President & CEO’s Letter

I am pleased to share with you Independent Bank Corporation’s Environmental, Social and Governance (ESG) report for 2020. Independent Bank is currently the third largest bank headquartered in the state of Michigan. We operate 62 bank branches in Michigan’s Lower Peninsula, as well as nine loan production offices (LPOs) in Michigan and Ohio. Established in 1864, we continue to work towards our mission of making a positive difference in the lives of those we serve: our customers, communities and shareholders, as well as our all our key stakeholders, including our associates and strategic partners.

This past year has been an extraordinary period for all of us. The coronavirus pandemic brought on a public health and an economic crisis. As a result, too many lives have been lost and too many livelihoods have been negatively impacted. With the pandemic we have also been reminded of the racial, ethnic and social injustices that still exist within our communities. While we cannot guarantee equal outcomes, we must continue to do all we can to ensure equal opportunity. At IBC, we continue to strive to be a part of the solution serving our clients, investing in our communities, and building long term value for all stakeholders. This report will include our response to the COVID-19. I am very proud of our team and the job they are doing as we work our way through to the other side of the pandemic.

While this is our first report, the principles behind ESG are not new and are fundamental to our community banking strategy. As a community bank, natural parts of our culture and keys to our success include being:

  • Good corporate citizens that care for our environment and facilitate others to do the same.
  • Great place to work and bank. Excellent neighbors and supporters of our communities.
  • Strong corporate stewards with good governance, enabling effective operations in a heavily regulated industry.

Over the last two years we invested over $1.25 million in sponsorships and donations to organizations in our communities. Our associates were recognized by the American Bankers Association for volunteerism in 2020, through their outreach programs, mentoring, and other partnerships. This includes the capstone initiative, our annual Making a Difference Day (MADD).

We are publishing this report in a section on our website, IndependentBank.com, to communicate more broadly the numerous efforts made by our Company to provide sustainable long-term value to stakeholders. This report contains highlights of key initiatives and/or progress we have made as it pertains to protecting our environment, social equality, and sound governance. What you won’t find is lofty goals and promises of something we hope to do some day. Instead, we will highlight the many good things that we do in these areas today and our opportunities for improvement going forward.

Sincerely,

William B. (Brad) Kessel

President and CEO


The information contained in this report shall not be deemed to be filed or furnished or otherwise incorporated by reference in future filings with the Securities and Exchange Commission under the Securities Act of 1933 or the Securities Exchange Act of 1934.

ESG Initiatives

engagement

Environmental

Good corporate citizens that care for our environment and facilitate others to do the same.

We all have a responsibility to take care of our planet as the effects of global warming are more apparent than ever. Our efforts are focused both internally and externally. Internally this past year, our team completed a multi-year project upgrade to LED lighting in all of our facilities. In addition, in 2020 we began a new multi-year investment in new heating and cooling systems that will significantly reduce our energy usage throughout our footprint. We also continue to materially reduce our paper and print usage through integrated tracking and reporting, with reminders encouraging digital usage where possible. Externally, our lenders continue to support local businesses and industries working towards reducing carbon emissions with financing of windfarms, solar farms, and the electric vehicle (EV) market.


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Social

Great place to work and bank. Excellent neighbors and supporters of our communities.

Employer

At Independent Bank we pride ourselves in providing a great place to work. One measurement is our annual employee engagement survey which has consistently had good results. Further we have a strong offering of benefits and professional development. Some key components include:

  • Competitive compensation with regular benchmarking
  • Enhanced wellness program resulting in 250% increase in participation in 2020
  • Leadership, mentoring and training programs
  • Solid benefits package to include Employee Stock Ownership Program (ESOP)

During 2020 we furthered our Diversity, Equity and Inclusion program by conducting bank wide training and enhancing our hiring process.

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Community

Supporting our community and being good neighbors is in our DNA as a community bank. We are grateful for the communities we serve and their support of us as well. With our history dating back to 1864, we are in many small, rural communities where the local bank is very important to the success of the individuals and businesses in the area. We understand the important role we can play. Volunteerism and community support have always been part of our culture, especially when times are tough. Some highlights of our community activities in 2020 include:

  • 5th Annual Making a Difference Day with 794 employees participating in 88 volunteer projects and donating $110,000.
  • Promoting financial literacy with donations of time and money. Over the years, we have been recognized regularly by the Michigan Bankers Association for our efforts to promote financial literacy.

Customers

We strive to help our customers Be Independent, reaching their financial goals, to help our businesses succeed and prosper, and to help our communities thrive.

A key area where a bank can make a difference is home ownership which is an important vehicle for individuals to generate wealth. Home ownership puts individuals and their neighborhoods on a path to stability and prosperity. We have a strong mortgage business that provided $1.8 billion in loans during 2020 to 7,753 individuals. We offer a wide array of mortgage products to benefit homeowners across a broad spectrum.

Our deep commitment to this business results in our understanding that in many of our markets, the growth rate in home prices continues to outpace the growth rate in personal income, making home ownership more difficult, particularly for those borrowers in the lower to moderate income levels. That is why we invested in multiple initiatives in 2020 to promote affordable housing. These include a $2 million investment to support affordable housing in partnership with Cinnaire, specifically the development and

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rehabilitation of nine apartment communities across Michigan; a $500,000 Affordable Housing Program (AHP) grant through the FHLB for a rehabilitation project in Traverse City, MI; and a one million dollar pledge for our new My Home Reward Program which enables applicants to purchase or refinance homes in low-income neighborhoods throughout our markets with no closing costs.

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Governance

Strong corporate governance, enabling effective operations in heavily regulated industry.

The successful management of a bank requires good stewardship of our resources and strong governance. There are many aspects to how we execute our business which include our:

  • Engaged, talented and diverse Board of Directors
  • Strong & experienced Senior Leadership team
  • Well established enterprise risk management framework
  • Effective policies and procedures
  • Strong cybersecurity program with effective controls, regular customer awareness communications and employee training
  • Robust financial disclosures
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A key resource to our Board is the Corporate Governance Committee which serves as a source of strength for our Company. In addition to monitoring our corporate governance standards, this Committee has been active in evaluating and recommending new directors to our Board. This effort led to the appointments of Ms. Keller in 2016, Mr. Cok in 2017, Mr. Beia in 2018, Ms. Kruse in 2019, and most recently Mr. Archer Jr. in October of 2020.

Our most recent addition, Mr. Archer, is the CEO of Ignition Media Group, a leading integrated marketing agency, and President and founding partner of Archer Corporate Services, one of the nation’s leading marketing fulfillment service firms. In addition, Mr. Archer’s hospitality holding company, Congress Hospitality, is creator and managing partner of Central Kitchen, one of Detroit’s top restaurants.


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Leadership

Board of Directors
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Senior Management

COVID-19 Response

The COVID-19 pandemic officially began in late 2019, but it was early March 2020 when the first cases were reported in our markets and we began to feel the effects of the virus. Immediately we enacted our business continuity plan to help prevent the spread of the coronavirus, taking action to protect the health and well-being of our customers and our associates. This resulted in the development of the IB Safe Work Playbook and the rapid deployment of nearly all our non-branch associates to remote work status or work from home. During 2020, service to our customers went uninterrupted, although we did modify our branches to drive-thru service with lobby by appointment only for two extended periods of time, when we experienced high levels of COVID-19 in our markets.

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Over the course of the year, we offered loan payment relief where needed to our customers; we provided SBA Payroll Protection Program (PPP) loans to businesses in our markets; we followed the Government Sponsored Entities (GSEs) directives for moratoriums on foreclosures; and we processed a record volume of mortgage loan requests for new home purchases and refinances.

For our associates, listening to their needs and concerns has been critical. In doing so we have worked hard to have consistent, frequent, and open communication; we have paid service bonuses to our “front-line” associates; we have made adjustments to paid time off policies; and we have implemented extensive health and safety protocols throughout our facilities. As the vaccination process continues throughout our markets, we are hopeful for a “return to normal” in the very near future. In the interim, we will continue to adjust as appropriate to the changing circumstances always with the intent to protect the health and well-being of our customers, our associates, and our communities.


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