Independent Bank Corporation Reports 2021 Fourth Quarter and Full Year Results

Source: Nasdaq GlobeNewswire / 27 Jan 2022 07:59:01 America/New_York

GRAND RAPIDS, Mich., Jan. 27, 2022 (GLOBE NEWSWIRE) -- Independent Bank Corporation (NASDAQ: IBCP) reported fourth quarter 2021 net income of $12.5 million, or $0.58 per diluted share, versus net income of $17.0 million, or $0.77 per diluted share, in the prior-year period. For the year ended December 31, 2021, the Company reported net income of $62.9 million, or $2.88 per diluted share, compared to net income of $56.2 million, or $2.53 per diluted share, in 2020. The increase in full year 2021 net income as compared to 2020 primarily reflects an increase in net interest income and a decrease in provision for credit losses that were partially offset by a decrease in non-interest income and an increase in non-interest expense and income tax expense.

Fourth quarter 2021 highlights include:

An increase in net interest income of 10.6% over the fourth quarter of 2020;
Net gains on mortgage loans of $5.6 million and total mortgage loan origination volume of $424.6 million;
Deposit net growth of $105.0 million (or 10.4% annualized);
Continued strong asset quality metrics as evidenced by low loan charge-offs during the quarter as well as a low level of non-performing loans and non-performing assets; and
The payment of a 21 cent per share dividend on common stock on November 15, 2021.

Full year 2021 highlights include:

Increases in net income and diluted earnings per share of 12.0% and 13.8%, respectively, compared to 2020;
Return on average assets and return on average equity of 1.41% and 16.13%, respectively;
Net gains on mortgage loans of $35.9 million and total mortgage loan origination volume of $1.9 billion;
Net growth in portfolio loans of $171.4 million (or 6.3%);
Deposit net growth of $479.7 million (or 13.2 %);
Paid $0.84 in dividends which was a 5.0% increase compared to 2020; and
Tangible common equity per share increased by 6.1% to $17.33 from $16.33.

William B. (“Brad”) Kessel, the President and Chief Executive Officer of Independent Bank Corporation, commented: “I am very pleased with the high level of performance by our team generating strong core results for yet another quarter and the full year 2021. We continue to execute on our strategies of investing in people and technology. During the fourth quarter we saw good growth in net interest income, stabilization of our net interest margin and across the board loan growth, net of PPP. Our commercial pipeline is at its highest level in many quarters. Deposit gathering continues to be robust both via existing customers as well as through the addition of new customers. In addition, while mortgage gains have tapered down they continue to be solid and our card strategies are generating positive growth in interchange revenue. On the asset quality front, I could not be more pleased, with our net recoveries for the full year, as well as commercial watch credits at 3.10% of the portfolio, and a very low level of past due loans. We are excited about the momentum we have in our markets and look forward to continuing these trends into 2022.”

Significant items impacting comparable quarterly and year to date 2021 and 2020 results include the following:

Changes in the fair value due to price of capitalized mortgage loan servicing rights (the “MSR Changes”) of a positive $0.6 million ($0.02 per diluted share, after taxes) and $3.4 million ($0.12 per diluted share, after taxes) for the three-months and full-year ended December 31, 2021, respectively, as compared to a negative $0.9 million ($0.03 per diluted share, after taxes) and a negative $10.8 million ($0.39 per diluted share, after taxes) for the three-months and full year ended December 31, 2020 respectively.

Operating Results

The Company’s net interest income totaled $34.3 million during the fourth quarter of 2021, an increase of $3.3 million, or 10.6% from the year-ago period, and up $0.5 million, or 1.4%, from the third quarter of 2021. The Company’s tax equivalent net interest income as a percent of average interest-earning assets (the “net interest margin”) was 3.13% during the fourth quarter of 2021, compared to 3.12% in the year-ago period, and 3.18% in the third quarter of 2021. The year-over-year quarterly increase in net interest income is due to an increase in average interest-earning assets and the net interest margin. Average interest-earning assets were $4.43 billion in the fourth quarter of 2021, compared to $3.98 billion in the year ago quarter and $4.30 billion in the third quarter of 2021.

For the full year 2021, net interest income totaled $129.8 million, an increase of $6.2 million, or 5.0% from 2020. The Company’s net interest margin for the full year of 2021 was 3.10% compared to 3.34% in 2020. The increase in net interest income for the full year of 2021 compared to 2020 is due to an increase in average interest-earning assets that was partially offset by a decline in the net interest margin.

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

In addition, commercial loan balances, interest income and yields have been impacted by Paycheck Protection Program (“PPP”) lending activity. PPP lending activity is summarized in the following tables:

	PPP – Round 1
At or for the three months ended	12/31/2021			9/30/2021					12/31/2020
	#	(000’s)			#	(000’s)				#	(000’s)
Loans outstanding at period end	6	$	197		20	$	1,262			1,483	$	169,782
Average loans outstanding			774		-		2,699					220,214
Cumulative forgiveness applications submitted	2,124		261,088		2,085		260,015			808		122,962
Cumulative forgiveness applications approved	2,122		261,047		2,082		259,613			755		91,972
Net fees accreted into interest income			-		-		381					3,250
Net unaccreted fees at period end					-		-					3,216
Average loan yield			-		-		11.51	%				6.91	%

Note: PPP – Round 1 loan activity began in the second quarter of 2020.

	PPP – Round 2
At or for the three months ended	12/31/2021				9/30/2021					3/31/2021
	#	(000’s)				#	(000’s)				#	(000’s)
Loans outstanding at period end	180	$	26,167			806	$	88,888			1,250	$	128,240
Average loans outstanding			58,895			-		110,276			-		72,011
Cumulative forgiveness applications submitted	1,401		115,568			831		51,370			-		-
Cumulative forgiveness applications approved	1,372		109,405			810		50,535			-		-
Net fees accreted into interest income			2,372			-		2,249			-		229
Net unaccreted fees at period end			806			-		3,178			-		5,454
Average loan yield			17.11	%		-		9.17	%		-		2.25	%

Note: PPP – Round 2 loan activity began in the first quarter of 2021.

Non-interest income totaled $15.8 million and $76.6 million, respectively, for the fourth quarter and full year 2021, compared to $22.4 million and $80.7 million in the respective comparable year ago periods. These changes were primarily due to variances in mortgage banking related revenues (net gains on mortgage loans and mortgage loan servicing, net).

Net gains on mortgage loans in the fourth quarters of 2021 and 2020, were approximately $5.6 million and $15.9 million, respectively. For full year 2021, net gains on mortgage loans totaled $35.9 million compared to $62.6 million in 2020. The decrease in net gains on mortgage loans in 2021 was primarily due to a decrease in mortgage loan sales volume, as well as a decrease in profit margins on mortgage loan sales and fair value adjustments on the mortgage loan pipeline.

Mortgage loan servicing, net, generated a gain of $1.3 million and a loss of $0.4 million in the fourth quarters of 2021 and 2020, respectively. For full year 2021 and 2020, mortgage loan servicing, net, generated a gain of $5.7 million and loss of $9.4 million, respectively. The significant variances in mortgage loan servicing, net are primarily due to changes in the fair value of capitalized mortgage loan servicing rights associated with changes in mortgage loan interest rates and expected future prepayment levels. Mortgage loan servicing, net activity is summarized in the following table:

	Three Months Ended						Twelve Months Ended
	12/31/2021			12/31/2020			12/31/2021			12/31/2020
Mortgage loan servicing, net:	(Dollars in thousands)
Revenue, net	$	2,044		$	1,812		$	7,853			$	6,874
Fair value change due to price		567			(892	)		3,380				(10,833	)
Fair value change due to pay-downs		(1,342	)		(1,304	)		(5,488	)			(5,391	)
Total	$	1,269		$	(384	)	$	5,745			$	(9,350	)

Net gain(loss) on securities available for sale totaled $(0.01) million and $1.41 million in fourth quarter and full year 2021, respectively, compared to 0.01 million and $0.27 million in the prior year fourth quarter and full year, respectively. The increase in gain during the full year of 2021 was related to the divestiture of a group of mortgage backed securities in the first quarter of 2021.

Non-interest expenses totaled $34.0 million in the fourth quarter of 2021, compared to $32.7 million in the year-ago period. For full year 2021, non-interest expenses totaled $131.0 million versus $122.4 million in 2020. These year-over-year increases in non-interest expense are primarily due to increases in compensation and employee benefits (for the year to date period), data processing, interchange, costs(recoveries) related to the reserve for unfunded lending commitments and other expenses. The increase in compensation and employee benefits in 2021 is due to several factors, including, wage increases that were generally effective at the start of the year, an increase in lending personnel, increased overtime primarily associated with a data processing conversion, higher payroll taxes due to the increase in compensation and higher health care insurance costs (these costs during 2020 were unusually low due to the various COVID related lock-downs). The increase in data processing costs is primarily due to new software and technology product and service additions. The increase in interchange expense is due primarily to changes in transaction volume and transaction channel mix. The increase in expense related to the reserve for unfunded lending commitments is due to higher committed unfunded balances.

The Company recorded an income tax expense of $3.0 million and $14.4 million in the fourth quarter and full-year 2021, respectively. This compares to an income tax expense of $4.1 million and $13.3 million in the fourth quarter and full-year 2020, respectively. The changes in income tax expense primarily reflect changes in pre-tax earnings in 2021 relative to 2020.

Asset Quality

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

	12/31/2021				9/30/2021				% change vs. prior quarter
Loan Type	#	$ (000’s)		% of portfolio	#	$ (000's)		% of portfolio	#	$
Commercial	-	$	-	0.0%	-	$	-	0.0%	none	none
Mortgage	22		2,278	0.2%	39		5,901	0.5%	(43.6)%	(61.4)%
Installment	1		55	0.0%	7		109	0.0%	(85.7)%	(49.5)%
Total	23	$	2,333	0.1%	46	$	6,010	0.2%	(50.0)%	(61.2)%

Loans serviced for others	46	$	5,163	0.2%	64	$	7,986	0.3%	(28.1)%	(35.3)%

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

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

Loan Type	12/31/2021			12/31/2020			12/31/2019
	(Dollars in thousands)
Commercial	$	62		$	1,440		$	1,377
Mortgage		4,914			6,353			7,996
Installment		569			519			805
Subtotal		5,545			8,312			10,178
Less – government guaranteed loans		435			439			646
Total non-performing loans	$	5,110		$	7,873		$	9,532
Ratio of non-performing loans to total portfolio loans		0.18	%		0.29	%		0.35	%
Ratio of non-performing assets to total assets		0.11	%		0.21	%		0.32	%
Ratio of the allowance for loan losses to non-performing loans		924.70	%		450.01	%		274.32	%

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

Non-performing loans have decreased $2.8 million from December 31, 2020, due primarily to a decrease in non-performing commercial loans and mortgage loans.

The provision for credit losses was an expense of $0.6 million and a credit of $0.4 million in the fourth quarters of 2021 and 2020, respectively. The provision for credit losses was a credit of $1.9 million and an expense of $12.5 million in the full year of 2021 and 2020, respectively. The year-to-date decreases in the provision for credit losses in 2021 compared to 2020, were primarily the result of a decline in the adjustment to allocations based on subjective factors and the specific reserve allocations, with an increase in recoveries of loans previously charged off. In particular, the higher full year provision for credit losses in 2020 included an $11.2 million (or 128.2%) increase in the qualitative/subjective portion of the allowance for credit losses. That increase in 2020 principally reflected the unique challenges and prevailing economic uncertainty resulting from the COVID-19 pandemic and the potential impact on the loan portfolio.

The Company recorded loan net charge offs of $0.2 million and loan net recoveries of $0.1 million in the fourth quarters of 2021 and 2020, respectively. Full year 2021 and 2020, the Company recorded loan net recoveries of $2.0 million and loan net charge-offs of $3.2 million, respectively.

The allowance for credit losses totaled $47.3 million at December 31, 2021 compared to $35.4 million at December 31, 2020. The increase from December 31, 2020 is attributed to 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 impact of the adoption of CECL was an increase in the allowance for credit losses of $11.7 million. At December 31, 2021, the allowance for credit losses equaled 1.63% of total portfolio loans (1.64% when excluding PPP loans) under CECL, compared to 1.30% of total portfolio loans (1.38% when excluding PPP loans) at December 31, 2020, under the probable incurred loss methodology.

Balance Sheet, Liquidity and Capital

Total assets were $4.70 billion at December 31, 2021, an increase of $500.7 million from December 31, 2020. Loans, excluding loans held for sale, were $2.91 billion at December 31, 2021, compared to $2.73 billion at December 31, 2020. Deposits totaled $4.12 billion at December 31, 2021, an increase of $479.7 million from December 31, 2020. This increase is primarily due to growth in non-interest bearing, savings and interest-bearing checking and reciprocal and time deposit account balances.

Cash and cash equivalents totaled $109.5 million at December 31, 2021, versus $118.7 million at December 31, 2020. Securities available for sale totaled $1.41 billion at December 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.

Total shareholders’ equity was $398.5 million at December 31, 2021, or 8.47% of total assets. Tangible common equity totaled $366.8 million at December 31, 2021, or $17.33 per share. The Company’s wholly owned subsidiary, Independent Bank, remains significantly above “well capitalized” for regulatory purposes with the following ratios:

Regulatory Capital Ratios	12/31/2021	12/31/2020	Well Capitalized Minimum
Tier 1 capital to average total assets	8.57%	8.81%	5.00%
Tier 1 common equity to risk-weighted assets	11.80%	12.81%	6.50%
Tier 1 capital to risk-weighted assets	11.80%	12.81%	8.00%
Total capital to risk-weighted assets	13.05%	14.06%	10.00%

Share Repurchase Plan

On December 17, 2021, 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, 2022. For the full year 2021, the Company repurchased 814,910 shares at a weighted average price of $21.19 per share.

Earnings Conference Call

Brad Kessel, President and CEO, Gavin A. Mohr, CFO and Joel Rahn, EVP-Commercial Banking will review the quarterly results in a conference call for investors and analysts beginning at 11:00 am ET on Thursday, January 27, 2022.

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/ibcp220127.html.

A playback of the call can be accessed by dialing 1-877-344-7529 (Conference ID # 8699212). The replay will be available through February 3, 2022.

About Independent Bank Corporation

Independent Bank Corporation (NASDAQ: IBCP) is a Michigan-based bank holding company with total assets of approximately $4.7 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.

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.

Contact:
William B. Kessel, President and CEO, 616.447.3933
Gavin A. Mohr, Chief Financial Officer, 616.447.3929

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Financial Condition
	December 31,
		2021			2020
	(unaudited)
	(In thousands, except share
	amounts)
Assets
Cash and due from banks	$	51,069		$	56,006
Interest bearing deposits		58,404			62,699
Cash and Cash Equivalents		109,473			118,705
Securities available for sale		1,412,830			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		55,470			92,434
Loans held for sale, carried at lower of cost or fair value		34,811			-
Loans
Commercial		1,203,581			1,242,415
Mortgage		1,139,659			1,015,926
Installment		561,805			475,337
Total Loans		2,905,045			2,733,678
Allowance for credit losses ⁽¹⁾		(47,252	)		(35,429	)
Net Loans		2,857,793			2,698,249
Other real estate and repossessed assets		245			766
Property and equipment, net		36,404			36,127
Bank-owned life insurance		55,279			55,180
Capitalized mortgage loan servicing rights, carried at fair value		26,232			16,904
Other intangibles		3,336			4,306
Goodwill		28,300			28,300
Accrued income and other assets		66,140			62,456
Total Assets	$	4,704,740		$	4,204,013

Liabilities and Shareholders' Equity
Deposits
Non-interest bearing	$	1,321,601		$	1,153,473
Savings and interest-bearing checking		1,897,487			1,526,465
Reciprocal		586,626			556,185
Time		308,438			287,402
Brokered time		2,938			113,830
Total Deposits		4,117,090			3,637,355
Other borrowings		30,009			30,012
Subordinated debt		39,357			39,281
Subordinated debentures		39,592			39,524
Accrued expenses and other liabilities		80,208			68,319
Total Liabilities		4,306,256			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:
21,171,036 shares at December 31, 2021 and 21,853,800 shares at December 31, 2020		323,401			339,353
Retained earnings		74,582			40,145
Accumulated other comprehensive income		501			10,024
Total Shareholders’ Equity		398,484			389,522
Total Liabilities and Shareholders’ Equity	$	4,704,740		$	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.

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations

	Three Months Ended									Twelve Months Ended
	December 31,			September 30,			December 31,			December 31,
		2021			2021			2020			2021			2020
	(unaudited)
Interest Income	(In thousands, except per share amounts)
Interest and fees on loans	$	30,316		$	30,132		$	31,139		$	116,644		$	123,159
Interest on securities available for sale
Taxable		4,114			3,922			3,299			14,488			12,655
Tax-exempt		1,577			1,597			789			6,102			2,926
Other investments		217			204			235			846			1,089
Total Interest Income		36,224			35,855			35,462			138,080			139,829
Interest Expense
Deposits		977			1,090			3,516			4,465			12,666
Other borrowings and subordinated debt and debentures		962			962			953			3,850			3,551
Total Interest Expense		1,939			2,052			4,469			8,315			16,217
Net Interest Income		34,285			33,803			30,993			129,765			123,612
Provision for credit losses ⁽¹⁾		630			(659	)		(421	)		(1,928	)		12,463
Net Interest Income After Provision for Credit Losses		33,655			34,462			31,414			131,693			111,149
Non-interest Income
Interchange income		3,306			4,237			2,819			14,045			11,230
Service charges on deposit accounts		2,992			2,944			2,218			10,170			8,517
Net gains (losses) on assets
Mortgage loans		5,600			8,361			15,873			35,880			62,560
Securities available for sale		(10	)		5			14			1,411			267
Mortgage loan servicing, net		1,269			1,271			(384	)		5,745			(9,350	)
Other		2,614			2,877			1,823			9,392			7,521
Total Non-interest Income		15,771			19,695			22,363			76,643			80,745
Non-interest Expense
Compensation and employee benefits		19,905			21,659			20,039			79,969			74,781
Data processing		2,851			3,022			2,374			10,823			8,534
Occupancy, net		2,216			2,082			2,120			8,794			8,938
Interchange expense		1,083			1,202			926			4,434			3,342
Furniture, fixtures and equipment		1,060			1,075			964			4,172			4,089
Loan and collection		819			735			708			3,172			3,037
Communications		739			683			785			3,080			3,194
Legal and professional		534			513			600			2,068			2,027
Advertising		599			666			594			1,918			2,230
Conversion related expenses		191			275			1,541			1,827			2,586
FDIC deposit insurance		413			346			385			1,396			1,596
Costs (recoveries) related to unfunded lending commitments		844			369			(8	)		1,207			263
Branch closure costs		-			-			-			-			417
Net (gains) losses on other real estate and repossessed assets		(28	)		(28	)		(82	)		(230	)		64
Other		2,728			1,913			1,761			8,393			7,315
Total Non-interest Expense		33,954			34,512			32,707			131,023			122,413
Income Before Income Tax		15,472			19,645			21,070			77,313			69,481
Income tax expense		2,964			3,683			4,084			14,418			13,329
Net Income	$	12,508		$	15,962		$	16,986		$	62,895		$	56,152
Net Income Per Common Share
Basic	$	0.59		$	0.74		$	0.78		$	2.91		$	2.56
Diluted	$	0.58		$	0.73		$	0.77		$	2.88		$	2.53


(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.

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Selected Financial Data

	December 31,			September 30,			June 30,			March 31,			December 31,
		2021			2021			2021			2021			2020
	(unaudited)
	(Dollars in thousands except per share data)
Three Months Ended
Net interest income	$	34,285		$	33,803		$	31,393		$	30,284		$	30,993
Provision for credit losses ⁽¹⁾		630			(659	)		(1,425	)		(474	)		(421	)
Non-interest income		15,771			19,695			14,771			26,406			22,363
Non-interest expense		33,954			34,512			32,536			30,021			32,707
Income before income tax		15,472			19,645			15,053			27,143			21,070
Income tax expense		2,964			3,683			2,665			5,106			4,084
Net income	$	12,508		$	15,962		$	12,388		$	22,037		$	16,986

Basic earnings per share	$	0.59		$	0.74		$	0.57		$	1.01		$	0.78
Diluted earnings per share		0.58			0.73			0.56			1.00			0.77
Cash dividend per share		0.21			0.21			0.21			0.21			0.20

Average shares outstanding		21,256,367			21,515,669			21,749,654			21,825,937			21,866,326
Average diluted shares outstanding		21,473,963			21,726,346			21,966,829			22,058,503			22,112,829

Performance Ratios
Return on average assets		1.07	%		1.40	%		1.12	%		2.10	%		1.61	%
Return on average equity		12.61			15.93			12.78			23.51			17.82
Efficiency ratio ⁽²⁾		66.68			63.47			69.24			53.48			60.59

As a Percent of Average Interest-Earning Assets⁽²⁾
Interest income		3.30	%		3.37	%		3.22	%		3.27	%		3.57	%
Interest expense		0.17			0.19			0.20			0.22			0.45
Net interest income		3.13			3.18			3.02			3.05			3.12

Average Balances
Loans	$	2,957,985		$	2,903,700		$	2,859,544		$	2,834,012		$	2,876,795
Securities available for sale		1,367,038			1,317,382			1,274,556			1,093,618			1,009,578
Total earning assets		4,433,400			4,296,662			4,223,570			4,047,952			3,984,080
Total assets		4,654,491			4,513,774			4,434,760			4,254,294			4,195,546
Deposits		4,069,901			3,934,937			3,879,715			3,698,811			3,632,758
Interest bearing liabilities		2,863,057			2,740,444			2,674,425			2,589,102			2,574,306
Shareholders' equity		393,477			397,542			388,780			380,111			379,232

End of Period
Capital
Tangible common equity ratio		7.85	%		8.02	%		8.21	%		8.08	%		8.56	%
Average equity to average assets		8.45			8.81			8.77			8.93			9.04
Common shareholders' equity per share
of common stock	$	18.82		$	18.76		$	18.30		$	17.79		$	17.82
Tangible common equity per share
of common stock		17.33			17.27			16.82			16.30			16.33
Total shares outstanding		21,171,036			21,321,092			21,632,912			21,773,734			21,853,800

Selected Balances
Loans	$	2,905,045		$	2,883,978		$	2,814,559		$	2,784,224		$	2,733,678
Securities available for sale		1,412,830			1,348,378			1,330,660			1,247,280			1,072,159
Total earning assets		4,484,987			4,405,189			4,246,410			4,209,017			3,979,397
Total assets		4,704,740			4,622,340			4,461,272			4,426,440			4,204,013
Deposits		4,117,090			4,012,068			3,862,466			3,858,575			3,637,355
Interest bearing liabilities		2,865,090			2,784,554			2,633,747			2,626,280			2,553,418
Shareholders' equity		398,484			400,031			395,974			387,329			389,522

(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%.

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						Twelve Months Ended
	December 31,						December 31,
		2021			2020			2021			2020
	(Dollars in thousands)
Net Interest Margin, Fully Taxable
Equivalent ("FTE")

Net interest income	$	34,285		$	30,993		$	129,765		$	123,612
Add: taxable equivalent adjustment		492			221			1,866			823
Net interest income - taxable equivalent	$	34,777		$	31,214		$	131,631		$	124,435
Net interest margin (GAAP) ⁽¹⁾		3.08	%		3.10	%		3.06	%		3.32	%
Net interest margin (FTE) ⁽¹⁾		3.13	%		3.12	%		3.10	%		3.34	%

(1) Annualized for three months ended December 31, 2021 and 2020.

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

Tangible Common Equity Ratio
	December 31,			September 30,			June 30,			March 31,			December 31,
		2021			2021			2021			2021			2020
	(Dollars in thousands)
Common shareholders' equity	$	398,484		$	400,031		$	395,974		$	387,329		$	389,522
Less:
Goodwill		28,300			28,300			28,300			28,300			28,300
Other intangibles		3,336			3,579			3,821			4,063			4,306
Tangible common equity	$	366,848		$	368,152		$	363,853		$	354,966		$	356,916

Total assets	$	4,704,740		$	4,622,340		$	4,461,272		$	4,426,440		$	4,204,013
Less:
Goodwill		28,300			28,300			28,300			28,300			28,300
Other intangibles		3,336			3,579			3,821			4,063			4,306
Tangible assets	$	4,673,104		$	4,590,461		$	4,429,151		$	4,394,077		$	4,171,407

Common equity ratio		8.47	%		8.65	%		8.88	%		8.75	%		9.27	%
Tangible common equity ratio		7.85	%		8.02	%		8.21	%		8.08	%		8.56	%

Tangible Common Equity per Share of Common Stock:

Common shareholders' equity	$	398,484		$	400,031		$	395,974		$	387,329		$	389,522
Tangible common equity	$	366,848		$	368,152		$	363,853		$	354,966		$	356,916
Shares of common stock
outstanding (in thousands)		21,171			21,321			21,633			21,774			21,854

Common shareholders' equity per share
of common stock	$	18.82		$	18.76		$	18.30		$	17.79		$	17.82
Tangible common equity per share
of common stock	$	17.33		$	17.27		$	16.82		$	16.30		$	16.33

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.

Independent Bank Corporation Reports 2021 Fourth Quarter and Full Year Results

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