first nine months of 2020, non-interest expenses totaled $89.7 million versus $82.4 million in 2019.  These year-over-year increases in non-interest expense are primarily due to increases in compensation and employee benefits, FDIC deposit insurance and conversion related expenses. Third quarter and year to date 2020 performance based compensation expense increased $5.1 million and $6.5 million, respectively, primarily as a result of actual performance relative to established management incentive plan targets. The third quarter and first nine months of 2020 includes $0.6 million and $1.0 million, respectively, of expenses related to the Company’s core data processing conversion that is in process (this conversion is expected to be completed in April 2021). The year-to-date 2020 non-interest expense also includes $0.4 million of expenses (primarily write-downs of fixed assets and leases) related to the closures of eight bank branch offices that occurred in June and July 2020.

The Company recorded an income tax expense of $4.8 million and $9.2 million in the third quarter and first nine months of 2020, respectively.  This compares to an income tax expense of $3.1 million and $8.0 million in the third quarter and first nine months of 2019, respectively.  The changes in income tax expense primarily reflect changes in pre-tax earnings in 2020 relative to 2019.

3

Asset Quality

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


 
9/30/20
   
6/30/20
   
% change vs. prior quarter
 
Loan Type
   
#
   
$ (000’s)

 
% of
portfolio
     
#
   
$ (000's)
   
% of
portfolio
     
#
   
$
 
Commercial
   
17
   
$
25,105
     
1.9
%
   
386
   
$
210,486
     
15.4
%
   
(95.6
)%
   
(88.1
)%
Mortgage
   
197
     
32,091
     
3.1
%
   
388
     
81,212
     
7.8
%
   
(49.2
)%
   
(60.5
)%
Installment
   
97
     
2,631
     
0.5
%
   
280
     
7,459
     
1.6
%
   
(65.4
)%
   
(64.7
)%
Total
   
311
   
$
59,827
     
2.1
%
   
1,054
   
$
299,157
     
10.4
%
   
(70.5
)%
   
(80.0
)%
                                                                 
Loans serviced for others
   
416
   
$
66,279
     
2.3
%
   
773
   
$
114,839
     
4.2
%
   
(46.2
)%
   
(42.3
)%

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

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

Loan Type
 
9/30/2020
   
12/31/2019
   
9/30/2019
 
   
(Dollars in thousands)
 
Commercial
 
$
2,487
   
$
1,377
   
$
834
 
Mortgage
   
7,580
     
7,996
     
5,355
 
Installment
   
680
     
805
     
935
 
Subtotal
   
10,747
     
10,178
     
7,124
 
Less – government guaranteed loans
   
510
     
646
     
475
 
Total non-performing loans
 
$
10,237
   
$
9,532
   
$
6,649
 
Ratio of non-performing loans to total portfolio loans
   
0.36
%
   
0.35
%
   
0.24
%
Ratio of non-performing assets to total assets
   
0.28
%
   
0.32
%
   
0.24
%
Ratio of the allowance for loan losses to non-performing loans
   
349.43
%
   
274.32
%
   
393.26
%


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

Non-performing loans have increased $0.7 million from December 31, 2019, due primarily to an increase in non-performing commercial loans.

The provision for loan losses was an expense of $1.0 million and a credit of $0.3 million in the third quarters of 2020 and 2019, respectively.  The provision for loan losses was an expense of $12.9 million and $1.0 million in the first nine months of 2020 and 2019, 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, loan forbearances and loan net charge-offs.  In addition, the higher 2020 year-to-date provision for loan losses includes a $10.7 million (or 122.1%) 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 that is not otherwise captured elsewhere within the allowance for loan losses.  The Company recorded loan net recoveries of $0.3 million and loan net charge offs of $3.3 million in the third quarter and first nine months of 2020, respectively.  This compares to loan net recoveries of $0.5 million and $0.2 million, in the third quarter and first nine months of 2019, respectively.  At September 30, 2020, the allowance for loan losses totaled $35.8 million, or 1.25% 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 1.44% of portfolio loans at September 30, 2020.

Balance Sheet, Liquidity and Capital

Total assets were $4.17 billion at September 30, 2020, an increase of $604.3 million from December 31, 2019.  Loans, excluding loans held for sale, were $2.86 billion at September 30, 2020, compared to $2.73 billion at December 31, 2019.  Deposits totaled $3.60 billion at September 30, 2020, an increase of $561.0 million from December 31, 2019.  This increase is primarily due to growth in non-interest bearing, savings and interest-bearing checking and reciprocal deposit account balances.

4

Cash and cash equivalents totaled $46.6 million at September 30, 2020, versus $65.3 million at December 31, 2019. Securities available for sale totaled $985.1 million at September 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 $373.1 million at September 30, 2020, or 8.95% of total assets.  Tangible common equity totaled $340.2 million at September 30, 2020, or $15.55 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
 
9/30/2020
   
12/31/2019
   
Well
Capitalized
Minimum
 
Tier 1 capital to average total assets
   
8.78
%
   
9.49
%
   
5.00
%
Tier 1 common equity  to risk-weighted assets
   
12.57
%
   
11.96
%
   
6.50
%
Tier 1 capital to risk-weighted assets
   
12.57
%
   
11.96
%
   
8.00
%
Total capital to risk-weighted assets
   
13.82
%
   
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, the Company has not purchased any of its shares since March 2020.  However, primarily as a result of the Company’s strong financial performance and improved economic conditions, and dependent upon market and other factors, we may begin to purchase our shares under the 2020 share repurchase plan during the last two months of the year.

Earnings Conference Call

Brad Kessel, President and CEO and Gavin A. Mohr, CFO will review the quarterly results in a conference call for investors and analysts beginning at 11:00 am ET on Tuesday, October 27, 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 site/URL:  https://services.choruscall.com/links/ibcp201027.html.

A playback of the call can be accessed by dialing 1-877-344-7529 (Conference ID # 10147647). The replay will be available through November 3, 2020.
 
About Independent Bank Corporation

Independent Bank Corporation (NASDAQ: IBCP) is a Michigan-based bank holding company with total assets of approximately $4.2 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.

5

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 Corporation’s 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 Corporation’s 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 management’s 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.

6

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Financial Condition

   
September 30,
2020
   
December 31,
2019
 
   
(unaudited)
 
   
(In thousands, except share
amounts)
 
Assets
 
Cash and due from banks
 
$
42,435
   
$
53,295
 
Interest bearing deposits
   
4,121
     
12,009
 
Cash and Cash Equivalents
   
46,556
     
65,304
 
Interest bearing deposits - time
   
-
     
350
 
Securities available for sale
   
985,050
     
518,400
 
Federal Home Loan Bank and Federal Reserve Bank stock, at cost
   
18,427
     
18,359
 
Loans held for sale, carried at fair value
   
99,747
     
69,800
 
Loans
               
Commercial
   
1,351,790
     
1,166,695
 
Mortgage
   
1,024,036
     
1,098,911
 
Installment
   
479,653
     
459,417
 
Total Loans
   
2,855,479
     
2,725,023
 
Allowance for loan losses
   
(35,771
)
   
(26,148
)
Net Loans
   
2,819,708
     
2,698,875
 
Other real estate and repossessed assets
   
1,487
     
1,865
 
Property and equipment, net
   
36,538
     
38,411
 
Bank-owned life insurance
   
55,019
     
55,710
 
Deferred tax assets, net
   
1,572
     
2,072
 
Capitalized mortgage loan servicing rights
   
15,403
     
19,171
 
Other intangibles
   
4,561
     
5,326
 
Goodwill
   
28,300
     
28,300
 
Accrued income and other assets
   
56,576
     
42,751
 
Total Assets
 
$
4,168,944
   
$
3,564,694
 
                 
Liabilities and Shareholders' Equity
               
Deposits
               
Non-interest bearing
 
$
1,152,072
   
$
852,076
 
Savings and interest-bearing checking
   
1,431,841
     
1,186,745
 
Reciprocal
   
557,551
     
431,027
 
Time
   
303,392
     
376,877
 
Brokered time
   
152,889
     
190,002
 
Total Deposits
   
3,597,745
     
3,036,727
 
Other borrowings
   
30,005
     
88,646
 
Subordinated debt
   
39,261
     
-
 
Subordinated debentures
   
39,507
     
39,456
 
Accrued expenses and other liabilities
   
89,334
     
49,696
 
Total Liabilities
   
3,795,852
     
3,214,525
 
                 
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: 21,885,368 shares at September 30, 2020 and 22,481,643 shares at December 31, 2019
   
339,408
     
352,344
 
Retained earnings
   
27,538
     
1,611
 
Accumulated other comprehensive income (loss)
   
6,146
     
(3,786
)
Total Shareholders’ Equity
   
373,092
     
350,169
 
Total Liabilities and Shareholders’ Equity
 
$
4,168,944
   
$
3,564,694
 

7

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations

   
Three Months Ended
   
Nine Months Ended
 
   
September 30,
   
June 30,
   
September 30,
   
September 30,
 
   
2020
   
2020
   
2019
   
2020
   
2019
 
   
(unaudited)
 
Interest Income
 
(In thousands, except per share amounts)
 
Interest and fees on loans
 
$
30,393
   
$
29,863
   
$
34,226
   
$
92,020
   
$
100,743
 
Interest on securities available for sale
                                       
Taxable
   
3,450
     
2,847
     
2,771
     
9,356
     
8,811
 
Tax-exempt
   
954
     
793
     
319
     
2,137
     
1,017
 
Other investments
   
237
     
251
     
495
     
854
     
1,449
 
Total Interest Income
   
35,034
     
33,754
     
37,811
     
104,367
     
112,020
 
Interest Expense
                                       
Deposits
   
2,062
     
2,388
     
6,236
     
9,150
     
17,938
 
Other borrowings and subordinated debt and debentures
   
1,006
     
904
     
703
     
2,598
     
2,211
 
Total Interest Expense
   
3,068
     
3,292
     
6,939
     
11,748
     
20,149
 
Net Interest Income
   
31,966
     
30,462
     
30,872
     
92,619
     
91,871
 
Provision for loan losses
   
975
     
5,188
     
(271
)
   
12,884
     
1,045
 
Net Interest Income After Provision for Loan Losses
   
30,991
     
25,274
     
31,143
     
79,735
     
90,826
 
Non-interest Income
                                       
Service charges on deposit accounts
   
2,085
     
1,623
     
2,883
     
6,299
     
8,323
 
Interchange income
   
3,428
     
2,526
     
2,785
     
8,411
     
7,744
 
Net gains on assets
                                       
Mortgage loans
   
20,205
     
17,642
     
5,677
     
46,687
     
13,590
 
Securities available for sale
   
-
     
-
     
-
     
253
     
304
 
Mortgage loan servicing, net
   
(644
)
   
(3,022
)
   
(1,562
)
   
(8,966
)
   
(4,684
)
Other
   
1,937
     
1,598
     
2,492
     
5,698
     
6,862
 
Total Non-interest Income
   
27,011
     
20,367
     
12,275
     
58,382
     
32,139
 
Non-interest Expense
                                       
Compensation and employee benefits
   
21,954
     
16,279
     
16,673
     
54,742
     
48,955
 
Occupancy, net
   
2,199
     
2,159
     
2,161
     
6,818
     
6,797
 
Data processing
   
2,215
     
1,590
     
2,282
     
6,160
     
6,597
 
Furniture, fixtures and equipment
   
999
     
1,090
     
1,023
     
3,125
     
3,058
 
Interchange expense
   
831
     
726
     
891
     
2,416
     
2,332
 
Communications
   
806
     
800
     
733
     
2,409
     
2,219
 
Loan and collection
   
768
     
756
     
714
     
2,329
     
1,976
 
Advertising
   
589
     
364
     
636
     
1,636
     
1,935
 
Legal and professional
   
566
     
468
     
541
     
1,427
     
1,281
 
FDIC deposit insurance
   
411
     
430
     
13
     
1,211
     
723
 
Conversion related expenses
   
643
     
346
     
-
     
1,045
     
-
 
Branch closure costs
   
-
     
417
     
-
     
417
     
-
 
Correspondent bank service fees
   
101
     
94
     
100
     
294
     
300
 
Net (gains) losses on other real estate and repossessed assets
   
46
     
(9
)
   
52
     
146
     
(27
)
Other
   
1,513
     
1,836
     
2,029
     
5,531
     
6,284
 
Total Non-interest Expense
   
33,641
     
27,346
     
27,848
     
89,706
     
82,430
 
Income Before Income Tax
   
24,361
     
18,295
     
15,570
     
48,411
     
40,535
 
Income tax expense
   
4,777
     
3,523
     
3,125
     
9,245
     
7,979
 
Net Income
 
$
19,584
   
$
14,772
   
$
12,445
   
$
39,166
   
$
32,556
 
Net Income Per Common Share
                                       
Basic
 
$
0.90
   
$
0.67
   
$
0.55
   
$
1.78
   
$
1.41
 
Diluted
 
$
0.89
   
$
0.67
   
$
0.55
   
$
1.76
   
$
1.40
 

8

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Selected Financial Data

   
September 30,
2020
   
June 30,
2020
   
March 31,
2020
   
December 31,
2019
   
September 30,
2019
 
   
(unaudited)
 
   
(Dollars in thousands except per share data)
 
Three Months Ended
                             
Net interest income
 
$
31,966
   
$
30,462
   
$
30,191
   
$
30,710
   
$
30,872
 
Provision for loan losses
   
975
     
5,188
     
6,721
     
(221
)
   
(271
)
Non-interest income
   
27,011
     
20,367
     
11,004
     
15,597
     
12,275
 
Non-interest expense
   
33,641
     
27,346
     
28,719
     
29,303
     
27,848
 
Income before income tax
   
24,361
     
18,295
     
5,755
     
17,225
     
15,570
 
Income tax expense
   
4,777
     
3,523
     
945
     
3,346
     
3,125
 
Net income
 
$
19,584
   
$
14,772
   
$
4,810
   
$
13,879
   
$
12,445
 
                                         
Basic earnings per share
 
$
0.90
   
$
0.67
   
$
0.22
   
$
0.62
   
$
0.55
 
Diluted earnings per share
   
0.89
     
0.67
     
0.21
     
0.61
     
0.55
 
Cash dividend per share
   
0.20
     
0.20
     
0.20
     
0.18
     
0.18
 
                                         
Average shares outstanding
   
21,881,562
     
21,890,761
     
22,271,412
     
22,481,551
     
22,486,041
 
Average diluted shares outstanding
   
22,114,692
     
22,113,187
     
22,529,370
     
22,776,908
     
22,769,572
 
                                         
Performance Ratios
                                       
Return on average assets
   
1.90
%
   
1.54
%
   
0.54
%
   
1.56
%
   
1.42
%
Return on average equity
   
21.36
     
17.39
     
5.54
     
15.92
     
14.64
 
Efficiency ratio (1)
   
56.36
     
53.07
     
69.32
     
62.56
     
63.76
 
                                         
As a Percent of Average Interest-Earning Assets (1)
                                       
Interest income
   
3.62
%
   
3.72
%
   
4.28
%
   
4.44
%
   
4.60
%
Interest expense
   
0.31
     
0.36
     
0.65
     
0.74
     
0.84
 
Net interest income
   
3.31
     
3.36
     
3.63
     
3.70
     
3.76
 
                                         
Average Balances
                                       
Loans
 
$
2,925,872
   
$
2,913,857
   
$
2,766,770
   
$
2,776,037
   
$
2,786,544
 
Securities available for sale
   
891,975
     
660,126
     
527,395
     
488,016
     
423,255
 
Total earning assets
   
3,887,455
     
3,659,614
     
3,350,948
     
3,320,828
     
3,285,081
 
Total assets
   
4,102,318
     
3,868,408
     
3,565,829
     
3,529,744
     
3,483,296
 
Deposits
   
3,559,070
     
3,303,302
     
3,066,298
     
3,040,099
     
3,023,334
 
Interest bearing liabilities
   
2,532,481
     
2,402,361
     
2,309,995
     
2,251,928
     
2,219,133
 
Shareholders' equity
   
364,714
     
341,606
     
348,963
     
345,910
     
337,162
 
                                         
End of Period
                                       
Capital
                                       
Tangible common equity ratio
   
8.23
%
   
8.03
%
   
8.40
%
   
8.96
%
   
8.71
%
Average equity to average assets
   
8.89
     
8.83
     
9.79
     
9.80
     
9.68
 
Common shareholders' equity per share of common stock
 
$
17.05
   
$
16.23
   
$
15.33
   
$
15.58
   
$
15.13
 
Tangible common equity per share of common stock
   
15.55
     
14.72
     
13.81
     
14.08
     
13.63
 
Total shares outstanding
   
21,885,368
     
21,880,183
     
21,892,001
     
22,481,643
     
22,480,748
 
                                         
Selected Balances
                                       
Loans
 
$
2,855,479
   
$
2,866,663
   
$
2,718,115
   
$
2,725,023
   
$
2,722,446
 
Securities available for sale
   
985,050
     
856,280
     
594,284
     
518,400
     
439,592
 
Total earning assets
   
3,962,824
     
3,833,523
     
3,416,845
     
3,343,941
     
3,348,631
 
Total assets
   
4,168,944
     
4,043,315
     
3,632,387
     
3,564,694
     
3,550,837
 
Deposits
   
3,597,745
     
3,485,125
     
3,083,564
     
3,036,727
     
3,052,312
 
Interest bearing liabilities
   
2,515,185
     
2,456,193
     
2,350,056
     
2,312,753
     
2,272,587
 
Shareholders' equity
   
373,092
     
355,123
     
335,618
     
350,169
     
340,245
 

(1)
Presented on a fully tax equivalent basis assuming a marginal tax rate of 21%.

9

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
September 30,
   
Nine Months Ended
September 30,
 
   
2020
   
2019
   
2020
   
2019
 
   
(Dollars in thousands)
 
Net Interest Margin, Fully Taxable Equivalent ("FTE")
                       
                         
Net interest income
 
$
31,966
   
$
30,872
   
$
92,619
   
$
91,871
 
Add:  taxable equivalent adjustment
   
258
     
100
     
602
     
319
 
Net interest income - taxable equivalent
 
$
32,224
   
$
30,972
   
$
93,221
   
$
92,190
 
Net interest margin (GAAP) (1)
   
3.28
%
   
3.74
%
   
3.40
%
   
3.82
%
Net interest margin (FTE) (1)
   
3.31
%
   
3.76
%
   
3.42
%
   
3.83
%
                                 
Adjusted Net Income before tax
                               
                                 
Income before income tax
 
$
24,361
   
$
15,570
   
$
48,411
   
$
40,535
 
Provision for loan losses
   
975
     
(271
)
   
12,884
     
1,045
 
Pre-tax, pre-provision income
 
$
25,336
   
$
15,299
   
$
61,295
   
$
41,580
 

(1)
Annualized.

10

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

Tangible Common Equity Ratio
                             
   
September 30,
2020
   
June 30,
2020
   
March 31,
2020
   
December 31,
2019
   
September 30,
2019
 
   
(Dollars in thousands)
 
Common shareholders' equity
 
$
373,092
   
$
355,123
   
$
335,618
   
$
350,169
   
$
340,245
 
Less:
                                       
Goodwill
   
28,300
     
28,300
     
28,300
     
28,300
     
28,300
 
Other intangibles
   
4,561
     
4,816
     
5,071
     
5,326
     
5,598
 
Tangible common equity
 
$
340,231
   
$
322,007
   
$
302,247
   
$
316,543
   
$
306,347
 
                                         
Total assets
 
$
4,168,944
   
$
4,043,315
   
$
3,632,387
   
$
3,564,694
   
$
3,550,837
 
Less:
                                       
Goodwill
   
28,300
     
28,300
     
28,300
     
28,300
     
28,300
 
Other intangibles
   
4,561
     
4,816
     
5,071
     
5,326
     
5,598
 
Tangible assets
 
$
4,136,083
   
$
4,010,199
   
$
3,599,016
   
$
3,531,068
   
$
3,516,939
 
                                         
Common equity ratio
   
8.95
%
   
8.78
%
   
9.24
%
   
9.82
%
   
9.58
%
Tangible common equity ratio
   
8.23
%
   
8.03
%
   
8.40
%
   
8.96
%
   
8.71
%
                                         
Tangible Common Equity per Share of Common Stock:
                                 
                                         
Common shareholders' equity
 
$
373,092
   
$
355,123
   
$
335,618
   
$
350,169
   
$
340,245
 
Tangible common equity
 
$
340,231
   
$
322,007
   
$
302,247
   
$
316,543
   
$
306,347
 
Shares of common stock outstanding (in thousands)
   
21,885
     
21,880
     
21,892
     
22,482
     
22,481
 
                                         
Common shareholders' equity per share of common stock
 
$
17.05
   
$
16.23
   
$
15.33
   
$
15.58
   
$
15.13
 
Tangible common equity per share of common stock
 
$
15.55
   
$
14.72
   
$
13.81
   
$
14.08
   
$
13.63
 

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.


11


The following information was filed by Independent Bank Corp (IBCP) on Tuesday, October 27, 2020 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-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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