SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report: April 27, 2021

INDEPENDENT BANK CORPORATION
(Exact name of registrant as specified in its charter)

Michigan
0-7818
38-2032782
(State or other jurisdiction of incorporation)
(Commission File Number)
(IRS Employer Identification No.)

4200 East Beltline
Grand Rapids, Michigan
  
49525
(Address of principal executive office)
  
(Zip Code)

Registrant's telephone number,
including area code:
(616) 527-5820

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Trading symbol(s)
Name of each exchange on which registered
Common stock, no par value
IBCP
NASDAQ Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02.
Results of Operations and Financial Condition

On April 27, 2021, Independent Bank Corporation issued a press release announcing its financial results for the quarter ended March 31, 2021.  A copy of the press release is attached as Exhibit 99.1.  Attached Exhibit 99.2 contains supplemental data to that press release and attached Exhibit 99.3 contains a slide presentation for our earnings conference call.

The information in this Form 8-K and the attached Exhibits shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

Item 9.01.
Financial Statements and Exhibits

Exhibits.

99.1
Press release dated April 27, 2021.

99.2
Supplemental data to the Registrant's press release dated April 27, 2021.

99.3
Earnings conference call presentation.

104
Cover Page Interactive Data File (embedded within the Inline XBRL document).

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


  
INDEPENDENT BANK CORPORATION
 

(Registrant)
 
 
Date
April 27, 2021
By
s/Gavin A. Mohr

 
Gavin A. Mohr, Principal Financial Officer


2
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
2021 FIRST QUARTER RESULTS
 
GRAND RAPIDS, Mich., April. 27, 2021 - Independent Bank Corporation (NASDAQ: IBCP) reported first quarter 2021 net income of $22.0 million, or $1.00 per diluted share, versus net income of $4.8 million, or $0.21 per diluted share, in the prior-year period. The increase in 2021 first quarter earnings as compared to 2020 primarily reflects increases in net interest income, non-interest income as well as a decrease in the provision for credit losses that were partially offset by an increase in non-interest expense.
 
First quarter 2021 highlights include:

 •
Increases in net income and diluted earnings per share of  358.2% and 376.2%, respectively, compared to 2020;

•
Return on average assets and return on average equity of 2.10% and 23.51%, respectively;

•
Net gains on mortgage loans of $12.8 million (up 45.1% over 2020) and total mortgage loan origination volume of $509.0 million;

•
Deposit net growth of $221.2 million (or 6.1%);

•
Continued strong asset quality metrics as evidenced by net loan recoveries during the quarter, a low level of non-performing loans and non-performing assets;

•
The adoption of Financial Accounting Standards Board Accounting Standards Update 2016-13, Financial Instruments — Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (“CECL”) on January 1, 2021. The adoption of CECL increased  beginning of year allowance for credit losses, allowance for losses related to unfunded lending commitments and deferred tax assets $11.7 million, $1.5 million and $2.7 million, respectively and decreased retained earnings $10.3 million;

•
COVID related forbearances declined to 0.62% of total loans; and

•
The payment of a 21 cent per share dividend on common stock on February 16, 2021.
 
Significant items impacting comparable first quarter 2021 and 2020 results include the following:

 •
Net gains on sale of securities equal to $1.4 million ($0.05 per diluted share, after tax) in the first quarter of 2021 related to the divestiture of certain securities.

•
A change in the fair value due to price of capitalized mortgage loan servicing rights (the “MSR Change”) of a positive $4.6 million ($0.17 per diluted share, after taxes) as compared to a negative MSR change of $5.9 million ($0.21 per diluted share, after taxes) for the first quarters of 2021 and 2020, respectively.

1

 •
The provision for credit losses was a credit of $0.5 million in the first quarter of 2021 compared to an expense of $6.7 million in the first quarter of 2020.

William B. (“Brad”) Kessel, the President and Chief Executive Officer of Independent Bank Corporation, commented: “We are pleased to report very strong financial performance in the first quarter of 2021 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 a company record 2,044 mortgage loans for  over one-half billion dollars, helping our customers buy new homes or refinance existing mortgage loans. Our team facilitated 1,250 loans under the second round of the Paycheck Protection Program totaling $128.2 million while continuing to assist our customers in completing and submitting PPP round 1 forgiveness applications to the SBA. Finally, we maintained solid asset quality metrics during the first quarter of 2021. COVID-19 related loan forbearance balances decreased by 26.2% during the first quarter of 2021. As we look ahead to the balance of 2021 and beyond, we are mindful that the challenges from the COVID-19 pandemic remain; however, 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 and 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.  On November 13, 2020 we again limited our branch lobbies to appointment only in response to increasing COVID-19 cases in the State of Michigan. Branch lobbies were reopened January 4, 2021.  With the ability to use drive through service, ATMs or our electronic banking solutions there was minimal disruption to our 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.  Customer demand for this program was extraordinary.  As of March 31, 2021, we continue to assist our customers with loan forgiveness applications from round 1 of PPP while processing new PPP applications for round 2 of the Paycheck Protection Program. Current PPP activity is summarized below:
 
Three Months Ending
  
PPP – Round 1
    
PPP – Round 2
  
   
12/31/2020
    
3/31/2021
    
3/31/2021
  
     
#
      
(000’s)
   
#
      
(000’s)

   
#
      
(000’s)

Loans Outstanding
    
1,483
    
$
169,782
      
698
    
$
105,934
      
1,250
    
$
128,240
  
Avg. Loans Outstanding
    
-
      
220,214
      
-
      
137,833
      
-
      
68,626
  
Apps. Submitted for Forgiveness
    
808
      
122,962
      
1,477
      
183,346
      
-
      
-
  
Forgiveness Apps. Approved
    
755
      
91,972
      
1,354
      
158,046
      
-
      
-
  
Net Fees Accreted into Int. Income
    
-
      
3,251
      
-
      
1,853
      
-
      
219
  
Unaccreted Fees
    
-
      
3,216
      
-
      
1,362
      
-
      
5,454
  
Average Loan Yield
    
-
      
6.91
%
    
-
      
6.43
%
    
-
      
2.21
%

Operating Results
 
The Company’s net interest income totaled $30.3 million during the first quarter of 2021, an increase of $0.1 million, or 0.3% from the year-ago period, and down $0.7 million, or 2.3%, from the fourth quarter of 2020. The Company’s tax equivalent net interest income as a percent of average interest-earning assets (the “net interest margin”) was 3.05% during the first quarter of 2021, compared to 3.63% in the year-ago period, and 3.12% in the fourth 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 largely offset by a decline in the net interest margin.  Average interest-earning assets were $4.05 billion in the first quarter of 2021, compared to $3.35 billion in the year ago quarter and $3.98 billion in the fourth quarter of 2020.
 
2
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. Lower interest rates combined with a higher allocation to lower yielding assets has placed continued pressure on the Company’s net interest margin.
 
Non-interest income totaled $26.4 million in the first quarter of 2021 compared to $11.0 million for the first quarter of 2020 and $22.4 million in the fourth quarter of 2020.  These changes were primarily due to variances in mortgage banking related revenues (net gains on mortgage loans and mortgage loan servicing, net), gain on sale of securities and improved interchange income.
 
Net gains on mortgage loans in the first quarters of 2021 and 2020, were approximately $12.8 million and $8.8 million, respectively. The increase in net gains on mortgage loans in the first quarter of 2021 compared to the first quarter of 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.
 
Mortgage loan servicing, net, generated a gain of $5.2 million and a loss of $5.3 million in the first quarters of 2021 and 2020, 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
  
   
3/31/2021
    
3/31/2020
  
Mortgage loan servicing, net:
  
(Dollars in thousands)
  
Revenue, net
  
$
1,910
    
$
1,673
  
Fair value change due to price
    
4,640
      
(5,931
)
Fair value change due to pay-downs
    
(1,383
)
    
(1,042
)
Total
  
$
5,167
    
$
(5,300
)

Net gain on sale of securities totaled $1.4 million in first quarter of 2021 compared to $0.3 million in the prior year quarter. The gain on sale of securities in the first quarter of 2021 is related to the divestiture of a group of mortgage backed securities.
 
Interchange income equaled $3.0 million in the first quarter of 2021, an increase of $0.6 million from the prior year quarter. The increase is primarily due to higher transaction volume year-over-year.
 
Non-interest expenses totaled $30.0 million in the first quarter of 2021, compared to $28.7 million in the year-ago period. These year-over-year increases in non-interest expense are primarily due to increases in compensation and employee benefits and conversion related expense. The first quarter 2021 includes $0.2 million of expenses related to the Company’s core data processing conversion that is in process. (the Day 1 conversion is expected to be completed in May 2021)
 
The Company recorded an income tax expense of $5.1 million and $0.9 million in the first quarter of 2021 and 2020, respectively.  The changes in income tax expense primarily reflect a 371.6% increase in pre-tax earnings in 2021 relative to 2020.
 
3
Asset Quality
 
A breakdown of loan forbearance totals by loan type is as follows:


  
3/31/2021
    
12/31/2020
    
% change vs. prior quarter
  
Loan Type
    
#
    

$(000’s)

 
% of portfolio
      
#
    
$(000's)
    
% of portfolio
      
#
    
 $  
Loans serviced for others
    
205
    
$
26,975
      
0.9
%
    
288
    
$
42,897
      
1.4
%
    
(28.8
)%
    
(37.1
)%
                                                                 
Commercial
    
0
    
$
0
      
0.0
%
    
2
    
$
163
      
0.0
%
    
(100.0
)%
    
(100.0
)%
Mortgage
    
111
      
15,263
      
1.53
%
    
134
      
19,830
      
2.0
%
    
(17.2
)%
    
(23.0
)%
Installment
    
32
      
537
      
0.1
%
    
48
      
1,412
      
0.3
%
    
(33.3
)%
    
(62.0
)%
Total
    
143
    
$
15,800
      
0.6
%
    
184
    
$
21,405
      
0.8
%
    
(22.3
)%
    
(26.2
)%

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
  
3/31/2021
    
12/31/2020
    
3/31/2020
  
   
(Dollars in thousands)
  
Commercial
  
$
1,373
    
$
1,440
    
$
9,094
  
Mortgage
    
5,741
      
6,353
      
7,669
  
Installment
    
434
      
519
      
691
  
Subtotal
    
7,548
      
8,312
      
17,454
  
Less – government guaranteed loans
    
459
      
439
      
676
  
Total non-performing loans
  
$
7,089
    
$
7,873
    
$
16,778
  
Ratio of non-performing loans to total portfolio loans
    
0.25
%
    
0.29
%
    
0.62
%
Ratio of non-performing assets to total assets
    
0.17
%
    
0.21
%
    
0.50
%
Ratio of the allowance for loan losses to non-performing loans
    
659.54
%
    
450.01
%
    
193.68
%


(1)
Excludes loans that are classified as “troubled debt restructured” that are still performing.
 
Non-performing loans have decreased $0.8 million from December 31, 2020, due primarily to a decrease in non-performing mortgage loans.
 
The provision for credit losses was a credit of $0.5 in the first quarter of 2021 compared to an expense of $6.7 million in the prior year quarter. The $7.2 million comparative decrease in the provision for credit losses during the first quarter of 2021 relative to the same quarter in 2020 was the result of decreases in newly identified losses in the commercial and retail loan portfolios, a decrease in the adjustment to allocations based on subjective factors and increases in gross recoveries of previously charged-off commercial and retail loans.
 
The allowance for credit losses totaled $46.8 million at March 31, 2021 compared to $35.4 million at December 31, 2020. The increase from the prior quarter is attributed to the recording of our CECL adoption entry effective January 1, 2021. The impact of the adoption was an increase in our allowance for credit losses of $11.7 million. The adjustment was within our disclosed range of $10.5 million to $12.5 million. The after tax impact to retained earnings was a decrease of $10.3 million.   At March 31, 2021, the allowance for credit losses equaled 1.68% of total portfolio loans under CECL, compared to 1.30% of total portfolio loans, at December 31, 2020 under the incurred loss methodology.
 
The Company recorded loan net recoveries of $0.1 million in the first quarter of 2021 compared to net charge offs of $0.4 million in the prior year quarter.
 
Balance Sheet, Liquidity and Capital
 
Total assets were $4.4 billion at March 31, 2021, an increase of $222.4 million from December 31, 2020.  Loans, excluding loans held for sale, were $2.78 billion at March 31, 2021, compared to $2.73 billion at December 31, 2020.  Deposits totaled $3.86 billion at March 31, 2021, an increase of $221.2 million from December 31, 2020.  This increase is primarily due to growth in non-interest bearing, savings and interest-bearing checking and reciprocal deposit account balances.
 
Cash and cash equivalents totaled $130.5 million at March 31, 2021, versus $118.7 million at December 31, 2020. Securities available for sale totaled $1.25 billion at March 31, 2021, versus $1.07 billion at December 31, 2020.  The significant increase in securities available for sale is due to the deployment of funds generated from the growth in deposits.
 
4
Total shareholders’ equity was $387.3 million at March 31, 2021, or 8.75% of total assets.  Tangible common equity totaled $355.0 million at March 31, 2021, or $16.30 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
  
3/31/2021
  
12/31/2020
  
Well
Capitalized
Minimum
Tier 1 capital to average total assets
    
8.95
%
    
8.81
%
    
5.00
%
Tier 1 common equity  to risk-weighted assets
    
12.74
%
    
12.81
%
    
6.50
%
Tier 1 capital to risk-weighted assets
    
12.74
%
    
12.81
%
    
8.00
%
Total capital to risk-weighted assets
    
13.99
%
    
14.06
%
    
10.00
%

Share Repurchase Plan
 
On December 18, 2020, the Board of Directors of the Company authorized the 2021 share repurchase plan.  Under the terms of the 2021 share repurchase plan, the Company is authorized to purchase up to 1,100,000 shares, or approximately 5% of its outstanding common stock. The repurchase plan is authorized to last through December 31, 2021. Thus far in 2021, the company has repurchased 180,667 shares at a weighted average price of $19.93 per share.
 
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, April 27, 2021.
 
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/ibcp210427.html.
 
A playback of the call can be accessed by dialing 1-877-344-7529 (Conference ID # 10153919). The replay will be available through May 4, 2021.
 
About Independent Bank Corporation
 
Independent Bank Corporation (NASDAQ: IBCP) is a Michigan-based bank holding company with total assets of approximately $4.4 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 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.
 
5
Certain risks and important factors that could affect Independent Bank Corporation's future results are identified in its Annual Report on Form 10-K for the year ended December 31, 2020 and other reports filed with the SEC, including among other things under the heading “Risk Factors” in such Annual Report on Form 10-K. Any forward-looking statement speaks only as of the date on which it is made, and Independent Bank Corporation undertakes no obligation to update any forward-looking statement, whether to reflect events or circumstances, after the date on which the statement is made, to reflect new information or the occurrence of unanticipated events, or otherwise.
 
6
INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Financial Condition

   
March 31,
2021
    
December 31,
2020
  
   
(unaudited)
  
   
(In thousands, except share
amounts)
  
Assets
  
Cash and due from banks
  
$
49,220
    
$
56,006
  
Interest bearing deposits
    
81,287
      
62,699
  
Cash and Cash Equivalents
    
130,507
      
118,705
  
Securities available for sale
    
1,247,280
      
1,072,159
  
Federal Home Loan Bank and Federal Reserve Bank stock, at cost
    
18,427
      
18,427
  
Loans held for sale, carried at fair value
    
77,799
      
92,434
  
Loans
                
Commercial
    
1,301,223
      
1,242,415
  
Mortgage
    
999,982
      
1,015,926
  
Installment
    
483,019
      
475,337
  
Total Loans
    
2,784,224
      
2,733,678
  
Allowance for credit losses (1)
    
(46,755
)
    
(35,429
)
Net Loans
    
2,737,469
      
2,698,249
  
Other real estate and repossessed assets
    
346
      
766
  
Property and equipment, net
    
36,736
      
36,127
  
Bank-owned life insurance
    
55,318
      
55,180
  
Capitalized mortgage loan servicing rights
    
23,530
      
16,904
  
Other intangibles
    
4,063
      
4,306
  
Goodwill
    
28,300
      
28,300
  
Accrued income and other assets
    
66,665
      
62,456
  
Total Assets
  
$
4,426,440
    
$
4,204,013
  
                 
Liabilities and Shareholders' Equity
  
Deposits
                
Non-interest bearing
  
$
1,301,842
    
$
1,153,473
  
Savings and interest-bearing checking
    
1,670,106
      
1,526,465
  
Reciprocal
    
608,689
      
556,185
  
Time
    
275,022
      
287,402
  
Brokered time
    
2,916
      
113,830
  
Total Deposits
    
3,858,575
      
3,637,355
  
Other borrowings
    
30,006
      
30,012
  
Subordinated debt
    
39,300
      
39,281
  
Subordinated debentures
    
39,541
      
39,524
  
Accrued expenses and other liabilities
    
71,689
      
68,319
  
Total Liabilities
    
4,039,111
      
3,814,491
  
                 
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: 21,773,734 shares at March 31, 2021 and 21,853,800 shares at December 31, 2020
    
335,704
      
339,353
  
Retained earnings
    
47,287
      
40,145
  
Accumulated other comprehensive income
    
4,338
      
10,024
  
Total Shareholders’ Equity
    
387,329
      
389,522
  
Total Liabilities and Shareholders’ Equity
  
$
4,426,440
    
$
4,204,013
  

(1)
Beginning January 1, 2021, calculation is based on CECL methodology.  Prior to January 1, 2021, calculation was based on the probable incurred loss methodology.

7
INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations

   
Three Months Ended
  
   
March 31,
2021
    
December 31,
2020
    
March 31,
2020
  
   
(unaudited)
  
Interest Income
  
(In thousands, except per share amounts)
  
Interest and fees on loans
  
$
28,105
    
$
31,139
    
$
31,764
  
Interest on securities available for sale
                        
Taxable
    
2,796
      
3,299
      
3,059
  
Tax-exempt
    
1,384
      
789
      
390
  
Other investments
    
217
      
235
      
366
  
Total Interest Income
    
32,502
      
35,462
      
35,579
  
Interest Expense
                        
Deposits
    
1,256
      
3,516
      
4,700
  
Other borrowings and subordinated debt and debentures
    
962
      
953
      
688
  
Total Interest Expense
    
2,218
      
4,469
      
5,388
  
Net Interest Income
    
30,284
      
30,993
      
30,191
  
Provision for credit losses (1)
    
(474
)
    
(421
)
    
6,721
  
Net Interest Income After Provision for Credit Losses
    
30,758
      
31,414
      
23,470
  
Non-interest Income
                        
Interchange income
    
3,049
      
2,819
      
2,457
  
Service charges on deposit accounts
    
1,916
      
2,218
      
2,591
  
Net gains on assets
                        
Mortgage loans
    
12,828
      
15,873
      
8,840
  
Securities available for sale
    
1,416
      
14
      
253
  
Mortgage loan servicing, net
    
5,167
      
(384
)
    
(5,300
)
Other
    
2,030
      
1,823
      
2,163
  
Total Non-interest Income
    
26,406
      
22,363
      
11,004
  
Non-interest Expense
                        
Compensation and employee benefits
    
18,522
      
20,039
      
16,509
  
Data processing
    
2,374
      
2,374
      
2,355
  
Occupancy, net
    
2,343
      
2,120
      
2,460
  
Furniture, fixtures and equipment
    
1,003
      
964
      
1,036
  
Interchange expense
    
948
      
926
      
859
  
Communications
    
881
      
785
      
803
  
Loan and collection
    
759
      
708
      
805
  
Legal and professional
    
499
      
600
      
393
  
Advertising
    
489
      
594
      
683
  
FDIC deposit insurance
    
330
      
385
      
370
  
Conversion related expenses
    
218
      
1,541
      
56
  
Correspondent bank service fees
    
100
      
101
      
99
  
Net (gains) losses on other real estate and repossessed assets
    
(180
)
    
(82
)
    
109
  
Other
    
1,735
      
1,652
      
2,182
  
Total Non-interest Expense
    
30,021
      
32,707
      
28,719
  
Income Before Income Tax
    
27,143
      
21,070
      
5,755
  
Income tax expense
    
5,106
      
4,084
      
945
  
Net Income
  
$
22,037
    
$
16,986
    
$
4,810
  
Net Income Per Common Share
                        
Basic
  
$
1.01
    
$
0.78
    
$
0.22
  
Diluted
  
$
1.00
    
$
0.77
    
$
0.21
  

(1)
Beginning January 1, 2021, calculation is based on CECL methodology.  Prior to January 1, 2021, calculation was based on the probable incurred loss methodology.
8
INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Selected Financial Data

   
March 31,
2021
    
December 31,
2020
    
September 30,
2020
    
June 30,
2020
    
March 31,
2020
  
   
(unaudited)
  
   
(Dollars in thousands except per share data)
  
Three Months Ended
                              
Net interest income
  
$
30,284
    
$
30,993
    
$
31,966
    
$
30,462
    
$
30,191
  
Provision for credit losses (1)
    
(474
)
    
(421
)
    
975
      
5,188
      
6,721
  
Non-interest income
    
26,406
      
22,363
      
27,011
      
20,367
      
11,004
  
Non-interest expense
    
30,021
      
32,707
      
33,641
      
27,346
      
28,719
  
Income before income tax
    
27,143
      
21,070
      
24,361
      
18,295
      
5,755
  
Income tax expense
    
5,106
      
4,084
      
4,777
      
3,523
      
945
  
Net income
  
$
22,037
    
$
16,986
    
$
19,584
    
$
14,772
    
$
4,810
  
 
                                        
Basic earnings per share
  
$
1.01
    
$
0.78
    
$
0.90
    
$
0.67
    
$
0.22
  
Diluted earnings per share
    
1.00
      
0.77
      
0.89
      
0.67
      
0.21
  
Cash dividend per share
    
0.21
      
0.20
      
0.20
      
0.20
      
0.20
  
 
                                        
Average shares outstanding
    
21,825,937
      
21,866,326
      
21,881,562
      
21,890,761
      
22,271,412
  
Average diluted shares outstanding
    
22,058,503
      
22,112,829
      
22,114,692
      
22,113,187
      
22,529,370
  
                                         
Performance Ratios
                                        
Return on average assets
    
2.10
%
    
1.61
%
    
1.90
%
    
1.54
%
    
0.54
%
Return on average equity
    
23.51
      
17.82
      
21.36
      
17.39
      
5.54
  
Efficiency ratio (2)
    
53.48
      
60.59
      
56.36
      
53.07
      
69.32
  
 
                                        
As a Percent of Average Interest-Earning Assets (2)
                                  
Interest income
    
3.27
%
    
3.57
%
    
3.62
%
    
3.72
%
    
4.28
%
Interest expense
    
0.22
      
0.45
      
0.31
      
0.36
      
0.65
  
Net interest income
    
3.05
      
3.12
      
3.31
      
3.36
      
3.63
  
 
                                        
Average Balances
                                        
Loans
  
$
2,834,012
    
$
2,876,795
    
$
2,925,872
    
$
2,913,857
    
$
2,766,770
  
Securities available for sale
    
1,093,618
      
1,009,578
      
891,975
      
660,126
      
527,395
  
Total earning assets
    
4,047,952
      
3,984,080
      
3,887,455
      
3,659,614
      
3,350,948
  
Total assets
    
4,254,294
      
4,195,546
      
4,102,318
      
3,868,408
      
3,565,829
  
Deposits
    
3,698,811
      
3,632,758
      
3,559,070
      
3,303,302
      
3,066,298
  
Interest bearing liabilities
    
2,589,102
      
2,574,306
      
2,532,481
      
2,402,361
      
2,309,995
  
Shareholders' equity
    
380,111
      
379,232
      
364,714
      
341,606
      
348,963
  
                                         
End of Period
                                        
Capital
                                        
Tangible common equity ratio
    
8.08
%
    
8.56
%
    
8.23
%
    
8.03
%
    
8.40
%
Average equity to average assets
    
8.93
      
9.04
      
8.89
      
8.83
      
9.79
  
Common shareholders' equity per share of common stock
  
$
17.79
    
$
17.82
    
$
17.05
    
$
16.23
    
$
15.33
  
Tangible common equity per share of common stock
    
16.30
      
16.33
      
15.55
      
14.72
      
13.81
  
Total shares outstanding
    
21,773,734
      
21,853,800
      
21,885,368
      
21,880,183
      
21,892,001
  
                                         
Selected Balances
                                        
Loans
  
$
2,784,224
    
$
2,733,678
    
$
2,855,479
    
$
2,866,663
    
$
2,718,115
  
Securities available for sale
    
1,247,280
      
1,072,159
      
985,050
      
856,280
      
594,284
  
Total earning assets
    
4,209,017
      
3,979,397
      
3,962,824
      
3,833,523
      
3,416,845
  
Total assets
    
4,426,440
      
4,204,013
      
4,168,944
      
4,043,315
      
3,632,387
  
Deposits
    
3,858,575
      
3,637,355
      
3,597,745
      
3,485,125
      
3,083,564
  
Interest bearing liabilities
    
2,626,280
      
2,553,418
      
2,515,185
      
2,456,193
      
2,350,056
  
Shareholders' equity
    
387,329
      
389,522
      
373,092
      
355,123
      
335,618
  

(1)
Beginning January 1, 2021, calculation is based on CECL methodology.  Prior to January 1, 2021, calculation was based on the probable incurred loss methodology.
(2)
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
March 31,
  
   
2021
    
2020
  
   
(Dollars in thousands)
  
 Net Interest Margin, Fully Taxable
            
    Equivalent ("FTE")
            
             
Net interest income
  
$
30,284
    
$
30,191
  
   Add:  taxable equivalent adjustment
    
404
      
121
  
Net interest income - taxable equivalent
  
$
30,688
    
$
30,312
  
Net interest margin (GAAP) (1)
    
3.01
%
    
3.61
%
Net interest margin (FTE) (1)
    
3.05
%
    
3.63
%

(1)
Annualized.

Tangible Common Equity Ratio

   
March 31,
2021
    
December 31,
2020
    
September 30,
2020
    
June 30,
2020
    
March 31,
2020
  
   
(Dollars in thousands)
  
Common shareholders' equity
  
$
387,329
    
$
389,522
    
$
373,092
    
$
355,123
    
$
335,618
  
Less:
                                        
Goodwill
    
28,300
      
28,300
      
28,300
      
28,300
      
28,300
  
Other intangibles
    
4,063
      
4,306
      
4,561
      
4,816
      
5,071
  
Tangible common equity
  
$
354,966
    
$
356,916
    
$
340,231
    
$
322,007
    
$
302,247
  
                                         
Total assets
  
$
4,426,440
    
$
4,204,013
    
$
4,168,944
    
$
4,043,315
    
$
3,632,387
  
Less:
                                        
Goodwill
    
28,300
      
28,300
      
28,300
      
28,300
      
28,300
  
Other intangibles
    
4,063
      
4,306
      
4,561
      
4,816
      
5,071
  
Tangible assets
  
$
4,394,077
    
$
4,171,407
    
$
4,136,083
    
$
4,010,199
    
$
3,599,016
  
                                         
Common equity ratio
    
8.75
%
    
9.27
%
    
8.95
%
    
8.78
%
    
9.24
%
Tangible common equity ratio
    
8.08
%
    
8.56
%
    
8.23
%
    
8.03
%
    
8.40
%

Tangible Common Equity per Share of Common Stock:

Common shareholders' equity
  
$
387,329
    
$
389,522
    
$
373,092
    
$
355,123
    
$
335,618
  
Tangible common equity
  
$
354,966
    
$
356,916
    
$
340,231
    
$
322,007
    
$
302,247
  
Shares of common stock outstanding (in thousands)
    
21,774
      
21,854
      
21,885
      
21,880
      
21,892
  
                                         
Common shareholders' equity per share of common stock
  
$
17.79
    
$
17.82
    
$
17.05
    
$
16.23
    
$
15.33
  
Tangible common equity per share of common stock
  
$
16.30
    
$
16.33
    
$
15.55
    
$
14.72
    
$
13.81
  

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.


10
Exhibit 99.2

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Supplemental Data

Non-performing assets (1)

   
March 31,
2021
    
December 31,
2020
    
September 30,
2020
    
June 30,
2020
    
March 31,
2020
  
   
(Dollars in thousands)
  
Non-accrual loans
  
$
7,548
    
$
8,312
    
$
10,481
    
$
12,938
    
$
17,454
  

                                       
Loans 90 days or more past due and still accruing interest
    
-
      
-
      
266
      
5
      
-
  
Subtotal
    
7,548
      
8,312
      
10,747
      
12,943
      
17,454
  
Less:  Government guaranteed loans
    
459
      
439
      
510
      
604
      
676
  
Total non-performing loans
    
7,089
      
7,873
      
10,237
      
12,339
      
16,778
  
Other real estate and repossessed assets
    
346
      
766
      
1,487
      
1,569
      
1,494
  
Total non-performing assets
  
$
7,435
    
$
8,639
    
$
11,724
    
$
13,908
    
$
18,272
  
                                         
As a percent of Portfolio Loans
                                        
Non-performing loans
    
0.25
%
    
0.29
%
    
0.36
%
    
0.43
%
    
0.62
  
Allowance for credit losses
    
1.68
      
1.30
      
1.25
      
1.20
      
1.20
  
Non-performing assets to total assets
    
0.17
      
0.21
      
0.28
      
0.34
      
0.50
  
Allowance for credit losses as a percent of non-performing loans
    
659.54
      
450.01
      
349.43
      
279.60
      
193.68
  

(1)
Excludes loans classified as "trouble debt restructured" that are not past due.

Troubled debt restructurings ("TDR")

   
March 31, 2021
  
   
Commercial
    
Retail (1)
    
Total
  
   
(In thousands)
  
Performing TDR's
  
$
5,032
    
$
34,679
    
$
39,711
  
Non-performing TDR's (2)
    
1,105
      
1,459
 (3)    
2,564
  
Total
  
$
6,137
    
$
36,138
    
$
42,275
  

   
December 31, 2020
  
   
Commercial
    
Retail (1)
    
Total
  
   
(In thousands)
  
Performing TDR's
  
$
7,956
    
$
36,385
    
$
44,341
  
Non-performing TDR's (2)
    
1,148
      
1,584
 (3)    
2,732
  
Total
  
$
9,104
    
$
37,969
    
$
47,073
  

(1)
Retail loans include mortgage and installment loan segments.
(2)
Included in non-performing assets table above.
(3)
Also includes loans on non-accrual at the time of modification until six payments are received on a timely basis.

1
Allowance for credit losses

   
Three months ended
March 31,
  
   
2021
    
2020
  
   
Loans
    
Unfunded
Commitments
    
Loans
    
Unfunded
Commitments
  
   
(Dollars in thousands)
  
Balance at beginning of period
  
$
35,429
    
$
1,805
    
$
26,148
    
$
1,542
  
Additions (deductions)
                                
Impact of adoption of ASC 326
    
11,574
      
1,469
       -
       -
  
Provision for credit losses (1)
    
(474
)
    
-
      
6,721
      
-
  
Initial allowance on loans purchased with credit deterioration
    
134
       -
       -
       -
  
Recoveries credited to allowance
    
548
      
-
      
399
      
-
  
Loans charged against the allowance
    
(456
)
    
-
      
(773
)
    
-
  
Additions included in non-interest expense
    
-
      
(32
)
    
-
      
119
  
Balance at end of period
  
$
46,755
    
$
3,242
    
$
32,495
    
$
1,661
  
                                 
Net loans charged (recovered) against the allowance to average Portfolio Loans
    
(0.01
)%
            
0.06
%
        

(1)
Beginning January 1, 2021, calculation is based on CECL methodology.  Prior to January 1, 2021, calculation was based on the probable incurred loss methodology.

Capitalization

   
March 31,
2021
    
December 31,
2020
  
   
(In thousands)
  
Subordinated debt
  
$
39,300
    
$
39,281
  
Subordinated debentures
    
39,541
      
39,524
  
Amount not qualifying as regulatory capital
    
(524
)
    
(505
)
Amount qualifying as regulatory capital
    
78,317
      
78,300
  
Shareholders’ equity
                
Common stock
    
335,704
      
339,353
  
Retained earnings
    
47,287
      
40,145
  
Accumulated other comprehensive income
    
4,338
      
10,024
  
Total shareholders’ equity
    
387,329
      
389,522
  
Total capitalization
  
$
465,646
    
$
467,822
  

2
Non-Interest Income

   
Three months ended
  
   
March 31,
2021
    
December 31,
2020
    
March 31,
2020
  
   
(In thousands)
  
Interchange income
  
$
3,049
    
$
2,819
    
$
2,457
  
Service charges on deposit accounts
    
1,916
      
2,218
      
2,591
  
Net gains on assets
                        
Mortgage loans
    
12,828
      
15,873
      
8,840
  
Securities
    
1,416
      
14
      
253
  
Mortgage loan servicing, net
    
5,167
      
(384
)
    
(5,300
)
Investment and insurance commissions
    
583
      
493
      
513
  
Bank owned life insurance
    
139
      
160
      
270
  
Other
    
1,308
      
1,170
      
1,380
  
Total non-interest income
  
$
26,406
    
$
22,363
    
$
11,004
  

Capitalized Mortgage Loan Servicing Rights

   
Three months ended
March 31,
  
   
2021
    
2020
  
   
(In thousands)
  
Balance at beginning of period
  
$
16,904
    
$
19,171
  
Originated servicing rights capitalized
    
3,369
      
2,632
  
Change in fair value
    
3,257
      
(6,974
)
Balance at end of period
  
$
23,530
    
$
14,829
  

3
Mortgage Loan Activity

   
Three months ended
  
   
March 31,
2021
    
December 31,
2020
    
March 31,
2020
  
   
(Dollars in thousands)
  
Mortgage loans originated
  
$
509,003
    
$
502,491
    
$
311,078
  
Mortgage loans sold
    
377,418
      
388,631
      
262,260
  
Net gains on mortgage loans
    
12,828
      
15,873
      
8,840
  
Net gains as a percent of mortgage loans sold  ("Loan Sales Margin")
    
3.40
%
    
4.08
%
    
3.37
%
Fair value adjustments included in the
                        
Loan Sales Margin
    
(0.98
)
    
(0.53
)
    
0.78
  

Non-Interest Expense


  
Three months ended
  
   
March 31,
2021
    
December 31,
2020
    
March 31,
2020
  
   
(In thousands)
  
Compensation
  
$
10,121
    
$
10,852
    
$
10,703
  
Performance-based compensation
    
4,292
      
5,485
      
2,121
  
Payroll taxes and employee benefits
    
4,109
      
3,702
      
3,685
  
Compensation and employee benefits
    
18,522
      
20,039
      
16,509
  
Data processing
    
2,374
      
2,374
      
2,355
  
Occupancy, net
    
2,343
      
2,120
      
2,460
  
Furniture, fixtures and equipment
    
1,003
      
964
      
1,036
  
Interchange expense
    
948
      
926
      
859
  
Communications
    
881
      
785
      
803
  
Loan and collection
    
759
      
708
      
805
  
Legal and professional
    
499
      
600
      
393
  
Advertising
    
489
      
594
      
683
  
FDIC deposit insurance
    
330
      
385
      
370
  
Amortization of intangible assets
    
242
      
255
      
255
  
Conversion related expenses
    
218
      
1,541
      
56
  
Supplies
    
174
      
167
      
184
  
Correspondent bank service fees
    
100
      
101
      
99
  
Provision for loss reimbursement on sold loans
    
34
      
40
      
37
  
Costs (recoveries) related to unfunded lending commitments
    
(32
)
    
(8
)
    
119
  
Net (gains) losses on other real estate and repossessed assets
    
(180
)
    
(82
)
    
109
  
Other
    
1,317
      
1,198
      
1,587
  
Total non-interest expense
  
$
30,021
    
$
32,707
    
$
28,719
  

4
Average Balances and Tax Equivalent Rates


  
 
   
Three Months Ended
March 31,
  
         
2021
                
2020
        
   
Average
Balance
    
Interest
    
Rate (2)
    
Average
Balance
    
Interest
    
Rate (2)
  
   
(Dollars in thousands)
  
Assets
                                    
Taxable loans
  
$
2,827,335
    
$
28,039
      
4.00
%
  
$
2,758,909
    
$
31,688
      
4.61
%
Tax-exempt loans (1)
    
6,677
      
84
      
5.10
      
7,861
      
97
      
4.96
  
Taxable securities
    
782,471
      
2,796
      
1.43
      
468,095
      
3,059
      
2.61
  
Tax-exempt securities (1)
    
311,147
      
1,770
      
2.28
      
59,300
      
490
      
3.31
  
Interest bearing cash
    
101,895
      
29
      
0.12
      
38,424
      
128
      
1.34
  
Other investments
    
18,427
      
188
      
4.14
      
18,359
      
238
      
5.21
  
Interest Earning Assets
    
4,047,952
      
32,906
      
3.27
      
3,350,948
      
35,700
      
4.28
  
Cash and due from banks
    
56,371
                      
49,610
                  
Other assets, net
    
149,971
                      
165,271
                  
Total Assets
  
$
4,254,294
                    
$
3,565,829
                  
                                                 
Liabilities
                                                
Savings and interest-bearing checking
  
$
2,140,405
      
675
      
0.13
    
$
1,615,589
      
1,930
      
0.48
  
Time deposits
    
339,872
      
581
      
0.69
      
594,871
      
2,770
      
1.87
  
Other borrowings
    
108,825
      
962
      
3.59
      
99,535
      
688
      
2.78
  
Interest Bearing Liabilities
    
2,589,102
      
2,218
      
0.35
      
2,309,995
      
5,388
      
0.94
  
Non-interest bearing deposits
    
1,218,534
                      
855,838
                  
Other liabilities
    
66,547
                      
51,033
                  
Shareholders’ equity
    
380,111
                      
348,963
                  
Total liabilities and shareholders’ equity
  
$
4,254,294
                    
$
3,565,829
                  
                                                 
Net Interest Income
          
$
30,688
                    
$
30,312
          
                                                 
Net Interest Income as a Percent of Average Interest Earning Assets
                    
3.05
%
                    
3.63
%

(1)
Interest on tax-exempt loans and securities is presented on a fully tax equivalent basis assuming a marginal tax rate of 21%.
(2)
Annualized

5
Commercial Loan Portfolio Analysis as of March 31, 2021

   
Total Commercial Loans
  
         
Watch Credits
    
Percent of Loan
  
Loan Category
  
All Loans
    
Performing
    
Non-accrual
    
Total
    
Category in
Watch Credit
  
   
(Dollars in thousands)
  
Land
  
$
14,178
    
$
175
    
$
-
    
$
175
      
1.2
%
Land Development
    
13,274
      
35
      
-
      
35
      
0.3
  
Construction
    
75,364
      
36
      
-
      
36
      
0.0
  
Income Producing
    
362,506
      
2,049
      
-
      
2,049
      
0.6
  
Owner Occupied
    
353,101
      
12,219
      
719
      
12,938
      
3.7
  
Total Commercial Real Estate Loans
  
$
818,423
    
$
14,514
      
719
    
$
15,233
      
1.9
  
                                         
Other Commercial Loans
  
$
482,800
    
$
15,107
      
654
    
$
15,761
      
3.2
  
Total non-performing commercial loans
                  
$
1,373
                  

Commercial Loan Portfolio Analysis as of December 31, 2020

   
Total Commercial Loans
  
         
Watch Credits
    
Percent of Loan
  
Loan Category
  
All Loans
    
Performing
    
Non-accrual
    
Total
    
Category in
Watch Credit
  
   
(Dollars in thousands)
  
Land
  
$
14,567
    
$
116
    
$
-
    
$
116
      
0.8
%
Land Development
    
12,176
      
36
      
-
      
36
      
0.3
  
Construction
    
68,724
      
36
      
-
      
36
      
0.1
  
Income Producing
    
358,603
      
3,699
      
-
      
3,699
      
1.0
  
Owner Occupied
    
360,510
      
24,693
      
745
      
25,438
      
7.1
  
Total Commercial Real Estate Loans
  
$
814,580
    
$
28,580
      
745
    
$
29,325
      
3.6
  
                                         
Other Commercial Loans
  
$
427,835
    
$
16,059
      
695
    
$
16,754
      
3.9
  
Total non-performing commercial loans
                  
$
1,440
                  


6
Exhibit 99.3
 Independent Bank Corporation (IBCP)  Earnings CallFirst Quarter 2021April 27, 2021 
 
 Cautionary note regarding forward-looking statements  This presentation 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, 2020 and other reports filed with the SEC, including among other things under the heading “Risk Factors” in such Annual Report on Form 10-K. Any forward-looking statement speaks only as of the date on which it is made, and Independent Bank Corporation undertakes no obligation to update any forward-looking statement, whether to reflect events or circumstances after the date on which the statement is made, to reflect new information or the occurrence of unanticipated events, or otherwise.  2 
 
 Agenda  Formal Remarks.William B. (Brad) Kessel, President and Chief Executive OfficerGavin A. Mohr, Executive Vice President and Chief Financial OfficerQuestion and Answer session.Closing Remarks.Note: This presentation is available at www.IndependentBank.com in the Investor Relations area under the “Presentations” tab.  3 
 
   COVID-19 ResponseSupporting Employees, Clients & Communities   4  Employees  Clients & Communities      Work from home. Providing the technology, culture, and operational infrastructure for the workforce to work remotely as needed.Granting additional sick and vacation time. Complying with applicable Michigan requirements (MI Safe Start Plan, etc.).Performing additional routine and on-demand sanitization of facilities using enhanced methods.  Pro-actively reaching out to our business customers to understand needs. Supporting local businesses. Closed over $375 million in SBA Payroll Protection Program (PPP) loans. Working with business and consumer customers on temporary payment relief.  When it became apparent that the Coronavirus (COVID-19) pandemic could pose a threat to our people and business, we activated our Business Continuity and Crisis Communication Core Teams to take early and decisive action 
 
 Historical Financial Data  5        Year Ended December 31,           Quarter Ended,          ($M except per share data)    2017  2018  2019  2020     3/31/20  6/30/20  9/30/20  12/31/20  3/31/21                                      Balance Sheet:                         Total Assets    $2,789   $3,353   $3,565   $4,204     $3,632   $4,043   $4,169   $4,204   $4,426   Portfolio Loans     $2,019   $2,583   $2,725   $2,734      $2,718   $2,867   $2,855   $2,734   $2,784   Deposits    $2,401   $2,913   $3,037   $3,637     $3,084   $3,485   $3,598   $3,637   $3,859   Tangible Common Equity    $263   $304   $317   $357      $302   $322   $340   $357   $355   Profitability:                         Pre-Tax, Pre-Provision Income    $39.6   $50.6   $58.6   $81.9     $12.5   $23.5   $25.3   $20.6   $26.7   Pre-Tax, Pre-Prov / Avg. Assets    1.50%  1.62%  1.70%  2.08%     1.41%  2.44%  2.46%  1.98%  2.54%  Net Income(1)    $20.5   $39.8   $46.4   $56.2     $4.8   $14.8   $19.6   $17.0   $22.0   Return on Average Assets(1)    0.77%  1.27%  1.35%  1.43%     0.54%  1.54%  1.90%  1.61%  2.10%  Return on Average Equity(1)    7.8%  12.4%  13.6%  15.7%    5.5%  17.4%  21.4%  17.8%  23.5%  Net Interest Margin (FTE)    3.65%  3.88%  3.80%  3.34%     3.63%  3.36%  3.31%  3.12%  3.05%  Efficiency Ratio    69.2%  67.2%  64.9%  59.2%    69.3%  53.1%  56.4%  60.6%  53.5%  Asset Quality:                         NPAs / Assets    0.35%  0.29%  0.32%  0.21%    0.50%  0.34%  0.28%  0.21%  0.17%  NPAs / Loans + OREO    0.49%  0.38%  0.42%  0.32%     0.67%  0.48%  0.41%  0.32%  0.27%  Reserves / Total Portfolio Loans    1.12%  0.96%  0.96%  1.30%    1.20%  1.20%  1.25%  1.30%  1.68%  NCOs / Avg. Loans    (0.06%)  (0.03%)  (0.02%)  0.11%     0.06%  0.45%  (0.04%)  (0.02%)  (0.01%)  Capital Ratios:                         TCE Ratio    9.4%  9.2%  9.0%  8.6%    8.4%  8.0%  8.2%  8.6%  8.1%  Leverage Ratio     10.6%  10.5%  10.1%  9.2%     9.6%  9.1%  9.0%  9.2%  9.3%  Tier 1 Capital Ratio    14.0%  13.3%  12.7%  13.3%    12.2%  12.6%  13.0%  13.3%  13.2%  Total Capital Ratio    15.2%  14.3%  13.7%  16.0%     13.4%  15.3%  15.6%  16.0%  15.8% 
 
 1Q 2021 Financial Highlights  Income StatementPre-tax, pre-provision income was $26.7 million in the first quarter of 2021 compared to $12.5 million in the first quarter of 2020.Net income of $22.0 million, or $1.00 per diluted share compared to $4.8 million, or $0.21 per diluted share for the year ago quarter.Net interest income of $30.3 million, compared to $30.2 million, for the year ago quarter.Mortgage loan originations of $509.0 million, also, $377.4 million in mortgage loans sold with $12.8 million in net gains on mortgage loans compared to $8.8 million in net gains from the year ago quarter. Mortgage servicing rights change (the “MSR Change”) due to price of $4.6 million ($0.17 per diluted share, after taxes) compared to a negative $5.9 million ($0.21 per diluted share, after taxes) in the first quarter of 2020. Provision for loan loss credit of $0.5 million compared to an expense of $6.7 million in the first quarter of 2020. Balance Sheet/CapitalSecurities available for sale increased by $175.1 million.Total portfolio loans increased by $50.5 million.Total deposits grew by $221.2 million.Paid a 21 cent per share cash dividend on common stock on February 16, 2021.  6 
 
 Our Michigan Markets  7  Source: S&P Global Market Intelligence and Company documents. Map does not include loan production offices. Deposit market share data based on FDIC Summary of Deposits Annual Survey as of June 30, 2020.Note: Loan and deposit balances exclude the loans and deposits (such as brokered deposits) that are not clearly allocable to a certain market region. Loans specifically exclude: $155 million of Ohio mortgage loans, $50 million of resort loans and $15 million of purchased mortgage loans.      94          96          75          69      Michigan’s premier community bank. #1 deposit market share amongst Michigan banks < $10B in assets and #9 deposit market share overall. Top 10 market share in 20 of 23 counties of operation – with opportunity to gain market share in attractive Michigan markets.Low cost and stable deposit base in East/”Thumb” and Central regions utilized to fund loan growth in the West and Southeast regions (higher growth & more metropolitan).Eight bank branches were closed (two on June 26, 2020 and six on July 31, 2020). The closures by region were: 3 in the East/”Thumb”, 2 in the Central and 1 each in the West, Northwest and Southeast. New full service bank branch opened in Brighton, Michigan in 4Q’20.7 Loan Production Offices (LPOs), including 5 throughout Michigan and 2 in Ohio (residential mortgage lending only).    Branches (62)    East / “Thumb”Branches: 20Deposits: $954MLoans: $193M  SoutheastBranches: 8Deposits: $474MLoans: $740M  CentralBranches: 10Deposits: $463MLoans: $186M  WestBranches: 20Deposits: $1,018MLoans: $941M  NorthwestBranches: 4Deposits: $264MLoans: $259M 
 
 Select Economic Statistics  8  Unemployment Trends (%)  Total Employees (Thousands)  Regional Average Home Sales Price (Thousands)  Annualized Home Sales (Thousands)  Elevated unemployment rates due to COVID-19  As of Feb ‘21  Stable prices in key markets  Strong job growth prior to COVID-19  Slowing Michigan home sales  Select Economic Statistics  
 
     Low Cost Deposit Franchise Focused on Core Deposit Growth  9  Substantially core funding – $3.6 billion of non-maturity deposit accounts (92.8% of total deposits).Total deposits increased $221.2 million (6.1%) since 12/31/20 with non-interest bearing up $148.4 million, savings and interest- bearing checking up $143.6 million, reciprocal up $52.5 million and time down $12.4 million.Deposits by Customer Type:Retail – 51.9%Commercial – 34.4%Municipal – 13.7%  Deposit Composition – 3/31/21  Deposit Highlights  Michigan Deposit Market Share  $3.9B  Core Deposits: 92.8%  Cost of Deposits (%)/Total Deposits ($B)  Note: Core deposits defined as total deposits less maturity deposits.  
 
 Diversified Loan PortfolioFocused on High Quality Growth  10  Lending Highlights  Note: Portfolio loans exclude loans HFS.  Portfolio loan changes in 1Q’21:Commercial – increased $58.8 million. PPP loan balances increased $64.4 million and totaled $234.2 million at March 31, 2021.Mortgage – decreased $15.9 million due to portfolio pay-downs.Installment – increased $7.7 million.Mortgage loan portfolio weighted average FICO and LTV of 749 and 71%, respectively and average balance of $195,000.Installment weighted average FICO of 759 and average balance of $21,000.Commercial loan rate mix:62% fixed / 38% variable.Indices – 59% tied to Prime, 38% tied to LIBOR and 3% tied to a US Treasury rate.Mortgage loan (including HECL) rate mix: 54% fixed / 46% adjustable or variable. Indices – 20% tied to Prime, 59% tied to LIBOR , 19% tied to a US Treasury rate and 2% tied to SOFR  Loan Composition – 3/31/21  $2.9B  Yield on Loans (%)/Total Portfolio Loans ($B) 
 
 COVID-19 Programs – Loan Forbearances  11  Highlights  Loan Forbearances    The table above reflects the status of loan forbearances for the last four quarters. The percent of the loan portfolio is based on loan dollars.Loan Forbearances:Forbearance period is generally three months for mortgage and installment loans and three or six months for commercial loans. Retail (mortgage and installment) loan forbearances are primarily principal & interest deferrals.Commercial loan forbearances are primarily principal deferrals only.Forbearance requests peaked in early June 2020 and have since significantly abated.     3/31/2021      12/31/2020      9/30/2020      6/30/2020      Current % Change from 6/30     Loan Type  #  $ (000’s)  % of portfolio  #  $ (000’s)  % of portfolio  #  $ (000’s)  % of portfolio  #  $ (000's)  % of portfolio  #  $   Commercial  0  $0  0.00%  2  $163   0.02%  17  $25,105   1.90%  386  $210,486   15.40%  -100.0%  -100.0%   Mortgage  111  15,263  1.53%  134  19,830  1.95%  197  32,091  3.10%  388  81,212  7.80%  -71.4%  -81.2%   Installment  32  537  0.11%  48  1,412  0.30%  97  2,631  0.50%  280  7,459  1.60%  -88.6%  -92.8%   Total   143   $15,800  0.62%   184    $21,405   0.83%   311    $59,827   2.10%   1,054    $299,157   10.40%  -86.4%  -94.7%                                                Loans serviced for others  205  $26,975  0.88%  288  $42,897   1.44%  416  $66,279   2.30%  773  $114,839    4.2%  -73.5%  -76.5% 
 
 COVID-19 Programs – Paycheck Protection Program (“PPP”)  12  Highlights  PPP Loan Portfolio  The table above reflects the status of PPP loans as of December 31, and March 31, 2021 for Round 1 and Round 2 respectively.Paycheck Protection Program:Forgiveness applications began to be submitted to the SBA in August 2020. SBA generally has 90 days to process forgiveness applications.Forgiveness application approvals and payments from the SBA began to be received in October 2020.Expect the remaining unaccreted fees at March 31, 2021 to be accreted into interest income in the next 12 months.    PPP – Round 1        PPP – Round 2     Description  12/31/2020    3/31/2021    3/31/2021      #  ($ in 000’s)  #  ($ in 000’s)  #  ($ in 000’s)  Loans outstanding at quarter-end  1,483   169,782  698   105,934   1,250  128,240  Average loans outstanding for the quarter  n/a  220,214  n/a   137,833  n/a  68,626   Forgiveness applications submitted to the SBA  808   122,962  1,477   183,346  n/a  n/a  Forgiveness applications processed and approved by the SBA  755   91,972  1,354   158,046  n/a  n/a  Net fees accreted into interest income during the quarter  n/a  3,251  n/a   1,853  n/a  219  Unaccreted fees remaining at quarter-end   n/a  3,216  n/a   1,362  n/a  5,454  Average loan yield for the quarter   n/a  6.91%  n/a   6.43%  n/a  2.21% 
 
 Loans by Industry as a % of Total Commercial Loans ($ in millions)C&I and Owner Occupied Real Estate = 67.8% of Commercial Loan Portfolio  Investor RE by Collateral Type as a % of Total Commercial Loans ($ in millions)Investment Real Estate = 32.2% of the Commercial Loan Portfolio   13  Commercial Loan Portfolio Concentrations  13 
 
 Investment Securities Portfolio  14  Highlights  High quality, liquid, diverse portfolio with relatively short duration.Fair value of $1.25 billion, an increase of $175.4 million in 1Q’21.Net unrealized gain of $7.9 million, representing 0.64% of amortized cost.Portfolio ratings: 72% AAA rated (or backed by the U.S. Government); 14% AA rated; 5% A rated; 5% BAA rated and 3% unrated.3.38 year estimated average duration with a weighted average yield of 1.96% (with TE gross up).Approximately 25.20% of the portfolio is variable rate.    $1.2B  Investment Portfolio by Type (3/31/21)  Investment Securities Activity – 1Q’21  Total repayments include $1.73 million of repayments on Treasury/Agency securities not shown in the table.    Agency MBS, CMO & CMBS   Municipal/Govern-ment   Asset-backed  Private Label Mortgage    Corp.    Total     (Dollars in 000’s)            Purchases (at cost)  $188,933  $136,525  $20,746  $3,000  $24,661  $373,866  Repayments (a)  48,457  8,412  46,553  2,804  1,676  109,636  Sales  76,763  --  --  --  --  76,763                Purchases in 1Q’21              Yield (TE)  1.44%  2.25%  0.83%  1.11%  1.41%  1.70%  Duration   4.85%  7.37%  0.46%  6.21%  4.47%  5.52% 
 
 Strong Capital Position  15   Source: S&P Global Market Intelligence and Company documents.Note: Company closed acquisition of TCSB Bancorp, Inc. in Q2 ‘18.  TCE / TA (%)   Leverage Ratio (%)   CET1 Ratio (%)   Total RBC Ratio (%)   IBCP Target 8.50% - 9.50 %  Capital retention to support (i) organic growth and (ii) acquisitions; and Return of capital through (i) strong and consistent dividend and (ii) share repurchases  Long-Term Capital Priorities:  Strong Capital Position 
 
 HighlightsInterest rate sensitivity profile of the loan and securities portfolios, in combination with a low cost core deposit base, positions us as slightly asset sensitive.Net interest income decreased $0.7 million, or 2.3%, in 1Q’21 vs. 4Q’20 due primarily to a $3.0 million decrease in interest income that was partially offset by a $2.3 million decrease in interest expense on deposits. Net interest margin was 3.05% during the first quarter of 2021, compared to 3.63% in the year-ago quarter and 3.12% in the fourth quarter of 2020.  Yields, NIM and Cost of Funds (%)  Net Interest Income ($ in Millions)   Net Interest Margin/Income  16 
 
 Linked Quarter Analysis  17  1Q’21 NIM Changes  Linked Quarter Average Balances and FTE Rates  Yield on average interest-earning assets declined 30 basis points.Yield on PPP round 1 loans decreased 48 basis points due to a decline in fee accretion. Commercial loan yields net of PPP declined 34 basis points compared to the prior quarter. A combination of change in mix and lower yields on new volume loans is the primary driver. Continued growth in liquid assets combined with declining investment yields negatively impacted the net interest margin by 7 basis points (IBD growth 2 bps, investment growth 4 bps, investment yield 1 bps) in Q1’21.Funding costs decreased by 7 basis points (funding cost 0.03%, deferred hedge loss 0.04%) in Q1’21.  1Q’21 Highlights  Q4'20  3.12%        Decline in cost of funds  0.07%  Discount accretion on commercial loans  -0.02%  Accelerated amortization of loss on derivatives   0.16%  Decline in earning asset yields (growth and mix)  -0.29%        Q1'21  3.05% 
 
 Strong Non-interest Income  18  Diverse sources of non-interest income – representing 46.6% of operating revenue in 1Q’21.1Q’21 interchange income of $3.0 million compared to $2.5 million in the prior year quarter. This increase is due to an increase in transaction volume. COVID-19 has adversely impacted service charges on deposits. In addition, we have suspended certain electronic banking fees due to the enhanced need for customers to access this channel.Mortgage banking: $12.8 million in net gains on mortgage loans in 1Q’21 vs. $8.8 million in the year ago quarter. A combination of higher sales volumes and stronger profit margins led to this increase.$509.0 million in mortgage loan originations in 1Q’21 vs. $311.1 million in 1Q’20 and $502.5 million in 4Q’20.1Q’21 mortgage loan servicing includes a $4.6 million ($0.17 per diluted share, after tax) increase in fair value adjustment due to price compared to a dcrease of $5.9 million ($0.21 per diluted share, after tax) in the year ago quarter.       Source: Company documents.  $26.4M  2021 1Q’21 Non-interest Income (millions)  Non-interest Income Trends ($M)  Highlights 
 
 Focus on Improved Efficiency   19  Source: Company documents.  Non-interest Expense ($M)  Highlights   Efficiency Ratio (4 quarter rolling average)   Continued focus on expense control and driving positive operating leverage. Compensation and employee benefits expense of $18.5 million compared to $16.5 in the prior year quarter. $1.3 million increase in incentive compensation accrual due to an increase in expected payout levels compared to Q1’20. $0.2 million gain on sale of ORE/ORA certain retail properties.1Q’21 non-interest expense included $0.22 million of conversion related expenses (associated with core data processing conversion that is in process).Opportunities exist to gain additional efficiencies as we continue to optimize our delivery channels. 
 
 Credit Quality Summary  Note 1: Non-performing loans and non-performing assets exclude troubled debt restructurings that are performing.Note 2: 12/31/16 30 to 89 days delinquent data excludes $1.63 million of payment plan receivables that were held for sale.  Non-performing Assets ($ in Millions)  ORE/ORA ($ in Millions)  Non-performing Loans ($ in Millions)  30 to 89 Days Delinquent ($ in Millions)  20 
 
 Classified Assets and New Default Trends  Note: Dollars all in millions.  Total Classified Assets  Commercial Loan New Defaults  Total Loan New Defaults  Retail Loan New Defaults  21 
 
 Troubled Debt Restructurings (TDRs)  TDR HighlightsWorking with client base to maximize sustainable performance.The specific reserves allocated to TDRs totaled $4.6 million at 3/31/21.A majority of our TDRs are performing under their modified terms but remain in TDR status for the life of the loan.93.3% of TDRs are current as of 3/31/21.Commercial TDR Statistics:23 loans with $6.1 million book balance.82.2% performing.WAR of 5.26% (accruing loans).Well seasoned portfolio; 96% of accruing loans are not only performing but have been for over a year since modification.Retail TDR Statistics:431 loans with $36.1 million book balance.96.0% performing.WAR of 4.27% (accruing loans).Well seasoned portfolio; over 92% of accruing loans are not only performing but have been for over a year since modification.  TDRs ($ in Millions)  93% of TDRs are Current  22 
 
 Note: Dollars all in millions.   Provision for Credit Losses   Loan Net Charge-Offs/Recoveries   Allowance for Credit Losses  Credit Cost Summary  23 
 
 Adoption of CECL   24  Adopted CECL on January 1, 2021 as allowed under the CARES Act extension. CECL day 1 adjustment to the ACL of $11.7 million which was within our disclosed range of $10.5 million to $12.5.Reserve for unfunded lending commitments increased $1.5 million.Retained earnings decreased $10.3 million. Allowance for credit losses (ACL) totaled $46.8 million at March 31, 2021. 1.68% of total portfolio loans 1.83% of total portfolio loans net of PPP loansQ1’21 provision for credit losses was a credit of $0.5 million.CECL Model Details:Discounted cash flow model with fourteen loan segments.Probability of default and loss given default based on long-term average for commercial loans and regression for mortgage and installment loans.Regression uses one year forecast / with immediate reversion to mean driven primarily by unemployment.Unemployment data: median of Bloomberg survey: 6.3% Q1, falls to 5.1% at the end of the one year forecast.Q factors: economic shock, forbearance activity, and loans in high risk industries.   Provision for Credit Losses Detail  Highlights 
 
 2021 Outlook Update  Category  Outlook  Lending  Continued growthLoan payoffs related to the Paycheck Protection Program will make loan growth challenging in 2021. IBCP goal of low (1%) single digit overall loan growth (5% - 7% excluding PPP impact), primarily supported by increases in commercial loans, mortgage loans and consumer loans. This growth forecast also assumes an improving Michigan economy.Q1 Update: Total loans increased $50.5 million (1.85%) in Q1’21. PPP round two loan production of $128.2 million is primarily responsible for the increase in total loans. PPP round one loans decreased $63.8 million due to loan forgiveness from the SBA. Commercial loans net of PPP production was a decrease of $5.6 million.   Net Interest Income  Growth driven primarily by higher average earning assetsIBCP goal of approximately 0.5% increase in net interest income (NII) over 2020. Expect the net interest margin (NIM) to trend lower (0.10% - 0.15%) in 2021 compared to full-year 2020. Primary driver is a reduction in earing asset yield. The forecast assumes no changes in the target federal funds rate in 2021 and long-term interest rates up very slightly over year end 2020 levels. Q1 Update: 1Q’21 net interest income was $0.1 million (0.31%) higher than the prior year quarter. The net interest margin was 3.05% for the quarter down 0.07% from the linked quarter and 0.58% from the prior year quarter. This primary driver of the decrease in the net interest margin is a higher allocation to lower yielding assets (mix), lower yields on new volume loans, lower yields on securities and slower accretion of PPP fees.   Provision for Credit Losses  Steady asset quality metricsVery difficult area to forecast. Future provision levels under CECL will be particularly sensitive to loan growth and mix, projected economic conditions, watch credit levels and loan default volumes. The allowance as a percentage of total loans was at 1.30% at 12/31/20. The initial (effective 1/1/20210) CECL adjustment is now expected to be approximately $10.5 million to $12.5 million. This CECL adjustment is still subject to certain final review procedures that will be completed in 1Q’21. A full year 2021 provision (expense) for credit losses of approximately 0.25% to 0.35% of average total portfolio loans would not be unreasonable.Q1 Update: The impact from our CECL adoption was an increase to our beginning of the year allowance for credit losses of $11.7 million which was within our disclosed range of $10.5 million to 12.5 million. The provision for credit losses was a credit of $0.5 million in the first quarter. If credit quality trends persist it is likely the full year provision for the ACL will be below our forecasted range of 0.25% to 0.35% of average total portfolio loans.   Non-interest Income  IBCP forecasted 2021 quarterly range of $13 million to $16 million with the total for the year down 30% to 35% from 2020 actual of $80.7 millionExpect mortgage loan origination volumes in 2021 to be down by approximately 30%. Expect overall mortgage banking revenues (gain on sale and mortgage loan servicing) to decline in 2020 due to lower volume as well as margin on loans sold. Expect service charges on deposits and interchange income in 2021 to be collectively comparable to 2020 (i.e. a decline in servicing charges on deposits due to lower NSF fees to be largely offset by an increase in interchange income). Q1 Update: Non-interest income totaled $26.4 million in Q1’21. Mortgage loan production as well as net gain on sale of mortgages was stronger than forecasted. Mortgage loans servicing added $5.2 million in non-interest income in Q1’21. The mortgage loan pipeline continues to be strong although refinance activity is slowing down.   Non-interest Expenses  IBCP forecasted 2021 quarterly range of $28.5 to $29.5 million with the total for the year down (4%-6%) from the 2020 actual of $122.4 million.Expect total compensation and employee benefits to be lower in 2021 compared to 2020 due primarily to a reduction in incentive compensation. Most other categories of non-interest expense expected to have small (1% to 2%) increases.Q1 Update: Total non-interest expense was $30.0 million in the first quarter, outside our $28.5 to $29.5 million targeted quarterly range. An increase in the accrual for incentive based compensation due to a higher than anticipated payout level is the primary driver of the increase in expense. Non-interest expense net of compensation and employee benefits is down $0.7 million from the prior year quarter.   Income Taxes  Approximately a 20% effective income tax rate in 2021. This assumes a 21% statutory federal corporate income tax rate during 2021. Q1 Update: Q1’21 actual effective income tax rate of 18.8%.  Share Repurchases  2021 share repurchase authorization at approximately 5% of outstanding shares. Expect total share repurchases in 2021 at the mid-point of this authorization.Q1 Update: The company repurchased 180,667 at an average price of $19.93 in 1Q’21.   25 
 
  Strategic Initiatives  26    Serve consumers and businesses in our markets in an inclusive way with straight forward marketing and outreach efforts and fostering relationships and strong customer engagement.Improve net interest income via balanced loan growth, disciplined risk adjusted loan pricing and active management of deposit pricing. Add new customers and grow revenue through outbound calling.Add new customers and grow revenue through the addition of new talented sales professionals in our existing markets. Supplement our organic growth initiatives via selective and opportunistic bank acquisitions and branch acquisitions.    Growth      Enhance process improvement expertise, enabling all business lines and departments to streamline/automate operating processes and workflows.Successfully complete 2021 core conversion, capitalizing upon opportunity to streamline and improve bank processes.Leverage virtual capabilities to make more effective meetings, training and customer engagement.Optimize branch delivery channel including assessing existing locations, new locations, service hours, staffing, & workflow and leveraging our existing technology. Expand Digital Branch services.Build/enhance dashboard reporting and business intelligence.   Process Improvement & Cost Controls      Create and maintain an engaged workforce through a culture and environment that promotes diversity, equity, inclusion and professional development. Empower and support our team members to serve our customers. Demonstrate that we are committed to the well-being of our team members who ensure our success. This entails recognizing and rewarding contributions, developing new talent via internships, providing coaching and development, and planning for succession and new opportunities.    Talent Management       Produce strong and consistent earnings and capital levels. Maintain good credit quality aided by strong proactive asset quality monitoring and problem resolution.Practice sound risk management with effective reporting to include fair banking and scenario planning.Actively manage and monitor liquidity and interest rate risk.Promote strong, independent & collaborative risk management, utilizing three layers of defense (business unit, risk management and internal audit). Ensure effective operational controls with special emphasis on cyber security, fraud prevention, core system conversion and regulatory compliance.Maintain effective relationships with regulators & other outside oversight parties.   Risk Management    
 
 Q&A and Closing Remarks  Question and Answer SessionClosing RemarksThank you for attending!NASDAQ: IBCP  27