Independent Bank (IBCP) 8-K Independent Bank Corporation Reports 2010 Second Quarter Results

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES

Supplemental Data Exhibit 99.2

Non-performing assets

	June 30,			December 31,
	2010			2009
	(dollars in thousands)
Non-accrual loans	$	84,158		$	105,965
Loans 90 days or more past due and still accruing interest		356			3,940
Total non-performing loans		84,514			109,905
Other real estate and repossessed assets		41,785			31,534
Total non-performing assets	$	126,299		$	141,439
As a percent of Portfolio Loans
Non-performing loans		4.16	%		4.78	%
Allowance for loan losses		3.72			3.55
Non-performing assets to total assets		4.61			4.77
Allowance for loan losses as a percent of non-performing loans		89.46			74.35

Allowance for loan losses

	Six months ended
				June 30,
	2010					2009
				Unfunded					Unfunded
	Loans			Commitments		Loans			Commitments
				(dollars in thousands)
Balance at beginning of period	$	81,717		$	1,858	$	57,900		$	2,144
Additions (deduction)
Provision for loan losses		29,694					55,783
Recoveries credited to allowance		1,839					1,494
Loans charged against the allowance		(37,644	)				(49,906	)
Additions (deductions) included in non-interest expense					336					(152	)
Balance at end of period	$	75,606		$	2,194	$	65,271		$	1,992
Net loans charged against the allowance to average Portfolio Loans (annualized)		3.33	%				3.98	%

Alternative Sources of Funds

	June 30,						December 31,
	2010						2009
			Average						Average
	Amount		Maturity	Rate			Amount		Maturity	Rate
				(dollars in thousands)
Brokered CDs	$	422,749	2.5 years		2.95	%	$	629,150	2.2 years		2.46	%
Fixed rate FHLB advances		23,275	5.9 years		6.41			27,382	5.5 years		6.59
Variable rate FHLB advances		75,000	1.2 years		0.48			67,000	1.4 years		0.32
Securities sold under agreements to repurchase		35,000	.4 years		4.42			35,000	.9 years		4.42
Total	$	556,024	2.3 years		2.86	%	$	758,532	2.2 years		2.51	%

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Capitalization

	June 30,			December 31,
	2010			2009
	(in thousands)
Subordinated debentures	$	50,175		$	92,888
Amount not qualifying as regulatory capital		(1,507	)		(2,788	)
Amount qualifying as regulatory capital		48,668			90,100
Shareholders’ Equity
Preferred stock		70,458			69,157
Common stock		250,737			23,863
Capital surplus					201,618
Accumulated deficit		(177,242	)		(169,098	)
Accumulated other comprehensive loss		(14,281	)		(15,679	)
Total shareholders’ equity		129,672			109,861
Total capitalization	$	178,340		$	199,961

Non-Interest Income

	Three months ended								Six months ended
	June 30,			March 31,			June 30,		June 30,
	2010			2010			2009		2010			2009
	(in thousands)
Service charges on deposit accounts	$	5,833		$	5,275		$	6,321	$	11,108		$	11,828
Net gains (losses) on assets
Mortgage loans		2,372			1,843			3,262		4,215			6,543
Securities		1,363			265			4,230		1,628			3,666
Other than temporary loss on securities available for sale
Total impairment loss					(118	)				(118	)		(17	)
Loss recognized in other comprehensive loss
Net impairment loss recognized in earnings					(118	)				(118	)		(17	)
VISA check card interchange income		1,655			1,572			1,500		3,227			2,915
Mortgage loan servicing		(2,043	)		432			2,349		(1,611	)		1,507
Mutual fund and annuity commissions		409			389			539		798			992
Bank owned life insurance		483			468			355		951			756
Title insurance fees		366			494			732		860			1,341
Gain on extinguishment of debt		18,086								18,086
Other		790			1,397			1,723		2,187			3,058
Total non-interest income	$	29,314		$	12,017		$	21,011	$	41,331		$	32,589

Capitalized Real Estate Mortgage Loan Servicing Rights

	Three months ended						Six months ended
	June 30,						June 30,
	2010			2009			2010			2009
				(in thousands)
Balance at beginning of period	$	15,435		$	11,589		$	15,273		$	11,966
Originated servicing rights capitalized		680			1,624			1,455			3,123
Amortization		(633	)		(1,640	)		(1,391	)		(2,819	)
(Increase)/decrease in impairment reserve		(2,460	)		2,965			(2,315	)		2,268
Balance at end of period	$	13,022		$	14,538		$	13,022		$	14,538
Impairment reserve at end of period	$	4,617		$	2,383		$	4,617		$	2,383

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          Mortgage Loan Activity

	Three months ended									Six months ended
	June 30,			March 31,			June 30,			June 30,
	2010			2010			2009			2010			2009
	(in thousands)
Mortgage loans originated	$	93,900		$	90,007		$	196,927		$	183,907		$	351,535
Mortgage loans sold		87,583			87,708			158,173			175,291			300,809
Mortgage loans sold with servicing rights released		20,747			11,864			9,174			32,611			14,603
Net gains on the sale of mortgage loans		2,372			1,843			3,262			4,215			6,543
Net gains as a percent of mortgage loans sold (“Loan Sale Margin”)		2.71	%		2.10	%		2.06	%		2.40	%		2.18	%
Fair value adjustments included in the Loan Sale Margin		0.43			(.07	)		0.04			0.18			0.33

     Non-Interest Expense

	Three months ended							Six months ended
	June 30,		March 31,		June 30,			June 30,
	2010		2010		2009			2010		2009
	(in thousands)
Salaries	$	10,242	$	10,176	$	9,815		$	20,418	$	19,484
Performance-based compensation and benefits		655		644		747			1,299		1,076
Other benefits		2,533		2,393		2,766			4,926		5,345
Compensation and employee benefits		13,430		13,213		13,328			26,643		25,905
Vehicle service contract counterparty contingencies		4,861		3,418		2,215			8,279		3,015
Loan and collection		2,785		4,786		3,227			7,571		7,265
Occupancy, net		2,595		2,909		2,560			5,504		5,608
Data processing		2,039		2,105		2,010			4,144		4,106
Loss on other real estate and repossessed assets		1,554		2,029		1,939			3,583		3,200
FDIC deposit insurance		1,763		1,802		2,755			3,565		3,941
Furniture, fixtures and equipment		1,648		1,719		1,848			3,367		3,697
Credit card and bank service fees		1,500		1,675		1,668			3,175		3,132
Communications		1,015		1,073		1,107			2,088		2,152
Legal and professional		894		1,136		705			2,030		1,346
Advertising		674		779		1,421			1,453		2,863
Supplies		415		393		457			808		926
Amortization of intangible assets		323		322		474			645		975
Credit costs related to unfunded lending commitments		280		56		(66	)		336		(152	)
Other		1,389		1,720		1,343			3,109		3,117
Total non-interest expense	$	37,165	$	39,135	$	36,991		$	76,300	$	71,096

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Average Balances and Rates

	Three Months Ended
	June 30,
	2010							2009
	Average							Average
	Balance		Interest		Rate			Balance		Interest		Rate
	(dollars in thousands)
Assets(1)
Taxable loans	$	2,115,837	$	36,569		6.93	%	$	2,513,367	$	45,157		7.20	%
Tax-exempt loans(2)		9,866		106		4.31			7,069		67		3.80
Taxable securities		87,554		902		4.13			118,116		1,705		5.79
Tax-exempt securities(2)		49,012		526		4.30			88,601		976		4.42
Cash — interest bearing		324,592		192		0.24
Other investments		27,001		197		2.93			28,011		239		3.42
Interest Earning Assets		2,613,862		38,492		5.90			2,755,164		48,144		7.01
Cash and due from banks		48,751							74,659
Other assets, net		160,291							165,715
Total Assets	$	2,822,904						$	2,995,538
Liabilities
Savings and NOW	$	1,088,526		670		0.25		$	974,994		1,493		0.61
Time deposits		1,019,882		6,838		2.69			979,506		7,318		3.00
Other borrowings		227,979		2,413		4.25			448,714		3,814		3.41
Interest Bearing Liabilities		2,336,387		9,921		1.70			2,403,214		12,625		2.11
Demand deposits		340,558							320,920
Other liabilities		52,051							93,861
Shareholders’ equity		93,908							177,543
Total liabilities and shareholders’ equity	$	2,822,904						$	2,995,538
Net Interest Income			$	28,571						$	35,519
Net Interest Income as a Percent of Earning Assets						4.38	%						5.17	%

(1)	All domestic, except for $0.4 million and $8.8 million for the three months ended June 30, 2010 and 2009, respectively, of average payment plan receivables included in taxable loans for customers domiciled in Canada.
(2)	Interest on tax-exempt loans and securities is not presented on a fully tax equivalent basis due to the current net operating loss carryforward position and the deferred tax asset valuation allowance.

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Average Balances and Rates

	Six Months Ended
	June 30,
	2010							2009
	Average							Average
	Balance		Interest		Rate			Balance		Interest		Rate
	(dollars in thousands)
Assets(1)
Taxable loans	$	2,184,046	$	75,491		6.95	%	$	2,504,582	$	89,457		7.19	%
Tax-exempt loans(2)		9,997		211		4.26			8,490		168		3.99
Taxable securities		91,859		2,062		4.53			116,478		3,438		5.95
Tax-exempt securities(2)		56,671		1,211		4.31			95,795		2,083		4.38
Cash — interest bearing		299,910		349		0.23
Other investments		27,426		412		3.03			28,641		563		3.96
Interest Earning Assets		2,669,909		79,736		6.01			2,753,986		95,709		6.99
Cash and due from banks		53,855							67,935
Other assets, net		154,408							162,086
Total Assets	$	2,878,172						$	2,984,007
Liabilities
Savings and NOW	$	1,086,524		1,533		0.28		$	960,032		3,074		0.65
Time deposits		1,073,452		14,194		2.67			917,609		14,285		3.14
Other borrowings		227,801		5,407		4.79			523,630		8,484		3.27
Interest Bearing Liabilities		2,387,777		21,134		1.78			2,401,271		25,843		2.17
Demand deposits		334,100							314,762
Other liabilities		58,359							81,267
Shareholders’ equity		97,936							186,707
Total liabilities and shareholders’ equity	$	2,878,172						$	2,984,007
Net Interest Income			$	58,602						$	69,866
Net Interest Income as a Percent of Earning Assets						4.41	%						5.10	%

(1)	All domestic, except for $0.7 million and $7.4 million for the six months ended June 30, 2010 and 2009, respectively, of average payment plan receivables included in taxable loans for customers domiciled in Canada.
(2)	Interest on tax-exempt loans and securities is not presented on a fully tax equivalent basis due to the current net operating loss carryforward position and the deferred tax asset valuation allowance.

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Commercial Loan Portfolio Analysis as of June 30, 2010

	Total Commercial Loans
			Watch Credits						Percent of Loan Category in Watch
Loan Category	All Loans		Performing		Non- performing		Total		Credit
	(dollars in thousands)
Land	$	28,587	$	9,939	$	3,621	$	13,560		47.4	%
Land Development		23,116		8,626		3,520		12,146		52.5
Construction		24,372		13,638		2,392		16,030		65.8
Income Producing		342,334		69,114		21,358		90,472		26.4
Owner Occupied		182,962		34,292		4,728		39,020		21.3
Total Commercial Real Estate Loans(1)	$	601,371	$	135,609	$	35,619	$	171,228		28.5
Other Commercial Loans(1)	$	165,386	$	26,871		1,977	$	28,848		17.4
Total non-performing commercial loans					$	37,596

(1) The total of these two categories is different than the June 30, 2010, Consolidated Statement of Financial Condition due primarily to loans in process.

17