Financial News

Independent Bank Corporation Reports 2008 Fourth Quarter And Full Year Results

IONIA, Mich., Jan. 26 /PRNewswire-FirstCall/ --

  • 2008 fourth quarter and full-year net loss applicable to common stock of $86.5 million ($3.80 per share) and $88.2 million ($3.88 per share), respectively. Fourth quarter and full year results were impacted by:

          -- A non-cash charge of $50.0 million  ($1.92 per share after tax)
             for goodwill impairment.  No impact on regulatory
             capital ratios or tangible equity.
          -- A non-cash charge of $26.8 million ($1.18 per share) that is
             included in income tax expense to establish a valuation
             allowance on deferred tax assets.
          -- A non-cash charge of $4.3 million ($0.12 per share after tax)
             for impairment of capitalized mortgage loan servicing rights.
          -- Securities losses of $6.9 million ($0.20 per share after tax)
             for the fourth quarter and $15.0 million ($0.43 per share after
             tax) for the full year.
          -- These items total $3.42 per share in the fourth quarter and
             $3.65 per share for the full year.

  • Pre-tax, pre-loan loss provision core operating earnings remain strong and improved in 2008 over 2007.
  • Company remains "well capitalized."
  • No executive officer bonuses for 2008 and all executive and senior officer salaries frozen at 2008 levels for 2009.

Independent Bank Corporation (Nasdaq: IBCP) reported a fourth quarter 2008 net loss applicable to common stock of $86.5 million, or $3.80 per share, versus net income from continuing operations of $2.3 million, or $0.10 per diluted share, in the prior-year period.

The net loss applicable to common stock for the year ended Dec. 31, 2008 was $88.2 million, or $3.88 per share, compared to net income from continuing operations of $10.0 million, or $0.44 per diluted share, for all of 2007.

The decrease in fourth quarter and full-year 2008 results compared to 2007 was primarily due to increases in the provision for loan losses, securities losses, impairment charges on capitalized mortgage loan servicing rights and goodwill, loan and collection expenses, losses on other real estate owned and income taxes (Including the aforementioned $26.8 million charge to establish a deferred tax evaluation allowance).

Michael M. Magee, President and CEO of Independent Bank Corporation, commented: "Our fourth quarter and full year results were adversely impacted by several large and unusual non-cash charges and securities losses. In addition, credit costs remained elevated as we continued to confront this unprecedented economic environment. Since we cannot control the external environment, our efforts remain focused on controlling internal operations, including improving asset quality, containing credit costs and reducing non-performing assets. Moreover, executive officer bonuses for 2008 were eliminated and salaries for all executive and senior officers were frozen at 2008 levels for 2009, as we continue to weather this time of uncertainty."

Operating Results

The Company's tax equivalent net interest income totaled $33.4 million during the fourth quarter of 2008, an increase of $1.9 million or 5.9% from the year-ago period, and a decrease of $1.6 million, or 4.6% from the third quarter of 2008. The Company's tax equivalent net interest income as a percent of average interest-earning assets (the "net interest margin") was 4.80% during the fourth quarter of 2008 compared to 4.22% in the year ago period, and 4.76% in the third quarter of 2008. Fourth quarter 2008 tax equivalent net interest income was adversely impacted by the following items: a $0.6 million increase in interest expense for declines in the fair values of interest rate swaps and caps that do not receive hedge accounting treatment; the elimination of $0.2 million in dividend income on Federal Home Loan Bank of Indianapolis stock due to a delay in its declaration; and a $0.5 million increase in the reversal of interest for loans placed on non-accrual. The total impact of these three items was $1.3 million.

Average interest-earning assets declined to $2.774 billion in the fourth quarter of 2008 compared to $2.974 billion in the year ago quarter and $2.930 billion in the third quarter of 2008. This decline in average interest-earning assets reflects decreases in the average balances of both investment securities and loans. Interest-earning assets were being reduced in order to improve regulatory capital ratios. In conjunction with the receipt of $72 million of additional capital on Dec. 12, 2008 through the U.S. Treasury's Capital Purchase Program, the Company is actively pursuing new lending opportunities. Such opportunities may be constrained by economic conditions in our markets, competition, credit approval requirements, and rate of return criteria.

Service charges on deposits totaled $6.0 million in the fourth quarter of 2008, a 6.6% decrease from the comparable period in 2007 due primarily to a decline in overdraft fees. VISA check card interchange income was unchanged at $1.4 million for the fourth quarter of 2008 compared to the year-ago period.

Securities losses totaled $6.9 million in the fourth quarter of 2008, versus losses of $1.0 million in the comparable period in 2007. The securities losses in the fourth quarter of 2008 include a decline in the fair value of trading securities of $0.7 million and a write down of $6.2 million (from a par value of $10 million to a fair value of $3.8 million) related to the dissolution of a money-market auction rate security and distribution of the underlying Bank of America preferred stock.

Gains on the sale of mortgage loans were $1.2 million in the fourth quarter of 2008, compared to $0.9 million in the year-ago quarter. The increase in gains relates primarily to a sharp increase in commitments to originate mortgage loans that are held for sale. This is due to a significant rise in refinancing activity resulting from lower mortgage loan interest rates in the last month of 2008.

Mortgage loan servicing generated a loss of $3.6 million in the fourth quarter of 2008, versus income of $0.4 million in the year-ago period. This decrease is primarily due to a $4.3 million impairment charge on capitalized mortgage loan servicing rights in the fourth quarter of 2008. This impairment charge reflects significantly lower mortgage loan interest rates in the current quarter resulting in higher estimated future prepayment rates. As a result, capitalized mortgage loan servicing rights declined to $12.0 million at Dec. 31, 2008 compared to $16.3 million at Sept. 30, 2008. The Company services approximately $1.65 billion in mortgage loans for others on which servicing rights have been capitalized.

Non-interest expense totaled $83.6 million in the fourth quarter of 2008, compared to $29.6 million in the year-ago period. The rise in non-interest expenses was primarily due to a non-cash goodwill impairment charge of $50.0 million and increases in loan and collection expenses ($2.1 million) and losses on other real estate and repossessed assets ($1.7 million). The increases in loan and collection costs and losses on other real estate and repossessed assets resulted from the elevated level of non-performing assets and lower residential housing prices.

During the fourth quarter of 2008 the Company updated its goodwill impairment testing (interim tests had also been performed in the second and third quarters of 2008). The Company's common stock price dropped further in the fourth quarter resulting in a wider difference between its market capitalization and book value. The results of the goodwill impairment testing showed that the estimated fair value of the Company's Independent Bank reporting unit was less than its carrying value of equity, resulting in this $50.0 million charge. The remaining goodwill at year-end of $16.7 million is at the Company's Mepco Finance Corporation reporting unit and the testing performed indicated that this goodwill was not impaired.

Compensation and employee benefit costs declined by $0.3 million or 2.0% in the fourth quarter of 2008 compared to the year-ago period due primarily to the elimination of cash bonuses for executive officers and the reduction of incentive bonuses for other employees. These compensation cost reductions were partially offset by additional staff added during 2008 to manage non-performing assets and loan collections.

Income tax expense for the fourth quarter of 2008 was $11.1 million, an increase of $11.2 million over the fourth quarter of 2007. For the full year of 2008, the income tax expense totaled $3.9 million, an increase of $5.0 million over the same period of 2007. The increases were primarily the result of establishing a valuation allowance of $26.8 million on deferred tax assets, partially offset by the effect of lower pre-tax income and the non-tax deductible portion of the goodwill impairment charge.

Statement of Financial Accounting Standards ("SFAS") 109, "Accounting for Income Taxes," requires that companies assess whether a valuation allowance should be established against their deferred tax assets based on the consideration of all available evidence using a "more likely than not" standard. In accordance with SFAS 109, the Company reviewed its deferred tax asset and determined that due mainly to the pre-tax loss incurred in 2008 and the challenging operating environment currently confronting all banks, that it must establish a valuation allowance for the majority of its net deferred tax asset. During the quarter ended Dec. 31, 2008, the Company recorded a $35.4 million valuation allowance, which consisted of $26.8 million recognized as income tax expense and $8.6 million recognized through the accumulated other comprehensive loss component of shareholders' equity. After the aforementioned valuation allowance, the remaining net deferred tax asset at Dec. 31, 2008 was $6.9 million.

Despite the valuation allowance, these deferred tax assets remain available to offset future taxable income. All deferred tax assets will be analyzed quarterly for changes affecting the valuation allowance, which may be adjusted in future periods accordingly. In making such judgments, significant weight is given to evidence that can be objectively verified. The Company analyzes changes in near-term market conditions and considers both positive and negative evidence as well as other factors which may impact future operating results in making the decision to establish or adjust this valuation allowance.

Pre-Tax, Pre-Loan Loss Provision Core Operating Earnings

The Company is presenting pre-tax pre-provision core operating earnings in this release for purposes of additional analysis of operating results. Pre-tax pre-provision core operating earnings, as defined by management, represents income (loss) from continuing operations excluding: income tax expense (benefit), the provision for loan losses, securities gains or losses, and any impairment charges (including goodwill, losses on other real estate or repossessed assets and fair-value adjustments) or elevated loan and collection costs caused by this economic cycle.

The following table reconciles pre-tax pre-provision core operating earnings to consolidated income (loss) from continuing operations presented in accordance with U.S. generally accepted accounting principles ("GAAP"), which is a principal and useful measure of earnings and provides comparability of earnings with other companies. However, the Company believes presenting pre-tax pre-provision core operating earnings provides investors with the ability to better understand its underlying operating trends separate from the direct effects of the impairment charges, credit issues, fair value adjustments, securities gains or losses, challenges inherent in the real estate downturn and other economic cycle issues and displays a consistent core operating earnings trend before the impact of these challenges. The credit quality section of this release already isolates the challenges and issues related to the credit quality of the Company's loan portfolio and the impact on its earnings as reflected in the provision for loan losses.



                  Pre-Tax, Pre-Loan Loss Provision Core Operating Earnings
                                     Three Months Ended     Year Ended
                                    12/31/08   12/31/07  12/31/08  12/31/07
                                                 (in thousands)

      Income (loss) from
        continuing operations       $(86,325)  $2,278   $(87,964)   $9,955
      Income tax expense
        (benefit)                     11,148      (15)     3,863    (1,103)
      Provision for loan
        Losses                        24,831     9,393    68,287    43,160
      Securities losses                6,924       964    14,961       705
      Impairment charge on
        capitalized mortgage
        loan servicing                 4,255       297     4,332       251
      Impairment charge on
        goodwill                      50,020        --    50,020       343
      Losses on other real
        estate and repossessed
        assets                         1,758       104     3,849       276
      Elevated loan and collection
        costs (1)                      2,286       187     4,431        --
         Pre-Tax, Pre-Loan Loss
           Provision Core
           Operating Earnings        $14,897   $13,208   $61,779   $53,587

  1. Represents the excess amount over a "normalized" level of $1.25 million quarterly or $5.0 million annually

TARP Capital Purchase Program

On Dec. 12, 2008, the Company issued 72,000 shares of its preferred stock and 3,461,538 warrants to purchase the Company's common stock (at a strike price of $3.12 per share) to the U.S. Treasury in return for $72 million under the Capital Purchase Program ("CPP"). Of the total proceeds, $68.4 million was allocated to the preferred stock and $3.6 million was allocated to the warrants (included in capital surplus) based on the relative fair value of each.

Although the CPP funds were initially utilized to pay down short-term borrowings with the Federal Reserve Bank, in the approximately 30-day period (ending Jan. 15, 2009) since the receipt of the CPP funds, the Company has made $72.4 million of loans. This loan volume includes: $27.2 million of commercial loans (of which $21.7 million were renewals of existing loans), $43.1 million of mortgage loans and $2.1 million of consumer installment loans (excluding finance receivables). Further, the CPP funds allow the Company to continue actively pursuing mortgage loan modifications and work-outs in lieu of foreclosure for those mortgage loan customers experiencing financial difficulty. During 2008 the Company processed over 200 mortgage loan modifications or work-outs in lieu of foreclosure. Recently, Fannie Mae recognized the Company for its efforts in successfully pursuing loan workouts and modifications during 2008.

Asset Quality

Commenting on asset quality, CEO Magee added: "Our provision for loan losses increased significantly in the fourth quarter, reflecting a rise in non-performing loans, further weakening in real estate values and an elevated level of loan net charge-offs. However, as a result of our proactive efforts to manage credit, commercial loan 30- to 89-day delinquency rates are at their lowest level since 2005 and commercial loan watch credits increased by only 1.4% in the fourth quarter."

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


    Loan Type                         12/31/2008     9/30/2008  12/31/2007
                                                (Dollars in Millions)
    Commercial                             $82.1         $74.2       $49.0
    Consumer                                 4.9           3.9         3.4
    Mortgage                                38.9          33.9        23.1
    Finance receivables                      3.4           2.6         1.7
      Total                               $129.3        $114.6       $77.2
    Ratio of non-performing loans to
     total portfolio loans                  5.25%         4.58%       3.07%
    Ratio of non-performing assets to
     total assets                           5.06%         4.29%       2.68%
    Ratio of the allowance for loan
     losses to non-performing loans        44.79%        47.01%      58.63%

The increase in non-performing loans since year-end 2007 is due principally to an increase in non-performing commercial real estate loans and residential mortgage loans. The rise in non-performing commercial real estate loans is primarily the result of several additional credits with real estate developers becoming past due in 2008. These delinquencies largely reflect cash flow difficulties encountered by real estate developers in Michigan as they confront a significant decline in sales of real estate. Since mid-2007 the land, land development and construction components of the Company's commercial loan portfolio have declined by 39%, 22% and 56%, respectively and now represents less than 5% of total assets. The elevated level of non-performing residential mortgage loans is primarily due to a rise in delinquencies and foreclosures reflecting both weak economic conditions and soft residential real estate values in many parts of Michigan. Other real estate and repossessed assets totaled $20.5 million at Dec. 31, 2008, compared to $20.0 million at Sept. 30, 2008, and $9.7 million at Dec. 31, 2007.

The provision for loan losses was $24.8 million and $9.4 million in the fourth quarters of 2008 and 2007, 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 $20.0 million (3.19% annualized of average loans) in the fourth quarter of 2008, compared to $6.7 million (1.05% annualized of average loans) in the fourth quarter of 2007. The fourth quarter 2008 loan net charge-offs were divided among the following categories: commercial loans, $13.6 million; consumer loans, $1.9 million (including $0.2 million of deposit overdrafts); mortgage loans, $3.5 million; and finance receivables $1.0 million. The commercial loan and mortgage loan net charge-offs in the fourth quarter of 2008 primarily reflect write-downs to expected liquidation values for real estate or other collateral securing the loans. At Dec. 31, 2008, the allowance for loan losses totaled $57.9 million, or 2.35% of portfolio loans, compared to $45.3 million, or 1.80% of portfolio loans, at Dec. 31, 2007.

Balance Sheet, Liquidity and Capital

Total assets were $2.96 billion at Dec. 31, 2008, compared to $3.25 billion at Dec. 31, 2007. Loans, excluding loans held for sale, were $2.46 billion at Dec. 31, 2008, compared to $2.52 billion at Dec. 31, 2007. Deposits totaled $2.07 billion at Dec. 31, 2008, a decrease of $438.6 million from Dec. 31, 2007. The decrease in deposits primarily reflects a $333.8 million decline in brokered certificates of deposit ("brokered CD's"). During 2008, maturing or callable brokered CD's were replaced with borrowings from the Federal Home Loan Bank and Federal Reserve Bank due to significantly lower comparative costs. The balance of the decline in deposits reflects a higher level of off-balance sheet sweeps to money market funds at year end 2008 and the Company's continued pricing discipline in highly competitive markets. The Company's liquidity position remains sound with nearly $617 million of unused borrowing capacity at Dec. 31, 2008.

Stockholders' equity totaled $198.6 million at Dec. 31, 2008, or 6.71% of total assets. The Company's subsidiary bank remains "well capitalized" for regulatory purposes with the following ratios at Dec. 31, 2008:




                                                                      Well
                                                                  Capitalized
    Regulatory Capital       12/31/2008    9/30/2008  12/31/2007    Minimum
     Ratio                   (estimate)

    Tier 1 capital to
     average assets               8.37%        7.45%       7.35%      5.00%
    Tier 1 capital to
     risk-weighted assets        10.76%        9.58%       9.25%      6.00%
    Total capital to
     risk-weighted assets        12.05%       10.84%      10.50%     10.00%

With regard to the outlook for 2009, CEO Magee concluded, "The new year is shaping up to be a very difficult one in terms of operating environment, given the continued challenges facing consumers and businesses in Michigan. As a result, we expect to again confront conditions that may adversely affect our business and financial results. The addition of equity under the Capital Purchase Program has enhanced our capital ratios which allows us to seek new lending opportunities. Our stronger capital position also allows us to continue our focus on reducing non-performing assets and improving asset quality. We expect these actions will help us achieve improved long-term operating results even in the face of anticipated prolonged economic weakness throughout 2009."

Conference Call

Michael M. Magee, President and Chief Executive Officer, Robert N. Shuster, Chief Financial Officer and Stefanie M. Kimball, Chief Lending Officer, will review fourth quarter 2008 results in a conference call for investors and analysts beginning at 10:00 a.m. ET on Tuesday, Jan. 27, 2009.

To participate in the live conference call, please dial 1-800-860-2442. The call can also be accessed (listen-only mode) via the Company's Web site at IndependentBank.com in the "Investor Relations" section. A playback of the call can be accessed by dialing 1-877-344-7529 (Replay Passcode # 426611). The replay will be available through Feb. 5, 2009.

In addition, a Power Point presentation associated with the fourth quarter 2008 conference call will be available on the Company's Web site at IndependentBank.com in the "Investor Relations" section under the "Presentations" tab beginning on Tuesday, Jan. 27, 2009.

About Independent Bank Corporation

Independent Bank Corporation (Nasdaq: IBCP) is a Michigan-based bank holding company with total assets of approximately $3 billion. Founded as First National Bank of Ionia in 1864, Independent Bank Corporation now operates over 100 offices 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. Payment plans to purchase vehicle service contracts are also available through Mepco Finance Corporation, a wholly owned subsidiary of Independent Bank. 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

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 or past operations, products or services, and forecasts of the Company's revenue, earnings or other measures of economic performance, including statements of profitability, business segments and subsidiaries, and estimates of credit quality trends. 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, involve assumptions and are subject to substantial risks and uncertainties, such as the 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 are 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

                                                December 31,    December 31,
                                                   2008              2007

                                                         (unaudited)
    Assets                                              (in thousands)
    Cash and due from banks                       $57,705           $79,289
    Trading securities                              1,929
    Securities available for sale                 215,412           364,194
    Federal Home Loan Bank and Federal
     Reserve Bank stock, at cost                   28,063            21,839
    Loans held for sale, carried at
     fair value, at December 31, 2008              27,603            33,960
    Loans
      Commercial                                  980,391         1,066,276
      Mortgage                                    839,496           873,945
      Installment                                 356,806           368,478
      Finance receivables                         286,836           209,631
                                   Total Loans  2,463,529         2,518,330
      Allowance for loan losses                   (57,900)          (45,294)
                                     Net Loans  2,405,629         2,473,036
    Property and equipment, net                    73,318            73,558
    Bank owned life insurance                      44,896            42,934
    Goodwill                                       16,734            66,754
    Other intangibles                              12,190            15,262
    Capitalized mortgage loan servicing
     rights                                        11,966            15,780
    Accrued income and other assets                64,500            60,910
                                  Total Assets $2,959,945        $3,247,516
    Liabilities and Shareholders'
     Equity
    Deposits
      Non-interest bearing                       $308,041          $294,332
      Savings and NOW                             907,187           987,299
      Retail time                                 668,968           707,419
      Brokered time                               182,283           516,077
                                Total Deposits  2,066,479         2,505,127
    Federal funds purchased                           750            54,452
    Other borrowings                              541,986           302,539
    Subordinated debentures                        92,888            92,888
    Financed premiums payable                      26,636            16,345
    Liabilities of discontinued
     operations                                                          34
    Accrued expenses and other
     liabilities                                   32,629            35,629
                             Total Liabilities  2,761,368         3,007,014
    Shareholders' Equity
      Preferred stock, Series A, no par
       value, $1,000 liquidation
       preference per share - 200,000 shares
       authorized; 72,000 shares outstanding
       at December 31, 2008                        68,456
      Common stock, $1.00 par
       value-40,000,000 shares
       authorized; issued and outstanding:
       23,013,980 shares at December 31, 2008
       and 22,647,511 shares at
       December 31, 2007                           22,791            22,601
      Capital surplus                             200,687           195,302
      Retained earnings (accumulated
       deficit)                                   (70,149)           22,770
      Accumulated other comprehensive
       loss                                       (23,208)             (171)
                    Total Shareholders' Equity    198,577           240,502
           Total Liabilities and Shareholders'
                                        Equity $2,959,945        $3,247,516

                    INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
                       Consolidated Statements of Operations

                                  Three Months             Twelve Months
                                     Ended                    Ended
                         Dec. 31,  Sept. 30,  Dec. 31,       Dec. 31,
                           2008      2008       2007      2008       2007
                                                (unaudited)
                                              (in thousands)

    Interest Income
      Interest and fees
       on loans            $45,444   $46,427   $50,891  $186,747  $202,361
      Interest on
       securities
        Taxable              1,909     2,078     2,258     8,467     9,635
        Tax-exempt           1,240     1,652     2,297     7,238     9,920
      Other investments         99       466       328     1,284     1,338
               Total
                Interest
                Income      48,692    50,623    55,774   203,736   223,254
    Interest Expense
      Deposits               9,717     9,577    20,684    46,697    89,060
      Other borrowings       6,379     7,099     5,022    26,890    13,603
               Total
                Interest
                Expense     16,096    16,676    25,706    73,587   102,663
               Net
                Interest
                Income      32,596    33,947    30,068   130,149   120,591
    Provision for loan
      losses                24,831    19,788     9,393    68,287    43,160
               Net
                Interest
                Income
                After
                Provision
                for
                Loan
                Losses       7,765    14,159    20,675    61,862    77,431
    Non-interest Income
      Service charges on
        deposit accounts     5,996     6,416     6,418    24,223    24,251
      Net gains (losses)
        on assets
        Mortgage loans       1,204       969       904     5,181     4,317
        Securities          (6,924)   (6,711)     (964)  (14,961)     (705)
      VISA check card
        interchange income   1,394     1,468     1,376     5,728     4,905
      Mortgage loan
        servicing           (3,616)      340       364    (2,071)    2,236
      Title insurance fees     280       307       344     1,388     1,551
      Other income           2,310     2,659     2,731    10,233    10,590
               Total
                Non-
                interest
                Income         644     5,448    11,173    29,721    47,145
    Non-interest Expense
      Compensation and
        employee benefits   13,164    14,023    13,438    55,179    55,811
      Occupancy, net         3,054     2,871     2,754    11,852    10,624
      Loan and collection    3,536     2,008     1,437     9,431     4,949
      Furniture, fixtures
        and equipment        1,770     1,662     1,944     7,074     7,633
      Data processing        1,951     1,760     1,854     7,148     6,957
      Loss on other real
        estate and
        repossessed assets   1,758       425       104     3,849       276
      Advertising            1,691     1,575     1,549     5,534     5,514
      Branch acquisition
        and conversion
        costs                                                          330
      Goodwill impairment   50,020                        50,020       343
      Other expenses         6,642     6,332     6,505    25,597    23,287
               Total
                Non-
                interest
                Expense     83,586    30,656    29,585   175,684   115,724
               Income
                (Loss)
                From
                Continuing
                Operations
                Before
                Income
                Tax        (75,177)  (11,049)     2,263  (84,101)    8,852
    Income tax expense
             (benefit)      11,148    (5,723)       (15)   3,863    (1,103)
               Income
                (Loss)
                From
                Continuing
                Operations (86,325)   (5,326)     2,278  (87,964)    9,955
               Discontinued
                operations,
                net of tax                          154                402
               Net Income
                (Loss)    $(86,325)  $(5,326)    $2,432 $(87,964)  $10,357
               Preferred
                dividends      215                           215
               Net Income
                (Loss)
                Applicable
                to
                Common
                Stock     $(86,540)  $(5,326)    $2,432 $(88,179)  $10,357


                   INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
                          Selected Financial Data

                                 Three Months             Twelve Months
                                    Ended                     Ended
                           Dec. 31, Sept. 30, Dec. 31,       Dec. 31,
                            2008      2008     2007       2008      2007

                                            (unaudited)
    Per Common Share
     Data (A)
    Income (Loss) From
      Continuing
      Operations
      Basic (B)          $(3.80)    $(.23)      $.10     $(3.88)      $.44
      Diluted (C)         (3.80)     (.23)       .10      (3.88)       .44
    Net Income (Loss)
      Basic (B)          $(3.80)    $(.23)      $.11     $(3.88)      $.46
      Diluted (C)         (3.80)     (.23)       .11      (3.88)       .45
    Cash dividends
     declared               .01       .01        .21        .14        .84


    Selected Ratios
     (annualized) (A)
    As a Percent of
      Average Interest-
      Earning Assets
      Tax equivalent
       interest
       income              7.11%     7.02%       7.65%     7.16%      7.71%
      Interest expense     2.31      2.26        3.43      2.53       3.45
      Tax equivalent net
        interest income    4.80      4.76        4.22      4.63       4.26
    Income (Loss) From
     Continuing
     Operations
      Average common
       equity           (154.82)%   (8.97)%      3.68%   (37.44)%     3.96%
      Average assets     (11.24)    (0.66)       0.28     (2.77)      0.31
    Net Income (Loss) to
      Average common
       equity           (154.82)%   (8.97)%      3.93%   (37.44)%     4.12%
      Average assets     (11.24)    (0.66)       0.30     (2.77)      0.32


    Average Shares
      Basic (B)      22,787,086 22,777,760 22,600,461 22,743,002 22,649,334
      Diluted (C)    22,846,768 22,837,476 22,703,111 22,807,971 22,830,486

(A) For the three- and twelve- month periods ended December 31,

2008, these amounts are calculated using loss from continuing

operations applicable to common stock and net loss applicable

to common stock.

(B) Average shares of common stock for basic net income per share

include shares issued and outstanding during the period.

(C) Average shares of common stock for diluted net income per share

include shares to be issued upon exercise of stock options,

stock units for deferred compensation plan for non-employee

directors and unvested restricted shares. For any period

in which a loss is recorded, the assumed exercise of stock

options and stock units for deferred compensation plan for

non-employee directors would have an anti-dilutive impact

on the loss per share and thus are ignored in the diluted

per share calculation.

SOURCE Independent Bank Corporation

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