Independent Bank Corporation Reports 2013 First Quarter Results

       Independent Bank Corporation Reports 2013 First Quarter Results

PR Newswire

IONIA, Mich., April 22, 2013

IONIA, Mich., April 22, 2013 /PRNewswire/ --Independent Bank Corporation
(NASDAQ: IBCP) reported first quarter 2013 net income applicable to common
stock of $4.7 million, or $0.27 per diluted share, versus net income
applicable to common stock of $2.4 million, or $0.07 per diluted share, in the
prior-year period.

The Company's fifth consecutive profitable quarter was highlighted by:

  oAdditional improvement in asset quality, with non-performing assets down
    13% during the quarter and 38% since Mar. 31, 2012.
  oA $5.8 million, or 113%, year-over-year decline in the quarterly provision
    for loan losses.
  oRegulatory capital ratios that increased significantly and remain
    substantially above minimum requirements for "well-capitalized"

On Dec. 7, 2012, the Company completed the sale of 21 branches. This
transaction resulted in the transfer of approximately $403.1 million of
deposits and the sale of approximately $48.0 million of loans. The
transaction also resulted in the transfer of $336.1 million of cash to the
purchaser of the branches.

William B. ("Brad") Kessel, the President and Chief Executive Officer of
Independent Bank Corporation, commented: "We are very pleased to report our
fifth consecutive quarter of profitability as well as further progress in
improving asset quality, as evidenced by a reduction in our non-performing
loans, loan net charge-offs and the provision for loan losses as compared to
the year ago quarter. Our capital initiatives remain centered on strategies
to convert the preferred stock owned by the U.S. Treasury ('UST') into common
stock and exit TARP. We are also focused on preserving the potential future
use of our net deferred tax asset, which totaled approximately $62.5 million
at Mar. 31, 2013, and on which we have established a full valuation
allowance. The potential future recovery of this valuation allowance
represents a source of capital that would be of meaningful value to our
shareholders."

The Company assesses whether a valuation allowance on its deferred tax assets
is necessary each quarter. Reversing or reducing the existing valuation
allowance requires the Company to conclude that the realization of the
deferred tax assets is "more likely than not." The ultimate realization of
this asset is primarily based on the Company generating future income. As the
Company continues to assess whether the valuation allowance on its deferred
tax assets is necessary in the future, it will focus on demonstrating a return
to sustainable profitability through the following primary criteria:

  oAchieving at least six consecutive quarters of profitability;
  oA forecast of future profitability that supports that the realization of
    the deferred tax assets is more likely than not; and
  oA forecast that future asset quality continues to be stable to improving
    and that other factors do not exist that could cause a significant adverse
    impact on future profitability.

Operating Results

The Company's net interest income totaled $19.6 million during the first
quarter of 2013, a decrease of $2.5 million, or 11.5%, from the year-ago
period, and a decrease of $1.3 million, or 6.3% from the fourth quarter of
2012. The Company's net interest income as a percent of average
interest-earning assets (the "net interest margin") was 4.21% during the first
quarter of 2013 compared to 4.14% in the year ago period, and 3.96% in the
fourth quarter of 2012. The decrease in net interest income is primarily due
to a decline in average interest-earning assets resulting from the
aforementioned branch sale. The increase in the net interest margin is due
primarily to a change in asset mix, as lower yielding interest-bearing cash
balances and short-term investments decreased following the branch sale.
Average interest-earning assets were $1.87 billion in the first quarter of
2013 compared to $2.14 billion in the year ago quarter and $2.10 billion in
the fourth quarter of 2012.

Non-interest income totaled $11.1 million in the first quarter of 2013,
compared to $14.6 million in the year-ago period, representing a decrease of
$3.5 million, or 24.1%. Service charges on deposit accounts, interchange
income and other non-interest income all declined primarily reflecting the
impact of the branch sale. In addition, the Company recorded a reduction in
non-interest income of $1.0 million in the first quarter of 2013 (as compared
to a reduction of $0.2 million in the first quarter of 2012), due to an
increase in the fair value of the warrant issued to the UST. The increase in
the fair value of this warrant primarily reflects the significant increase in
the Company's common stock price during the first three months of 2013. 

Non-interest expense totaled $25.5 million in the first quarter of 2013,
compared to $28.0 million in the year-ago period representing a decrease of
$2.6 million, or 9.2%. The branch sale had the most significant impact on
the declines in most of the categories of non-interest expenses. Loan and
collection expenses (down $0.7 million) and net losses on other real estate
("ORE") and repossessed assets (down $0.3 million) declined due primarily to
reduced levels of non-performing loans, commercial watch credits and ORE. In
addition, credit card and bank service fees (down $0.3 million) and vehicle
service contract counterparty contingencies (down $0.3 million) declined due
primarily to a decrease in the size of the Company's payment plan receivables
portfolio. The first quarter of 2012 included a $1.4 million one-time
reduction in other non-interest expense related to the reversal of a
previously established accrual at Mepco Finance Corporation that was
determined to no longer be necessary.

Asset Quality

Commenting on asset quality, President and CEO Kessel added: "Our provision
for loan losses decreased by $5.8 million, or 113.5%, in the first quarter of
2013 as compared to the year-ago level, primarily reflecting a reduction in
non-performing loans, a lower level of watch credits, reduced loan net
charge-offs, and an overall decline in total loan balances. Since Mar. 31,
2012, non-performing loans and commercial loan watch credits have declined by
approximately 46% and 30%, respectively. In addition, thirty- to eighty-nine
day delinquency rates at Mar. 31, 2013 were 0.61% for commercial loans and
1.47% for mortgage and consumer loans. These delinquency rates continue to be
well managed as we strive to further improve asset quality and further reduce
credit related costs."

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

Loan Type                                    3/31/2013 12/31/2012 3/31/2012
                                            (Dollars in Thousands)
Commercial                                  $ 11,595      $ 14,753   $ 24,595
Consumer/installment                        2,169         2,343      3,113
Mortgage                                    14,081        15,736     23,544
Payment plan receivables^(2)                35            104        481
 Total                                     $ 27,880      $ 32,936   $ 51,733
Ratio of non-performing loans to total      2.00%         2.32%      3.37%
portfolio loans
Ratio of non-performing assets to total     2.45%         2.92%      3.42%
assets
Ratio of the allowance for loan losses to   146.22%       134.43%    108.26%
non-performing loans



(1) Excludes loans that are classified as "troubled debt restructured" that
    are still performing.
    Represents payment plans for which no payments have been received for 90
    days or more and for which Mepco has not yet completed the process to
(2) charge the applicable counterparty for the balance due. These balances
    exclude receivables due from Mepco counterparties related to the
    cancellation of payment plan receivables.

Non-performing loans have declined by $5.1 million, or 15.4%, since year-end
2012. All categories of non-performing loans declined; the principal
decreases since year-end 2012 were in commercial loans and residential
mortgage loans. The decline in non-performing loans primarily reflects loan
net charge-offs, pay-offs, negotiated transactions and the migration of loans
into ORE during 2013. Non-performing commercial loans have declined by $66.5
million, or 85.1%, since they peaked in 2008. Non-performing retail
(residential mortgage and consumer/installment) loans have declined by $42.9
million, or 72.5%, since they peaked in 2009. Other real estate and
repossessed assets totaled $23.6 million at Mar. 31, 2013, compared to $26.1
million at Dec. 31, 2012.

The provision for loan losses was a credit of $0.7 million and an expense of
$5.1 million in the first quarters of 2013 and 2012, respectively. The level
of the provision for loan losses in each period reflects the Company's overall
assessment of the allowance for loan losses, taking into consideration factors
such as loan mix, levels of non-performing and classified loans and loan net
charge-offs. Loan net charge-offs were $2.8 million (0.82% annualized of
average loans) in the first quarter of 2013, compared to $8.0 million (2.07%
annualized of average loans) in the first quarter of 2012. The decline in
first quarter 2013 loan net charge-offs compared to year ago levels is
primarily due to a $2.2 million decline in commercial loan net charge-offs and
a $2.7 million decline in mortgage loan net charge-offs. At Mar. 31, 2013,
the allowance for loan losses totaled $40.8 million, or 2.93% of portfolio
loans, compared to $44.3 million, or 3.12% of portfolio loans, at Dec. 31,
2012.

Balance Sheet, Liquidity and Capital

Total assets were $2.11 billion at Mar. 31, 2013, an increase of $81.5 million
from Dec. 31, 2012. Loans, excluding loans held for sale, were $1.39 billion
at Mar. 31, 2013, compared to $1.42 billion at Dec. 31, 2012. Deposits
totaled $1.85 billion at Mar. 31, 2012, an increase of $71.3 million from Dec.
31, 2012. The increase in deposits is primarily due to growth in checking and
savings accounts.

Cash and cash equivalents totaled $221.6 million at Mar. 31, 2013, versus
$179.8 million at Dec. 31, 2012. Securities available for sale totaled $283.9
million at Mar. 31, 2013, versus $208.4 million at Dec. 31, 2012. This $75.5
million increase is primarily due to the purchase of residential
mortgage-backed securities and municipal securities during the first quarter
of 2013.

Total shareholders' equity was $144.1 million at Mar. 31, 2013, or 6.84% of
total assets. Tangible common equity totaled $55.0 million at Mar. 31, 2013,
or $5.81 per share. The Company's wholly owned subsidiary, Independent Bank,
remains "well capitalized" for regulatory purposes with the following ratios:

                                                         Well

                                                         Capitalized

Regulatory Capital Ratios              3/31/2013 12/31/2012 Minimum
                                                         

Tier 1 capital to average total assets 9.55%     8.26%      5.00%
Tier 1 capital to risk-weighted assets 14.39%    13.67%     6.00%
Total capital to risk-weighted assets  15.67%    14.95%     10.00%

About Independent Bank Corporation

Independent Bank Corporation (Nasdaq Symbol: IBCP) is a Michigan-based bank
holding company with total assets of approximately $2.1 billion. Founded as
First National Bank of Ionia in 1864, Independent Bank Corporation now
operates convenient locations 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 title services. 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 website at: www.IndependentBank.com.

Any statements in this news release that are not historical facts are
forward-looking statements as defined in the Private Securities Litigation
Reform Act of 1995. Words such as "expect," "believe," "intend," "estimate,"
"project," "may" and similar expressions are intended to identify
forward-looking statements. These forward-looking statements are predicated on
management's beliefs and assumptions based on information known to Independent
Bank Corporation's management as of the date of this news release and do not
purport to speak as of any other date. Forward-looking statements may include
descriptions of plans and objectives of Independent Bank Corporation's
management for future operations, products or services, and forecasts of the
Company's revenue, earnings or other measures of economic performance,
including statements of profitability, estimates of credit quality trends, and
statements about the potential value of our deferred tax assets. Such
statements reflect the view of Independent Bank Corporation's management as of
this date with respect to future events and are not guarantees of future
performance. These forward-looking statements involve assumptions and are
subject to substantial risks and uncertainties, such as changes in Independent
Bank Corporation's plans, objectives, expectations and intentions. Should one
or more of these risks materialize or should underlying beliefs or assumptions
prove incorrect, the Company's actual results could differ materially from
those discussed. Factors that could cause or contribute to such differences
include the ability of Independent Bank Corporation to meet the objectives of
its capital restoration plan, the ability of Independent Bank to remain
well-capitalized under federal regulatory standards, the pace of economic
recovery within Michigan and beyond, our ability to collect receivables from
Mepco Finance Corporation's counterparties related to cancellations of payment
plans, changes in interest rates, changes in the accounting treatment of any
particular item, the results of regulatory examinations, changes in industries
where the Company has a concentration of loans, changes in the level of fee
income, changes in general economic conditions and related credit and market
conditions, and the impact of regulatory responses to any of the foregoing.
Forward-looking statements speak only as of the date they are made.
Independent Bank Corporation does not undertake to update forward-looking
statements to reflect facts, circumstances, assumptions or events that occur
after the date the forward-looking statements are made. For any
forward-looking statements made in this news release or in any documents,
Independent Bank Corporation claims the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation
Reform Act of 1995.

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Financial Condition
                                          March 31,            December 31,
                                          2013                 2012
                                          (unaudited)
Assets                                    (In thousands, except share amounts)
Cash and due from banks              $    51,489         $         55,487
Interest bearing deposits                 170,141                  124,295
Cash and Cash Equivalents                 221,630                  179,782
Interest bearing deposits - time          6,973                    -
Trading securities                        201                      110
Securities available for sale             283,934                  208,413
Federal Home Loan Bank and Federal        20,838                   20,838
Reserve Bank stock, at cost
Loans held for sale, carried at fair      37,554                   47,487
value
Loans held for sale, carried at           -                        3,292
lower of cost or fair value
Loans
 Commercial                              612,331                  617,258
 Mortgage                                515,796                  527,340
 Installment                           184,424                  189,849
 Payment plan receivables                78,311                   84,692
Total Loans                               1,390,862                1,419,139
 Allowance for loan losses               (40,765)                 (44,275)
Net Loans                                 1,350,097                1,374,864
Other real estate and repossessed         23,639                   26,133
assets
Property and equipment, net               47,440                   47,016
Bank-owned life insurance                 51,228                   50,890
Other intangibles                         3,772                    3,975
Capitalized mortgage loan servicing       11,590                   11,013
rights
Prepaid FDIC deposit insurance            8,851                    9,448
assessment
Vehicle service contract                  18,270                   18,449
counterparty receivables, net
Accrued income and other assets           19,330                   22,157
Total Assets                         $    2,105,347      $         2,023,867
Liabilities and Shareholders' Equity
Deposits
 Non-interest bearing               $    504,614        $         488,126
 Savings and interest-bearing            919,098                  871,238
checking
 Reciprocal                              45,852                   33,242
 Retail time                             366,635                  372,340
 Brokered time                           14,594                   14,591
Total Deposits                            1,850,793                1,779,537
Other borrowings                          17,630                   17,625
Subordinated debentures                   50,175                   50,175
Vehicle service contract                  6,443                    7,725
counterparty payables
Accrued expenses and other                36,221                   33,830
liabilities
Total Liabilities                         1,961,262                1,888,892
Shareholders' Equity
 Convertible preferred stock, no
par value, 200,000 shares
authorized;
 74,426 shares issued and
outstanding at March 31, 2013 and
 December 31, 2012; liquidation
preference: $86,191 at March 31,
 2013 and $85,150 at December 31,      85,299                   84,204
2012
 Common stock, no par value,
500,000,000 shares authorized;
 issued and outstanding:
9,473,462 shares at March 31, 2013
 and 9,093,732 shares at              253,437                  251,237
December 31, 2012
 Accumulated deficit                     (187,698)                (192,408)
 Accumulated other comprehensive         (6,953)                  (8,058)
loss
Total Shareholders' Equity                144,085                  134,975
Total Liabilities and Shareholders'  $    2,105,347      $         2,023,867
Equity



INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
                                            Three Months Ended
                                            March 31, December 31, March 31,
                                            2013      2012         2012
                                            (unaudited)
                                            (In thousands)
Interest Income
 Interest and fees on loans             $  20,710    $   22,353   $  24,346
 Interest on securities
 Taxable                                 670           688         658
 Tax-exempt                              238           243         296
 Other investments                         332           430         396
Total Interest Income                       21,950        23,714      25,696
Interest Expense
 Deposits                                  1,529         1,961       2,424
 Other borrowings                          865           879         1,172
Total Interest Expense                      2,394         2,840       3,596
Net Interest Income                         19,556        20,874      22,100
Provision for loan losses                   (691)         449         5,131
Net Interest Income After Provision for     20,247        20,425      16,969
Loan Losses
Non-interest Income
 Service charges on deposit accounts       3,406         4,395       4,201
 Interchange income                        1,757         2,135       2,322
 Net gains (losses) on assets
 Mortgage loans                          3,637         5,282       3,860
 Securities                              84            72          684
 Other than temporary impairment loss
on securities
 Total impairment loss                 -             (7)         (177)
 Loss recognized in other              -             -           -
comprehensive loss
 Net impairment loss recognized      -             (7)         (177)
in earnings
 Mortgage loan servicing                   622           882         736
 Title insurance fees                      484           484         508
 Increase in fair value of U.S.            (1,045)       (74)        (154)
Treasury warrant
 Net gain on branch sale                   -             5,402       -
 Other                                     2,123         2,826       2,604
Total Non-interest Income                   11,068        21,397      14,584
Non-interest Expense
 Compensation and employee benefits        11,307        14,385      12,482
 Occupancy, net                            2,424         2,416       2,716
 Loan and collection                       2,226         1,836       2,890
 Data processing                           1,916         2,049       1,933
 Furniture, fixtures and equipment         1,032         1,145       1,196
 Communications                            780           886         973
 Legal and professional                    692           1,058       897
 Provision for loss reimbursement on       663           361         432
sold loans
 Net losses on other real estate and       652           943         987
repossessed assets
 FDIC deposit insurance                    630           817         857
 Advertising                               570           652         556
 Interchange expense                       410           478         406
 Credit card and bank service fees         334           383         651
 Vehicle service contract counterparty     127           551         471
contingencies
 Recoveries related to unfunded lending    (19)          (91)        (47)
commitments
 Other                                     1,729         2,038       649
Total Non-interest Expense                  25,473        29,907      28,049
Income Before Income Tax                    5,842         11,915      3,504
Income tax expense                          35            -           -
   $  5,807     $   11,915   $  3,504
Net Income
Preferred stock dividends and discount      1,095         1,106       1,056
accretion
Net Income Applicable to Common Stock    $  4,712     $   10,809   $  2,448



INDEPENDENT BANK CORPORATION AND SUBSIDIARIES

Selected Financial Data
                                       Three Months Ended
                                       March 31,   December 31,   March 31,
                                       2013        2012           2012
                                       (unaudited)
Per Common Share Data
Net Income Per Common Share (A)
 Basic (B)                          $ 0.51       $  1.21       $ 0.29
 Diluted (C)                          0.27          0.36         0.07
Cash dividends declared per common     0.00          0.00         0.00
share
Selected Ratios (D)
As a Percent of Average
Interest-Earning Assets
 Interest income                      4.73       %  4.50       % 4.82       %
 Interest expense                     0.52          0.54         0.68
 Net interest income                  4.21          3.96         4.14
Net Income to (A)
 Average common shareholders'         34.76      %  99.01      % 42.29      %
equity
 Average assets                       0.93          1.87         0.42
Average Shares
 Basic (B)                            9,266,072     8,921,761    8,533,584
 Diluted (C)                          21,831,316    33,301,197   47,318,098



    These amounts are calculated using net income applicable to common stock.
(A) Dividends on convertible preferred stock are added back in the diluted per
    share calculation.
    Average shares of common stock for basic net income per common share
(B) include shares issued and outstanding during the period and participating
    share awards.
    Average shares of common stock for diluted net income per common share
    include shares to be issued upon conversion of convertible preferred
(C) stock, shares to be issued upon exercise of common stock warrants, shares
    to be issued upon exercise of stock options, restricted stock units and
    stock units for a deferred compensation plan for non-employee directors.
(D) Ratios have been annualized.



SOURCE Independent Bank Corporation

Website: http://www.independentbank.com
Contact: William B. Kessel, President and CEO, 616.447.3933, or Robert N.
Shuster, Chief Financial Officer, 616.522.1765
 
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