SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED September 30, 2020

Commission file number   0-7818

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

Michigan
 
38-2032782
(State or jurisdiction of Incorporation or Organization)
 
(I.R.S. Employer Identification Number)

4200 East Beltline, Grand Rapids, Michigan  49525
(Address of principal executive offices)

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

NONE
Former name, address and fiscal year, if changed since last report.

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

Title of each Class
 
Trading Symbol
 
Name of each exchange which registered
Common stock, no par value
 
IBCP
 
The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all documents and reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes    NO

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes    NO

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, non-accelerated filer, smaller reporting company or an emerging growth company.
Large accelerated filer    Accelerated filer    Non-accelerated filer    Smaller reporting company    Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act.  Yes    No 

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES   NO 

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: common stock, no par value, 21,884,495 as of November 4, 2020.





INDEPENDENT BANK CORPORATION AND SUBSIDIARIES

INDEX

 
Number(s)
PART I -
Financial Information
 
Item 1.
3
 
4
 
5
 
6
 
7
 
8-65
Item 2.
66-92
Item 3.
93
Item 4.
93
     
PART II -
Other Information
 
Item 1A
94
Item 2.
97
Item 6.
98

1

Index
FORWARD-LOOKING STATEMENTS

Statements in this report that are not statements of historical fact, including statements that include terms such as ‘‘will,’’ ‘‘may,’’ ‘‘should,’’ ‘‘believe,’’ ‘‘expect,’’ ‘‘forecast,’’ ‘‘anticipate,’’ ‘‘estimate,’’ ‘‘project,’’ ‘‘intend,’’ ‘‘likely,’’ ‘‘optimistic’’ and ‘‘plan’’ and statements about future or projected financial and operating results, plans, projections, objectives, expectations, and intentions, are forward-looking statements. Forward-looking statements include, but are not limited to, descriptions of plans and objectives for future operations, products or services; projections of our future revenue, earnings or other measures of economic performance; forecasts of credit losses and other asset quality trends; statements about our business and growth strategies; and expectations about economic and market conditions and trends. These forward-looking statements express our current expectations, forecasts of future events, or long-term goals. They are based on assumptions, estimates, and forecasts that, although believed to be reasonable, may turn out to be incorrect. Actual results could differ materially from those discussed in the forward-looking statements for a variety of reasons, including:

economic, market, operational, liquidity, credit, and interest rate risks associated with our business including the impact of the ongoing COVID-19 pandemic on each of these items;
economic conditions generally and in the financial services industry, particularly economic conditions within Michigan and the regional and local real estate markets in which our bank operates including the economic impact of the ongoing COVID-19 pandemic in each of these areas;
the failure of assumptions underlying the establishment of, and provisions made to, our allowance for loan losses;
increased competition in the financial services industry, either nationally or regionally;
our ability to achieve loan and deposit growth;
volatility and direction of market interest rates;
the continued services of our management team; and
implementation of new legislation, which may have significant effects on us and the financial services industry.

This list provides examples of factors that could affect the results described by forward-looking statements contained in this report, but the list is not intended to be all-inclusive.  The risk factors disclosed in Part I – Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019, as updated by any new or modified risk factors disclosed in Part II – Item 1A of any subsequently filed Quarterly Report on Form 10-Q, include the known risks our management believes could materially affect the results described by forward-looking statements in this report. However, those risks may not be the only risks we face. Our results of operations, cash flows, financial position, and prospects could also be materially and adversely affected by additional factors that are not presently known to us that we currently consider to be immaterial, or that develop after the date of this report. We cannot assure you that our future results will meet expectations. While we believe the forward-looking statements in this report are reasonable, you should not place undue reliance on any forward-looking statement. In addition, these statements speak only as of the date made. We do not undertake, and expressly disclaim, any obligation to update or alter any statements, whether as a result of new information, future events, or otherwise, except as required by applicable law.
 

2

Index


Part I - Item 1.
INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Financial Condition

 
September 30,
2020
   
December 31,
2019
 
   
(unaudited)
 
   
(In thousands, except share amounts)
 
Assets
 
Cash and due from banks
 
$
42,435
   
$
53,295
 
Interest bearing deposits
   
4,121
     
12,009
 
Cash and Cash Equivalents
   
46,556
     
65,304
 
Interest bearing deposits - time
   
-
     
350
 
Securities available for sale
   
985,050
     
518,400
 
Federal Home Loan Bank and Federal Reserve Bank stock, at cost
   
18,427
     
18,359
 
Loans held for sale, carried at fair value
   
99,747
     
69,800
 
Loans
               
Commercial
   
1,351,790
     
1,166,695
 
Mortgage
   
1,024,036
     
1,098,911
 
Installment
   
479,653
     
459,417
 
Total Loans
   
2,855,479
     
2,725,023
 
Allowance for loan losses
   
(35,771
)
   
(26,148
)
Net Loans
   
2,819,708
     
2,698,875
 
Other real estate and repossessed assets, net
   
1,487
     
1,865
 
Property and equipment, net
   
36,538
     
38,411
 
Bank-owned life insurance
   
55,019
     
55,710
 
Deferred tax assets, net
   
1,572
     
2,072
 
Capitalized mortgage loan servicing rights, carried at fair value
   
15,403
     
19,171
 
Other intangibles
   
4,561
     
5,326
 
Goodwill
   
28,300
     
28,300
 
Accrued income and other assets
   
56,576
     
42,751
 
Total Assets
 
$
4,168,944
   
$
3,564,694
 
                 
Liabilities and Shareholders' Equity
 
Deposits
               
Non-interest bearing
 
$
1,152,072
   
$
852,076
 
Savings and interest-bearing checking
   
1,431,841
     
1,186,745
 
Reciprocal
   
557,551
     
431,027
 
Time
   
303,392
     
376,877
 
Brokered time
   
152,889
     
190,002
 
Total Deposits
   
3,597,745
     
3,036,727
 
Other borrowings
   
30,005
     
88,646
 
Subordinated debt
   
39,261
     
-
 
Subordinated debentures
   
39,507
     
39,456
 
Accrued expenses and other liabilities
   
89,334
     
49,696
 
Total Liabilities
   
3,795,852
     
3,214,525
 
Commitments and contingent liabilities
               
 Shareholders’ Equity
               
Preferred stock, no par value, 200,000 shares authorized;  none issued or outstanding
   
-
     
-
 
Common stock, no par value, 500,000,000 shares authorized; issued and outstanding: 21,885,368 shares at September 30, 2020 and 22,481,643 shares at December 31, 2019
   
339,408
     
352,344
 
Retained earnings
   
27,538
     
1,611
 
Accumulated other comprehensive income (loss)
   
6,146
     
(3,786
)
Total Shareholders’ Equity
   
373,092
     
350,169
 
Total Liabilities and Shareholders’ Equity
 
$
4,168,944
   
$
3,564,694
 

See notes to interim condensed consolidated financial statements (unaudited)

3

Index

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations

 
 
Three months ended
September 30,
   
Nine months ended
September 30,
 
 
 
2020
   
2019
   
2020
   
2019
 
 
 
(unaudited)
   
(unaudited)
 
 
 
(In thousands, except per share amounts)
 
Interest Income
                       
Interest and fees on loans
 
$
30,393
   
$
34,226
   
$
92,020
   
$
100,743
 
Interest on securities available for sale
                               
Taxable
   
3,450
     
2,771
     
9,356
     
8,811
 
Tax-exempt
   
954
     
319
     
2,137
     
1,017
 
Other investments
   
237
     
495
     
854
     
1,449
 
Total Interest Income
   
35,034
     
37,811
     
104,367
     
112,020
 
Interest Expense
                               
Deposits
   
2,062
     
6,236
     
9,150
     
17,938
 
Other borrowings and subordinated debt and debentures
   
1,006
     
703
     
2,598
     
2,211
 
Total Interest Expense
   
3,068
     
6,939
     
11,748
     
20,149
 
Net Interest Income
   
31,966
     
30,872
     
92,619
     
91,871
 
Provision for loan losses
   
975
     
(271
)
   
12,884
     
1,045
 
Net Interest Income After Provision for Loan Losses
   
30,991
     
31,143
     
79,735
     
90,826
 
Non-interest Income
                               
Interchange income
   
3,428
     
2,785
     
8,411
     
7,744
 
Service charges on deposit accounts
   
2,085
     
2,883
     
6,299
     
8,323
 
Net gains on assets
                               
Mortgage loans
   
20,205
     
5,677
     
46,687