Edgar Filing: INDEPENDENT BANK CORP /MI/

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ] Preliminary Proxy Statement
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12

INDEPENDENT BANK CORPORATION
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(Name of Registrant as Specified In Its Charter)

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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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paid previously. Identify the previous filing by registration statement
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SEC 1913 (02-02)

(INDEPENDENT BANK CORPORATION LOGO)

March 21, 2005

Dear Shareholder:

We invite you to attend our 2005 Annual Meeting of Shareholders. This
year's meeting will be held on Tuesday, April 26, 2005, at 3:00 p.m. at the
Ionia Theater, 205 West Main Street, Ionia, Michigan 48846.

It is important that your shares are represented at the Annual Meeting.
Please carefully read the Notice of Annual Meeting and Proxy Statement. Whether
or not you expect to attend the Annual Meeting, PLEASE SIGN, DATE AND RETURN THE
ENCLOSED PROXY IN THE ENVELOPE PROVIDED OR REGISTER YOUR VOTE BY PHONE OR THE
INTERNET.

Sincerely,

/s/ Michael M. Magee, Jr.
---------------------------------------
Michael M. Magee, Jr.
President and
Chief Executive Officer

/s/ Charles Van Loan
---------------------------------------
Charles Van Loan
Chairman of the Board

INDEPENDENT BANK CORPORATION
230 West Main Street
Ionia, Michigan 48846

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

To Be Held April 26, 2005

The Annual Meeting of Shareholders of Independent Bank Corporation will be
held at the Ionia Theater, 205 West Main Street, Ionia, Michigan 48846, on
Tuesday, April 26, 2005, at 3:00 p.m. (local time) for the following purposes:

1. Election of directors

a. To elect one nominee to our Board of Directors to serve a
one-year term expiring in 2006.

b. To elect three nominees to our Board of Directors to serve
three-year terms expiring in 2008.

2. To consider and vote upon the proposed amendment to our Long-Term
Incentive Plan to make an additional 750,000 shares of our common
stock available for issuance under that plan.

3. To transact such other business as may properly come before the
meeting or any adjournment thereof.

Shareholders of record as shown by our transfer books at the close of
business on February 25, 2005, are entitled to notice of and to vote at the
meeting or any adjournment thereof. Whether or not you expect to be present in
person at this meeting, please sign the enclosed proxy and return it promptly in
the enclosed envelope or register your vote by phone or the internet. We
encourage you to vote on the internet or by phone in order to reduce our mailing
and handling costs. If you attend the meeting and wish to vote in person, you
may do so even though you have submitted a proxy.

By order of our Board of Directors,

/s/ Robert N. Shuster
--------------------------------------
Robert N. Shuster
Secretary

Dated: March 21, 2005

INDEPENDENT BANK CORPORATION
230 West Main Street
Ionia, Michigan 48846

PROXY STATEMENT

MARCH 21, 2005

This Proxy Statement is furnished in connection with the solicitation,
beginning approximately March 21, 2005, by our Board of Directors, of proxies
for use at the Annual Meeting of Shareholders. This meeting will be held on
Tuesday, April 26, 2005, at 3:00 p.m. at the Ionia Theater, 205 West Main
Street, Ionia, Michigan 48846.

If the form of the Proxy accompanying this Proxy Statement is properly
executed and returned, the shares represented by the Proxy will be voted at the
Annual Meeting of Shareholders in accordance with the directions given in such
Proxy. If no choice is specified, the shares represented by the Proxy will be
voted for the election of directors listed as nominees and for the amendment to
our Long-Term Incentive Plan.

To vote by telephone, shareholders of record (shareholders who have been
issued a certificate representing their shares) may call toll free on a
touch-tone telephone 1-877-PRX-VOTE (1-877-779-8683); enter the control number
located on your proxy card and follow the recorded instructions. To vote by
internet, go to the site http://www.eproxyvote.com/ibcp; enter the control
number located on your proxy card and follow the instructions provided.

If your shares are held through a bank or a broker (referred to as "street
name"), you may also be eligible to vote your shares electronically. Simply
follow the instructions on your voting form, using either the toll-free
telephone number or the internet address that is listed.

A Proxy may be revoked prior to its exercise by delivering a written notice
of revocation to our Secretary, executing a subsequent Proxy or attending the
meeting and voting in person. Attendance at the meeting does not, however,
automatically serve to revoke a Proxy.

VOTING SECURITIES AND RECORD DATE

As of February 25, 2005, the record date for the Annual Meeting, we had
issued and outstanding 21,238,473, shares of Common Stock. Shareholders are
entitled to one vote for each share of our Common Stock registered in their
names at the close of business on the record date. Votes cast at the meeting and
submitted by proxy are counted by the inspectors of the meeting, who are
appointed by us.

As of February 25, 2005, no person was known by us to be the beneficial
owner of 5% or more of our Common Stock, except as follows:

Name and Address of Amount and Nature of Approximate
Title of Class Beneficial Owner Beneficial Ownership Percent of Class
-------------- ---------------------------- -------------------- ----------------

Common Stock, Independent Bank Corporation 1,092,052 5.0%
$1 par value Employee Savings and Stock
Ownership Trust ("ESSOT")
230 West Main Street
Ionia, Michigan 48846

Our ESSOT holds shares of Common Stock pursuant to the terms of our
Employee Savings and Stock Ownership Plan ("ESSOP"). The Principal Financial
Group administers the ESSOP and serves as directed trustee. Our ESSOP
Administrative Committee has investment power with respect to the shares of
Common Stock held by the ESSOT and has voting power to the extent that the ESSOP
participants do not direct the voting of the shares of Common Stock allocated to
their accounts.

Our Administrative Committee is comprised of three of our officers: Robert
N. Shuster, James J. Twarozynski and Laurinda M. Neve. Except for the shares of
Common Stock allocated to their respective accounts as participants in the
ESSOP, each member of our Administrative Committee disclaims beneficial
ownership of the shares held by the ESSOT.

ELECTION OF DIRECTORS

Our Articles of Incorporation provide that our Board be divided into three
classes of nearly equal size, with the classes to hold office for staggered
terms of three years each. Our Bylaws permit our Board of Directors to establish
the size of our Board from three to fifteen members. Our current Board has fixed
the size of our Board at eight members. Stephen L. Gulis, Terry L. Haske and
Charles A. Palmer are nominees to serve three-year terms expiring in 2008, and
Michael M. Magee, Jr., is a nominee to serve a one-year term expiring in 2006.
Mr. Bratsburg, Mr. Van Loan, Mr. Hetzler and Mr. McCarty are incumbent directors
previously elected by our shareholders.

The Proxies cannot be voted for a greater number of persons than the number
of nominees named. In the event that any nominee is unable to serve, which is
not now contemplated, our Board may designate a substitute nominee. The proxy
holders, to the extent they have been granted authority to vote in the election
of directors, may or may not vote for a substitute nominee.

In addition to the nominees for director, each director whose term will
continue after the meeting is named in the following table. Each nominee and
director owned beneficially, directly or indirectly, the number of shares of
Common Stock set forth opposite their respective names. The stock ownership
information and the information relating to each nominee's and director's age,
principal occupation or employment for the past five years has been furnished to
us as of February 25, 2005, by the respective nominees and directors.

A plurality of the votes cast at the Annual Meeting of Shareholders is
required to elect the nominees as directors. Accordingly, at this year's
meeting, the four individuals who receive the largest number of votes cast at
the meeting will be elected as directors. Shares not voted at the meeting,
whether by abstention, broker non-vote or otherwise, will not be treated as
votes cast at the meeting. Our Board of Directors recommends a vote FOR the
election of each of the four nominees.

Amount and
Nature of
Beneficial Percent of
Ownership(1) Outstanding
------------ -----------

NOMINEES FOR THREE-YEAR TERMS EXPIRING IN 2008

Stephen L. Gulis, Jr. (age 47) 0(2) .00%
Mr. Gulis is the Executive Vice President, Chief Financial Officer and
Treasurer of Wolverine World Wide, Inc. He became a Director in 2004.

Terry L. Haske (age 56) 56,833(3) .26
Mr. Haske is the President of Ricker & Haske, CPAs, P.C.
He became a Director in 1996.

Charles A. Palmer (age 60) 94,362 .43
Mr. Palmer is an attorney and a professor of law at Thomas M. Cooley
Law School. He became a Director in 1991.

NOMINEE FOR ONE-YEAR TERM EXPIRING IN 2006

Michael M. Magee, Jr. (age 49) 83,199(4) .38
Mr. Magee is the President and Chief Executive Officer of
Independent Bank Corporation. Prior to his appointment as President
and CEO as of January 1, 2005, Mr. Magee served as Chief
Operating Officer since February 2004 and prior to that he
served as President and Chief Executive Officer of Independent
Bank since 1993. He became a Director in 2005.

DIRECTORS WHOSE TERMS EXPIRE IN 2006

Robert L. Hetzler (age 59) 44,152 .20
Mr. Hetzler is the retired President of Monitor Sugar Company
(food processor). He became a Director in 2000. Mr. Hetzler was
appointed Lead Outside Director effective January 1, 2005.

James E. McCarty (age 57) 19,429(5) .09
Mr. McCarty is the President of McCarty Communications
(commercial printing). He became a Director in 2002.

DIRECTORS WHOSE TERMS EXPIRE IN 2007

Jeffrey A. Bratsburg (age 61) 134,448(6) .61
Mr. Bratsburg served as President and Chief Executive
Officer of Independent Bank West Michigan from 1985 until
his retirement in 1999. He became a Director in 2000.

Charles C. Van Loan (age 57) 342,453(7) 1.56
Mr. Van Loan is the Chairman of the Board of Directors of
Independent Bank Corporation. Mr. Van Loan served as
President and CEO of Independent Bank Corporation since
1993. He became a Director in 1992.

(1) Except as described in the following notes, each nominee owns the shares
directly and has sole voting and investment power or shares voting and
investment power with his spouse under joint ownership. Includes shares of
Common Stock that are issuable under options exercisable within 60 days.

(2) Excludes 1,266 common stock units held in Mr. Gulis' account under our
deferred compensation and stock purchase plan for non-employee directors
that are payable in our Common Stock upon retirement.

(3) Includes 5,278 shares owned jointly with Mr. Haske's father with respect to
which Mr. Haske shares voting and investment power.

(4) Includes 18,561 shares allocated to Mr. Magee's account under the ESSOT.

(5) Excludes 4,036 common stock units held in Mr. McCarty's account under our
deferred compensation and stock purchase plan for non-employee directors
that are payable in our Common Stock upon retirement. Includes 4,779 shares
held in a spousal trust and 902 shares held by a corporation owned by Mr.
McCarty.

(6) Excludes 774 common stock units held in Mr. Bratsburg's account under our
deferred compensation and stock purchase plan for non-employee directors
that are payable in our Common Stock upon retirement.

(7) Includes 34,114 shares allocated to Mr. Van Loan's account under the ESSOT,
2,836 shares held by Mr. Van Loan's dependent children and 27,341 shares
held in a spousal trust.

CORPORATE GOVERNANCE AND BOARD MATTERS

CORPORATE GOVERNANCE PRINCIPLES

For many years, our Board of Directors has been committed to sound and
effective corporate governance practices. The Board has documented those
practices in our Corporate Governance Principles. These principles address
director qualifications, periodic performance evaluations, stock ownership
guidelines and other corporate governance matters. Under those principles, a
majority of the members of our Board must qualify as independent under the rules
established by the NASDAQ stock market on which our stock trades. Our principles
also require the Board to have an audit committee, compensation committee and a
nominating and corporate governance committee, and that each member of those
committees qualifies as independent under the NASDAQ rules. Our corporate
governance principles, as well as the charters of each of the foregoing
committees are available for review on our website at www.ibcp.com under the
"Investor Relations" tab.

CODE OF BUSINESS CONDUCT AND ETHICS AND CODE OF ETHICS FOR SENIOR FINANCIAL
OFFICERS

Our Board has also adopted a Code of Business Conduct and Ethics that
applies to all of our employees, officers and directors. In addition, the Board
has adopted a Code of Ethics for Senior Financial Officers, which includes our
principle executive officer, principle financial officer and controller. Each of
these codes is posted on our website and can also be obtained free of charge
through our Corporate Secretary at 230 West Main Street, Ionia, Michigan 48846.
Any changes to or waivers of either code for our CEO or senior financial
officers will be disclosed at our website.

DETERMINATION OF INDEPENDENCE OF BOARD MEMBERS

As required by our Corporate Governance Principles, our Board has
determined that each of the following directors qualifies as an "Independent
Director", as such term is defined in Market Place Rules 4200(a)(15) of the
National Association of Securities Dealers (the "NASD"): Jeffrey A. Bratsburg,
Stephen L. Gulis, Terry L. Haske, Robert L. Hetzler, James E. McCarty and
Charles A. Palmer. Our Board has also determined that each member of the three
committees of the Board meets the independence requirements applicable to those
committees as prescribed by the NASDAQ listing requirements, and, as to the
audit committee, under the applicable rules of the Securities and Exchange
Commission. There are no family relationships between or among our directors,
nominees or executive officers.

MEETING ATTENDANCE

Each of our directors is expected to attend all meetings of the Board,
applicable committee meetings, and our annual meeting of shareholders. Each of
our directors, serving at that time, attended our 2004 annual shareholder
meeting. During 2004, the Board held 7 meetings; each director attended at least
75% of the aggregate number of meetings of our Board and Board committees on
which they served.

BOARD COMMITTEES

Our audit committee, which met on 22 occasions in 2004, consists of
directors Haske, Hetzler and Palmer. Stephen L. Gulis was also appointed to the
audit committee effective November 17, 2004. Our Board has determined that Mr.
Gulis qualifies as the "Audit Committee Financial Expert", as that term is
defined in the rules established by the Securities and Exchange Commission.
Prior to Mr. Gulis' appointment to the audit committee Mr. Haske had been
determined by the Board to qualify as the "Audit Committee Financial Expert."
The primary purpose of the audit committee is to assist the Board in overseeing
(1) the quality and integrity of our accounting, auditing and reporting
practices, (2) the performance of our internal audit function and independent
auditor, and (3) our disclosure controls and system of internal controls
regarding, finance, accounting, legal compliance, and ethics that management and
our Board have established. A copy of the committee's charter, which was amended
and restated this past year following the committee's annual review and
reassessment of its charter, is attached to this Proxy Statement as Appendix A.

Our compensation committee, consisting of Directors Bratsburg (Chairman),
Hetzler and Haske, met three times in 2004. This committee reviews and makes
recommendations to the Board on executive compensation matters, including any
benefits to be paid to our executives and officers.

Our nominating and corporate governance committee, consisting of directors
Palmer (Chairman), Bratsburg and Haske met two times in 2004. This committee is
responsible for making recommendations on the qualification and standards to
serve on our Board, identifying board candidates and monitoring our corporate
governance standards.

Our Articles of Incorporation contain certain procedural requirements
applicable to shareholder nominations of directors. Shareholders may nominate a
person to serve as a director if they provide written notice to us not later
than sixty and no more than ninety days prior to the first anniversary date of
the preceding year's annual meeting. The notice must include (1) name and
address of the shareholder who intends to make the nomination and of the person
or persons nominated, (2) a representation that

the shareholder is a current record holder and will continue to hold those
shares through the date of the meeting and intends to appear in person or by
proxy at the meeting, (3) a description of all arrangements between the
shareholder and each nominee, (4) the information regarding each nominee as
would be required to be included in a proxy statement filed under Regulation 14A
of the Exchange Act had the nominee been nominated by the Board of Directors,
and (5) the consent of each nominee to serve as director.

Our governance committee does not currently utilize the services of any
third party search firm to assist in the identification or evaluation of board
member candidates. However, the committee may use the services of such a firm in
the future if it deems necessary or appropriate.

The governance committee has not established specific, minimum
qualifications for director nominees. Our Corporate Governance Principles
mandate that directors possess the requisite background and experience to make a
strong, positive contribution to Independent Bank Corporation and our
shareholders. Our governance committee is responsible for reviewing the
qualifications and independence of the members of the Board. This assessment
includes a consideration of the skills, experience and diversity of the
prospective candidates. In light of these general requirements, our governance
committee reviews the suitability of each person nominated to our Board. These
same standards and suitability requirements are applicable to all director
nominees, regardless of the party making the director nomination. Mr. Stephen L.
Gulis and Mr. Michael M. Magee were appointed to our Board on November 17, 2004,
and January 1, 2005, respectively. Mr. Gulis has served as a director of one of
our subsidiary banks for over three years. Mr. Magee, our CEO, has served as an
executive officer for over 11 years. Both of these directors were nominated to
serve on our Board by our Nominating and Corporate Governance Committee.

The committee has not received any recommended director nominations from
any of our shareholders in connection with our 2005 annual meeting. The nominees
that are standing for election as directors at the 2005 annual meeting are
incumbent directors nominated by the committee.

SHAREHOLDER COMMUNICATIONS WITH THE BOARD

The Board of Directors has implemented a process by which a shareholder may
send written communications to the Board's attention. Any shareholder desiring
to communicate with the Board or one or more of our directors may send a letter
addressed to the Company's Corporate Secretary at P.O. Box 491, Ionia, Michigan
48846. The Secretary has been directed to promptly forward all communications to
the full Board or the specific director indicated in the letter.

COMPENSATION OF DIRECTORS

Directors who are not employed by us or any of our subsidiaries
("Non-employee Directors") receive an annual retainer of $10,000. Each
Non-employee Director also serves as a director of one of our subsidiary banks.
Non-employee Directors of our subsidiaries receive monthly meeting fees of $850.
Our Non-employee Directors are not compensated for committee meetings.

Pursuant to our Long-Term Incentive Plan, the compensation committee may
grant options to purchase shares of Common Stock to each Non-employee Director.
During 2004, each Non-employee Director received an option to purchase 3,398
shares of Common Stock at $26.12 per share, the fair market value of the Common
Stock on the date of the grant. These options could not be exercised prior to
December 31, 2004, are restricted as to transferability and expire 10 years
after the date of grant.

We maintain a Deferred Compensation and Stock Purchase Plan for
Non-employee Directors (the "Purchase Plan"). The Purchase Plan provides that
Non-employee Directors may defer payment of all or a part of their director fees
("Fees") or receive shares of Common Stock in lieu of cash payment of Fees.
Under the Purchase Plan, each Non-employee Director may elect to participate in
a Current Stock Purchase Account, a Deferred Cash Investment Account or a
Deferred Stock Account.

A Current Stock Purchase Account is credited with shares of Common Stock
having a fair market value equal to the Fees otherwise payable. A Deferred Cash
Investment Account is credited with an amount equal to the Fees deferred and on
each quarterly credit date with an appreciation factor that may not exceed the
prime rate of interest charged by Independent Bank. A Deferred Stock Account is
credited with the amount of Fees deferred and converted into stock units based
on the fair market value of our Common Stock at the time of the deferral.
Amounts in the Deferred Stock Account are credited with cash dividends and other
distributions on our Common Stock. Fees credited to a Deferred Cash Investment
Account or a Deferred Stock Account are deferred for income tax purposes. The
Purchase Plan does not provide for distributions of amounts deferred prior to a
participant's termination as a Non-employee Director, and the participant may
generally elect either a lump sum or installment distribution.

REPORT OF OUR AUDIT COMMITTEE

The information contained in this report shall not be deemed to be
"soliciting material" or "filed" or incorporated by reference in future filings
with the Securities and Exchange Commission, or subject to the liabilities of
Section 18 of the Securities Exchange Act of 1934, except to the extent that we
specifically incorporate it by reference into a document filed under the
Securities Act of 1933 or the Securities Exchange Act of 1934.

Our audit committee has met with Management and the independent auditors to
review and discuss our audited financial statements as of and for the year ended
December 31, 2004.

Our audit committee obtained from our independent auditors a formal written
statement describing the relationships between us and our auditors that might
bear on the auditors' independence, which is consistent with Independence
Standards Board Standard No. 1, "Independence Discussions with Audit
Committees." Our audit committee has also discussed with our auditors any
relationships that may impact their objectivity and independence and satisfied
itself as to our auditors' independence.

Our audit committee has reviewed with our independent auditors all
communications required by generally accepted auditing standards, including
those described in Statement on Auditing Standards No. 61, as amended,
"Communication with Audit Committees." Our audit committee also discussed, with
and without management present, the results of our independent auditors'
examination of our financial statements.

Based on the reviews and discussions referred to above, the audit committee
has recommended to our Board of Directors that the financial statements referred
to above be included in our Annual Report on Form 10-K for the year ended
December 31, 2004.

STEPHEN L. GULIS ROBERT L. HETZLER

TERRY L. HASKE CHARLES A. PALMER

AUDIT MATTERS AND OUR RELATIONSHIP WITH
OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Representatives of KPMG, LLP, our independent registered public accounting
firm, will be present at the annual meeting and will be given the opportunity to
make a statement if desired. They will also be available to respond to
appropriate questions. Our audit committee has yet to take action on the
selection of our independent registered public accounting firm for 2005, which
is expected to occur by May, 2005.

The following sets forth the fees paid to our independent registered public
accounting firm for the last two fiscal years:

Year ended December 31,
-----------------------
2004 2003
-------- --------

Audit fees $348,000 $260,000
Audit related fees(1) 25,000 29,000
Tax fees(2) 63,000 84,000
All other fees 75,000(3)
-------- --------
Total $511,000 $373,000
======== ========

(1) Consists primarily of fees related to an audit required under Housing and
Urban Development loan program and fees related to benefit plan audits.

(2) Consists primarily of fees related to the preparation of corporate tax
returns and corporate tax planning.

(3) Amount in 2004 consists of costs relating to the Mepco investigation
disclosed in appendix C to this proxy statement.

Our audit committee has established a pre-approval policy for procedures
for audit, audit related and tax services that can be performed by our
independent public accountants. A copy of that policy is attached to this Proxy
Statement as Appendix B. For 2004 and 2003, all of these fees were pre-approved
by the audit committee under that policy. Subject to certain limitations, the
authority to grant pre-approvals may be delegated to one or more members of the
audit committee.

PROPOSAL TO MAKE ADDITIONAL SHARES AVAILABLE FOR ISSUANCE
UNDER THE COMPANY'S LONG-TERM INCENTIVE PLAN

PROPOSED AMENDMENT TO THE COMPANY'S LONG-TERM INCENTIVE PLAN

In 2002, the Board of Directors adopted, and our shareholders approved, the
Independent Bank Corporation Long-Term Incentive Plan (the Plan). The Plan
provides for the grant of a variety of equity-based awards, described in more
detail below, such as stock options, including incentive stock options as
defined in Section 422 of the Internal Revenue Code, as amended (the Code),
reload options, stock appreciation rights, restricted stock, performance shares,
and other stock based awards. As of February 25, 2005, there were 61,000 shares
of common stock available for the grant of future awards under the Plan.

The Plan is intended to promote the long-term success of the company for
the benefit of our shareholders through stock-based compensation, by aligning
the personal interests of Plan participants with those of our shareholders. The
Plan is designed to allow selected Plan participants to participate financially
in our future, as well as to enable us to attract, retain, and reward those
individuals.

Our Board of Directors has approved an amendment to the Plan, subject to
shareholder approval, to make an additional 750,000 shares available for
issuance under the Plan. At the annual meeting, our shareholders are being
requested to consider and approve this amendment. The following paragraphs
summarize the material features of the Plan, as amended.

DESCRIPTION OF THE PLAN

The Plan is administered by the Compensation Committee of the Board (the
committee), which is required to consist of not fewer than three non-employee
directors, as defined in Rule 16b-3(b)(3) of the Securities Exchange Act of
1934. The committee determines the key employees of the company and its
subsidiaries, as well as directors and consultants, who are to be granted
awards, the types of awards (or combinations thereof) to be granted, the number
of shares of common stock to be covered by each award, the terms and conditions
of any award, such as conditions of forfeiture, transfer restrictions, and
vesting requirements.

The Plan provides that no more than 20 percent of Plan shares may be
awarded to any one employee, and not more than 15 percent of Plan shares may be
awarded in the form of Restricted Stock grants.

If the amendment is approved, the maximum number of shares that may be
issued under the Plan would be increased by 750,000 shares to 2,025,000 shares
(this amount includes 1,214,000 of outstanding stock options at February 25,
2005). In addition, shares from the following sources are added to the Plan: (i)
any shares subject to awards that have expired unexercised or that are
forfeited, canceled, terminated, or settled in cash in lieu of common stock
(provided that any shares subject to a forfeited or canceled award may not again
be made subject to an award from a participant who received directly or
indirectly any of the benefits of ownership of the securities underlying the
award, excluding the right to vote such shares); (ii) any shares surrendered to
us in payment of the exercise price of options or tax withholding obligations;
(iii) shares subject to options withheld to pay the exercise price or tax
withholding obligations; and (iv) the number of shares repurchased by us in the
open market or otherwise having an aggregate purchase price no greater than the
cash proceeds received by us from the sale of shares under the Plan.

TYPES OF AWARDS

The following types of awards may be granted under the Plan.

An "OPTION" is a contractual right to purchase a number of shares at a
price determined at the date the option is granted. The exercise price included
in both incentive stock options and nonqualified stock options must equal at
least 100 percent of the fair market value of the stock at the date of the
grant. Awards of certain options also may include reload options. A reload
option is an option to purchase shares equal to the number of shares of common
stock delivered in payment of the exercise price (including, in the discretion
of the committee, the number of shares tendered to the company to satisfy any
withholding tax liability arising upon exercise), and is automatically granted
upon delivery of the shares without further action by the committee. A reload
option retains the same terms of the original option, including the exercise
period; however, the exercise price of the reload option must equal the fair
market value of our common stock on the date of grant of the reload option.

A "STOCK APPRECIATION RIGHT" is an award of the right to receive stock or
cash of an equivalent value in an amount equal to the difference between the
price specified in the stock appreciation right and the prevailing market price
of our common stock at the time of exercise. Stock appreciation rights may be
granted only in tandem with options.

"RESTRICTED STOCK" is an award of common stock granted to a participant for
no or nominal consideration. Title to the shares passes to the participant at
the time of that grant; however, the ability to sell or otherwise dispose of the
shares is subject to restrictions and conditions determined by the committee.

"PERFORMANCE SHARES" are an award of the right to receive stock or cash of
an equivalent value at the end of the specified performance period upon the
attainment of specified performance goals.

An "OTHER STOCK-BASED AWARD" is any other award that may be granted under
the Plan that is valued in whole or in part by reference to or is payable in, or
otherwise based, on our common stock.

Our Board may at any time amend, discontinue, or terminate all or any part
of the Plan. However, no amendment may be made without shareholder approval that
would (i) increase the aggregate number of shares of common stock that may be
issued under the Plan, (ii) extend the maximum option period under the Plan, or
(iii) decrease the option price of any option to less than 100 percent of the
fair market value on the date of grant.

FEDERAL TAX CONSEQUENCES

The following summarizes the consequences of the grant and acquisition of
awards under the Plan for federal income tax purposes, based on management's
understanding of existing federal income tax laws. This summary is necessarily
general in nature and does not purport to be complete. Also, state and local
income tax consequences are not discussed and may vary from locality to
locality.

OPTION - Plan participants will not recognize taxable income at the time an
option is granted under the Plan unless the option has a readily ascertainable
market value at the time of grant. Management understands that options to be
granted under the Plan will not have a readily ascertainable market value;
therefore, income will not be recognized by participants before the time of
exercise of an option. For Nonqualified Stock Options, the difference between
the fair market value of the shares at the time an option is exercised and the
option price generally will be treated as ordinary income to the optionee, in
which case the company will be entitled to a deduction equal to the amount of
the optionee's ordinary income.

With respect to incentive stock options, participants will not realize
income for federal income tax purposes as a result of the exercise of such
options. In addition, if the shares acquired as a result of the exercise of an
incentive stock option are disposed of more than two years after the date the
option is granted and more than one year after the date the option was
exercised, the entire gain, if any, realized upon disposition of such shares
will be treated as capital gain for federal income tax purposes. Under these
circumstances, no deduction will be allowable to the company in connection with
either the grant or exercise of an incentive stock option. Exceptions to the
general rules apply in the case of a "disqualifying disposition."

If a participant disposes of shares of common stock acquired pursuant to
the exercise of an incentive stock option before the expiration of one year
after the date of exercise or two years after the date of grant, the sale of
such stock will be treated as a "disqualifying disposition." As a result, such a
participant would recognize ordinary income and the company would be entitled to
a deduction in the year in which such disposition occurred. The amount of the
deduction and the ordinary income recognized upon a disqualifying disposition
would generally be equal to the lesser of: (i) the sale price of the shares sold
minus the option price; or (ii) the fair market value of the shares at the time
of exercise minus the option price. If the disposition is to a related party
(such as a spouse, brother, sister, lineal descendant, or certain trusts for
business entities in which the seller holds a direct or indirect interest), the
ordinary income recognized generally is equal to the excess of the fair market
value of the shares at the time of exercise over the exercise price. Any
additional gain recognized upon disposition, in excess of the ordinary income,
will be taxable as capital gain. In addition, the exercise of incentive stock
options may result in an alternative minimum tax liability.

RELOAD STOCK OPTIONS - Participants will recognize no income on the grant
of any reload option. On exercise of a reload option, the tax consequences to
the participant and the company are the same as that for a nonqualified stock
option.

STOCK APPRECIATION RIGHTS - Upon the grant of a stock appreciation right,
the participant will realize no taxable income, and the company will receive no
deduction. A participant will realize income at the time of exercise if the
award becomes vested and is no longer subject to forfeiture and the participant
is entitled to receive the value of the award. The company will receive a
deduction of an equal amount in the same year the participant recognized income.

RESTRICTED STOCK - Recipients of shares of restricted stock that are not
"transferable" and are subject to "substantial risk of forfeiture" at the time
of grant will not be subject to federal income taxes until the lapse or release
of the restrictions or sale of the shares, unless the recipient files a specific
election under the Code to be taxed at the time of grant. The recipient's income
and the company's deduction will be equal to the excess of the then fair market
value (or sale price) of the share less any purchase price.

PERFORMANCE SHARE - Participants are not taxed upon the grant of
performance shares. Upon receipt of the underlying shares or cash, a participant
will be taxed at ordinary income tax rates (subject to withholding) on the
amount of cash received and/or the current fair market value of stock received,
and the company will be entitled to a corresponding deduction. The participant's
basis in any Performance shares received will be equal to the amount of ordinary
income on which he or she was taxed and, upon subsequent disposition, any gain
or loss will be capital gain or loss.

REQUIRED VOTE FOR APPROVAL - The affirmative vote of a majority of the
Company's Common Stock voted at the Annual Meeting, by person or by proxy, is
required to approve the proposed amendment to the Plan. While broker non-votes
will not be treated as votes cast on the proposal, shares voted as abstentions
will be counted as votes cast. Since a majority of the votes cast is required
for approval, the sum of any negative votes and abstentions will necessitate
offsetting affirmative votes to assure approval. Unless otherwise directed by
marking the accompanying proxy, the proxy holders named therein will vote FOR
the approval of the proposed amendment to the Plan.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE PROPOSED
AMENDMENT TO THE PLAN.

SHAREHOLDER RETURN PERFORMANCE GRAPH

Set forth below is a line graph comparing the yearly percentage change in
the cumulative total shareholder return on our Common Stock (based on the last
reported sales price of the respective year) with the cumulative total return of
the Nasdaq Stock Market Index (United States stocks, only) and the Nasdaq Bank
Stocks Index for the five-year period ended December 31, 2004. The following
information is based on an investment of $100 on January 1, 2000, in our Common
Stock, the Nasdaq Stock Market Index and the Nasdaq Bank Stocks Index, with
dividends reinvested.

(PERFORMANCE GRAPH)

January 1, December 31,
---------- -----------------------------------------------
2000 2000 2001 2002 2003 2004
---------- ------- ------- ------- ------- -------

Independent Bank Corporation $100.00 $146.10 $220.71 $256.85 $406.39 $435.23
Nasdaq Stock Market 100.00 60.31 47.84 33.07 49.45 53.81
Nasdaq Bank Stocks 100.00 114.23 123.68 126.65 162.92 186.45

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

GENERAL

Our ability to create shareholder wealth is predicated on our ability to
attract and retain qualified executives and senior managers. Our Board of
Directors, therefore, believes that our compensation policies and practices
must: 1) provide incentives and rewards for superior performance; 2) align the
interests of our executive officers and senior managers with the interests of
our shareholders, and; 3) provide executive officers and senior managers with
the opportunity to accumulate wealth that is commensurate with increases in the
value of our Common Stock.

COMPENSATION STRATEGY

Consistent with these objectives and based on a review by nationally
recognized compensation consultants, our Board of Directors has adopted a
"pay-for-performance" compensation strategy. The strategy seeks to maintain a
balance among three principal components of total compensation, as follows:

BASE SALARY-Excluding consideration of other relevant factors, which may
include individual performance, experience, expertise and tenure, our Board
intends to maintain the base salaries of executive officers and senior managers
at approximately the level established by our peers.

Annually, the compensation committee recommends a base salary for our
President and Chief Executive Officer (and beginning in 2005 our Chairman of the
Board) for consideration by the entire Board of Directors. The compensation
committee's recommendation is based upon compensation levels established by our
peers and the compensation committee's evaluation of the relevant factors that
are described above. The base salaries of the Presidents of each of our Banks
are determined in a similar manner by our President and Chief Executive Officer
and our Banks' respective boards of directors. The base salaries of other
executive officers are established by our President and Chief Executive Officer.

ANNUAL CASH INCENTIVE-To provide additional performance incentives, the
strategy provides for annual cash awards that are payable if we meet or exceed
annual performance objectives established by our Board of Directors. Assuming
"target performance" is achieved under the Management Incentive Compensation
Plan described below, our Board intends that aggregate annual cash compensation
(the total of base salary and annual cash incentive) will equal approximately
peer level.

LONG-TERM INCENTIVES-To align the interests of our executive officers and
senior managers with our shareholders, our Board's compensation strategy
provides for equity-based compensation plans, including our Employee Savings and
Stock Ownership Plan and our Long-Term Incentive Plan described below. These
compensation plans have been adopted by our Board of Directors, and our
Long-Term Incentive Plan has been approved by our shareholders. Such plans are,
however, administered by the committee.

COMPENSATION PLANS

Pursuant to our MANAGEMENT INCENTIVE COMPENSATION PLAN, our Board of
Directors establishes annual performance levels as follows: 1) threshold
represents the performance level which must be achieved before any incentive
awards are granted; 2) target performance is defined as the desired level of
performance in view of all relevant factors, as discussed below, and; 3) maximum
represents that which reflects outstanding performance.

The principal factors considered by our Board in the determination of these
performance levels include peer performance and investment community
expectations for our return on equity and earnings per common share, as well as
similar expectations for our competitors in the financial services industry.
Corresponding performance levels are established for each of our Banks or other
subsidiaries.

In addition to our objective earnings goals, payments pursuant to this plan
may also be subject to certain pre-determined individual goals. Such individual
goals may be objective or subjective in nature. The individual performance
component is, however, limited to 20% of the total incentive formula for our
executive officers and our Bank Presidents.

For our Chief Executive Officer, cash payments made pursuant to this plan
may range from 20% to 50% of base salary. For other executive officers and our
Bank Presidents, such cash payments may range from 15% to 35% of their base
salary. For the year ended December 31, 2004, our executive officers and our
Bank Presidents received cash awards pursuant to our Management Incentive
Compensation Plan that ranged from 15% to 20% of their respective base salaries.

OUR LONG-TERM INCENTIVE PLAN, is intended to provide our executive officers
and senior managers with additional long-term incentives to manage our affairs
in the best interests of our shareholders. On April 23, 2004, our Board of
Directors granted options to purchase 106,500 shares of Common Stock to 43 of
our executive officers and senior managers. These options provide the recipient
the right to purchase shares of Common Stock at $26.12 per share, the market
price of our Common Stock as of the date of the grant. Such options could not be
exercised before December 31, 2004, are restricted as to transferability and
expire 10 years after the date of the grant.

On January 28, 2005, our Board of Directors granted options to purchase
80,479 shares of Common Stock to our executive officers. Options covering 32,760
shares were designated as incentive stock options, as defined by the Internal
Revenue Code. Each option provides the recipient the right to purchase the
underlying shares of Common Stock at $30.11 per share, the market price of our
Common Stock as of the date of the grant. Such options may not be exercised
prior to March 31, 2005, are restricted as to transferability and expire 10
years after the date of the grant.

Our EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN, provides substantially all
full-time employees an equity interest in our Company. Contributions to the
ESSOP are determined annually and are subject to the approval of our Board of
Directors. Contributions for the year ended December 31, 2004, were equal to 2%
of the eligible wages for each of the approximately 1,100 participants in the
ESSOP.

CHIEF EXECUTIVE OFFICER COMPENSATION

Charles C. Van Loan has served as our Chief Executive Officer since
December 16, 1992. Prior to that time, Mr. Van Loan served as our President and
Chief Operating Officer and as the President and Chief Executive Officer of
Independent Bank. Effective on January 1, 2005, Mr. Van Loan resigned as Chief
Executive Officer and was appointed as the Chairman of the Board. Also effective
on January 1, 2005 Michael M. Magee was appointed as President and Chief
Executive Officer. Mr. Magee had been the Chief Operating Officer of the Company
since February 2004 and prior to that time had served as the President and Chief
Executive Officer of Independent Bank.

Consistent with our existing policies and practices, the Committee reviewed
compensation data from our peers and evaluated Mr. Van Loan's contributions to
our success as well as his experience and expertise. On the basis of its
evaluation, the Committee recommended for consideration by our full Board of
Directors a base salary of $353,290 (for the reasons described below this was
reduced to $333,290 effective as of January 1, 2005). As a result of our
earnings, relative to the goals established pursuant to our Management Incentive
Compensation Plan, Mr. Van Loan's cash incentive for 2004 totaled $70,658.

In February 2004 we announced a transition plan, pursuant to which Mr.
Magee began to gradually assume Mr. Van Loan's responsibilities. Following his
appointment as Chief Operating Officer, our Bank Presidents began reporting
directly to Mr. Magee while other corporate executives continued to report to
Mr. Van Loan. Effective as of the date of his appointment as Chief Executive
Officer, all of our other corporate executives (except for our Chief Financial
Officer) began reporting to Mr. Magee. During 2005 Mr. Van Loan will provide
continuing assistance to Mr. Magee and will continue to supervise the Chief
Financial Officer who oversees the Company's Accounting, Finance and Risk
Management Departments. We anticipate that the transition of duties from Mr. Van
Loan to Mr. Magee will be substantially complete by December 31, 2005.

JEFFREY A. BRATSBURG

TERRY L. HASKE ROBERT L. HETZLER

SECURITIES OWNERSHIP OF MANAGEMENT

The following table sets forth the beneficial ownership of our Common Stock
by our Chief Executive Officer and our four other highest paid executive
officers ("Named Executives") and by all directors and executive officers as a
group as of February 25, 2005.

Amount and
Nature of
Beneficial Percent of
Name Ownership(1) Outstanding
---- ------------ -----------

Charles C. Van Loan 342,453(2) 1.56%
Michael M. Magee 83,199 .38
Edward B. Swanson 141,818 .65
Ronald L. Long 68,768 .31
David C. Reglin 101,847 .47

All executive officers and directors
as a group (consisting of 16 persons) 2,288,890(3) 10.46

(1) In addition to shares held directly or under joint ownership with their
spouses, beneficial ownership includes shares that are issuable under
options exercisable within 60 days, and shares that are allocated to their
accounts as participants in the ESSOP.

(2) Includes shares held by Mr. Van Loan's dependent children and in a spousal
trust.

(3) Includes shares held by the ESSOT. Beneficial ownership is disclaimed as to
1,015,024 shares, including 943,794 shares which are held by the ESSOT.

SUMMARY COMPENSATION TABLE

The following table sets forth compensation received by our Named
Executives for each of the three years ended December 31, 2004.

Long-Term
Annual Compensation Awards All
Compensation Securities Other
-------------------- Underlying Compen-
Name & Principal Position Year Salary(1) Bonus(2) Options (#)(3) sation(4)
------------------------- ---- --------- -------- ------------------- ---------

Charles C. Van Loan(5) 2004 $353,290 $ 70,658 61,574 $10,250
Chairman of the 2003 343,200 171,600 62,209 18,000
Board 2002 330,000 185,000 30,809 18,000

Michael M. Magee(5) 2004 $256,216 $ 37,297 12,408 $10,250
President and Chief 2003 218,400 76,440 12,861 18,000
Executive Officer 2002 210,000 83,500 16,765 18,000

Edward B. Swanson 2004 $197,000 $ 29,550 10,350 $ 9,838
President and CEO 2003 189,280 56,094 9,790 17,040
Independent Bank South Michigan 2002 182,000 57,435 13,036 17,047

Ronald L. Long(6) 2004 $197,000 $ 29,550 10,350 $93,853
President and CEO 2003 189,280 66,248 11,512 17,040
Independent Bank East Michigan 2002 182,000 60,031 13,929 15,682

David C. Reglin 2004 $197,000 $ 29,550 10,350 $ 9,838
President and CEO 2003 189,280 76,248 11,512 17,040
Independent Bank West Michigan 2002 170,000 59,500 14,616 15,511

(1) Includes elective deferrals by employees pursuant to Section 401(k) of the
Internal Revenue Code.

(2) Includes amounts earned under the Company's Management Incentive
Compensation Plan.

(3) Includes options granted in 2005 relating to 2004 performance.

(4) Amounts represent our contributions to the ESSOP. Subject to certain age
and service requirements, all of our employees are eligible to participate
in this plan.

(5) Effective January 1, 2005, Mr. Magee was appointed President and Chief
Executive Officer and Mr. Van Loan was appointed Chairman of the Board.

(6) Included in All Other Compensation for 2004 is an $84,000 payment for
relocation costs.

OPTION GRANTS IN 2004

The following table provides information on options granted to our Named
Executives during the year ended December 31, 2004.

Individual Grants
Number of Percent of Total Exercise or Grant Date
Securities Underlying Options Granted to Base Price Expiration Present
Options Granted(1) Employees in 2004 (per share)(2) Date Value(3)
--------------------- ------------------ -------------- ---------------- ----------

Charles C. Van Loan 2,500 .66 $26.12 April 23, 2014 $ 25,650
20,173 5.31 30.11 January 28, 2015 240,761
38,901 10.24 (4) (4) 403,940

Michael M. Magee 2,500 .66 $26.12 April 23, 2014 $ 25,650
9,908 2.61 30.11 January 28, 2015 118,250

Edward B. Swanson 2,500 .66 $26.12 April 23, 2014 $ 25,650
7,850 2.07 30.11 January 28, 2015 93,688

Ronald L. Long 2,500 .66 $26.12 April 23, 2014 $ 25,650
7,850 2.07 30.11 January 28, 2015 93,688

David C. Reglin 2,500 .66 $26.12 April 23, 2014 $ 25,650
7,850 2.07 30.11 January 28, 2015 93,688

(1) Indicates number of shares which may be purchased pursuant to options
granted under our Long-Term Incentive Plan. Options with an expiration date
of April 23, 2014 could not be exercised in full or in part prior to
December 31, 2004. Options with an expiration date of January 28, 2015 were
granted in 2005 and vest on March 31, 2005. Such options relate to 2004
performance.

(2) The exercise price equals the prevailing market price of our Common Stock
on the date of grant. The exercise price may be paid in cash, by the
delivery of previously owned shares, through the withholding of shares
otherwise issuable upon exercise or a combination thereof.

(3) The values reflect application of the Black-Scholes option pricing model.
The assumptions employed on options with an expiration date of April 23,
2014, were expected volatility of 32.23%, risk-free rate of return of
4.40%, dividend yield of 2.45% and time to exercise of ten years. The
assumptions employed on options with an expiration date of January 28,
2015, were expected volatility of 31.97%, risk-free rate of return of
4.14%, dividend yield of 2.26% and time to exercise of ten years.

(4) Represents four separate grants to Mr. Van Loan for reload options on
February 25, 2004. The exercise price of these options is $27.69 per share
and have expiration dates ranging from January 21, 2012 to January 18,
2013.

AGGREGATED STOCK OPTION EXERCISES IN 2004
AND YEAR END OPTION VALUES

The following table provides information on the number and value of options
exercised in the past year, as well as the number and value of unexercised
options held by our Named Executives at December 31, 2004. Options covering
340,364 shares of Common Stock were exercised in 2004.

Number of Securities Underlying Value of Unexercised
Shares Unexercised Options In-the-Money Options(2)
Acquired Value ------------------------------- ---------------------------
Name on Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------- ----------- ------------- ----------- -------------

Charles C. Van Loan 55,747 $612,611 64,709 38,901 $ 112,913 $83,248
Michael M. Magee 53,310 943,651 33,483 -- 345,769 --
Edward B. Swanson 5,483 104,998 71,048 -- 1,091,797 --
Ronald L. Long 8,709 145,194 48,311 -- 547,273 --
David C. Reglin -- -- 65,339 -- 905,288 --

(1) The value realized upon the exercise of options is equal to the difference
between the market value of the shares of Common Stock acquired at the time
of exercise and the aggregate exercise price paid by our Named Executives.

(2) The value of unexercised options is based on the difference between the
closing price of our Common Stock on December 31, 2004 ($29.83) and the
exercise prices of the options.

MANAGEMENT CONTINUITY AGREEMENTS

We have entered into individual Management Continuity Agreements with our
executive officers and certain senior managers, including our Named Executives.
These agreements provide severance benefits if the individual's employment is
terminated within 36 months after a change in control or within six months
before a change in control if we terminate the individual's employment in
contemplation of a change in control and to avoid the agreement. For the
purposes of these agreements, a "change in control" is any occurrence reportable
as such in a proxy statement under applicable rules of the Securities and
Exchange Commission, and would include, without limitation, the acquisition of
beneficial ownership of 20% of our voting securities by any person, certain
extraordinary changes in the composition of our Board of Directors, or a merger
or consolidation in which we are not the surviving entity, or our sale or
liquidation.

Severance benefits are not payable if we terminate the employment for
cause, if employment terminates due to the individual's death or disability, or
if the individual resigns without "good reason." An individual may resign with
"good reason" after a change in control and retain benefits if we reduce the
individual's salary or bonus, assign duties inconsistent with the individual's
prior position, or make other material, adverse changes in the terms or
conditions of the individual's employment. The agreements are for self-renewing
terms of eighteen months to three years unless we take action to terminate
further extensions. The agreements are automatically extended for an eighteen
month to three-year term from the date of a change in control. These agreements
provide a severance benefit of a lump-sum payment equal to eighteen months to
three years salary and bonus and a continuation of benefits coverage for
eighteen months to three years.

TRANSACTIONS INVOLVING MANAGEMENT

Our Board of Directors and executive officers and their associates were
customers of, and had transactions with, our subsidiaries in the ordinary course
of business during 2004. All loans and commitments included in such transactions
were made in the ordinary course of business on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons and do not involve an unusual risk of
collectibility or present other unfavorable features. Such loans totaled
$1,486,000 at December 31, 2004, equal to 0.6% of shareholders' equity.

Mr. McCarty (Director) owns a graphic design and commercial printing
company which does business with us. During 2004 we purchased $97,000 in goods
and services from his company.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Pursuant to Section 16 of the Securities Exchange Act of 1934, our
directors and executive officers, as well as any person holding more than 10% of
our Common Stock, are required to report initial statements of ownership of our
securities and changes in such ownership to the Securities and Exchange
Commission. Based solely upon written representations by each Director and
Executive Officer and our review of those reports furnished to us, all of the
required reports were timely filed by such persons during 2004, except that Mr.
Van Loan, an executive officer of the Company, filed one report late covering
three gifts of Common Stock. Also, Mr. Bratsburg, was late in filing three
reports, covering three transactions, and Mr. McCarty was late in filing one
report, covering one transaction, all of which related to the crediting of
deferred stock units in lieu of director fees under the Company's Deferred
Compensation and Stock Purchase Plan for Nonemployee Directors.

SHAREHOLDER PROPOSALS

Article III of our Bylaws contain procedural requirements for shareholder
proposals, generally. Copies of our Articles of Incorporation and Bylaws have
been filed with the Securities and Exchange Commission and can be obtained from
its Public Reference Section or from us. Any other shareholder proposal to be
considered by us for inclusion in the 2006 Annual Meeting of Shareholders proxy
materials must be received by us no later than November 21, 2005. If we receive
notice of a shareholder proposal after February 4, 2006, the persons named as
proxies for the 2006 Annual Meeting of Shareholders will have discretionary
voting authority to vote on that proposal at that meeting.

GENERAL

The cost of soliciting proxies will be borne by us. In addition to
solicitation by mail, our officers and employees may solicit proxies by
telephone, telegraph or in person. We have retained the services of The Altman
Group to deliver proxy materials to brokers, nominees, fiduciaries and other
custodians for distribution to beneficial owners, as well as solicit proxies
from these institutions. The cost of such services is expected to total
approximately $4,000, plus reasonable out of pocket expenses.

As of the date of this proxy statement, Management knows of no other
matters to be brought before the meeting. However, if further business is
presented by others, the proxy holders will act in accordance with their best
judgment.

By order of our Board of Directors,

/s/ Robert N. Shuster
-----------------------------------
Robert N. Shuster
Secretary

Dated: March 21, 2005

APPENDIX A

CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

I. PURPOSE

The primary function of the Audit Committee is to assist the Board by
overseeing (1) the quality and integrity of the Company's accounting, auditing
and reporting practices, (2) the performance of the Company's internal audit
function and independent auditor, and (3) the Company's disclosure controls and
system of internal controls regarding finance, accounting, legal compliance, and
ethics that management and the Board of Directors have established.

The Audit Committee shall provide an open avenue of communication among the
independent auditors, financial and senior management, the internal auditor and
the Board of Directors.

II. MEMBERSHIP

A. Independence--The Audit Committee shall be comprised of three or more
members, each of whom (1) must qualify as an independent director
under the listing requirements of NASDAQ and Section 301 of the
Sarbanes-Oxley Act, (2) shall not have participated in the preparation
of the financial statements of the Company or any subsidiary during
the prior three year period, and (3) shall be free from any
relationship to the Company that, in the opinion of the Board, would
interfere with the exercise of his or her independent judgment as a
member of the Committee. All members of the Committee shall have a
working familiarity with basic financial and accounting practices, and
on or before January 1, 2004 at least one member of the Committee
shall be a "financial expert" in compliance with the criteria
established by the Securities and Exchange Commission.

B. Appointment--The members shall be nominated by the Nominating and
Corporate Governance Committee and appointed annually to one-year
terms by the Board. The Nominating and Corporate Governance Committee
shall recommend, and the Board shall designate, one member of the
Audit Committee as Chair.

C. Limitations. A member of the Audit Committee shall not simultaneously
serve on the audit committee of more than two other public companies.

III. MEETINGS

Meetings of the Audit Committee shall be subject to the Committee procedure
rules set forth in the Company's Bylaws and its own rules of procedure, which
shall be consistent with those Bylaws and the following:

A. The Audit Committee shall meet at least four (4) times annually and
more frequently as circumstances require. Each regularly scheduled
meeting of the Committee shall conclude with an executive session of
the Committee, absent members of management and on such terms and
conditions as the Committee may elect. In addition, the Committee may
meet periodically with management; the head of the Company's internal
auditing department and the independent auditors in separate executive
sessions to discuss any matters that the Audit Committee or the
internal audit department or independent auditors believe should be
discussed privately.

B. Following each of its meetings, the Audit Committee shall deliver a
report on the meeting to the Board, including a description of all
actions taken by the Audit Committee.

C. The Audit Committee shall keep written minutes of its meetings, which
minutes shall be maintained with the books and records of the Company.

IV. RESPONSIBLILITIES, DUTIES AND AUTHORITY

The Audit Committee shall have the following responsibilities, duties and
authority:

A. Document and Report Review

1. Review and update this Charter periodically or as conditions
dictate (at least, annually).

2. Review the Company's annual financial statements and any reports
or other financial information submitted to the Securities and
Exchange Commission or to the public, including any report issued
by the independent auditors.

3. Review the summary report of the internal auditor and
management's response to such reports.

4. Recommend to the Board whether the financial statements should be
included in the Annual Report on Form 10-K.

5. Review with financial management and the independent auditors the
quarterly report on Form 10-Q prior to its filing.

6 Review earnings press releases with management prior to
dissemination.

7. Discuss with management financial information and earnings
guidance provided to analysts and rating agencies.

B. Independent Auditors

1. Appoint, approve the compensation of, and provide oversight of
the Company's independent auditors, including the removal of the
Company's independent auditors. The independent auditors shall
report directly to the Committee, and the Committee shall oversee
the resolution of any disagreements between management and the
independent auditors.

2. Administer the Company's Policy Regarding the Approval of Audit
and Nonaudit Services Provided by the Independent Auditor.

3. Review the independent auditors' attestation and report on
management's internal control report, and hold timely discussions
with the independent auditors regarding:

(a) All critical accounting policies and practices;

(b) All alternative treatments of financial information within
generally accepted accounting principles that have been
discussed with management, ramifications of the use of such
alternative disclosures and treatments, and the treatment
preferred by the independent auditor;

(c) Other material written communications between the
independent auditor and management including, but not
limited to, management letter and schedule of unadjusted
differences;

(d) An analysis of the independent auditor's judgment as to the
quality of the Company's accounting principles, setting
forth significant reporting issues and judgments made in
connection with the preparation of the financial statements;
and

(e) All significant relationships the independent auditors have
with the Company to determine the independent auditors'
objectivity and independence, undertaking or recommending
appropriate action to ensure and continue that independence.

4. At least annually, obtain and review a report by the independent
auditor describing:

(a) The firm's internal quality control procedures;

(b) Any material issues raised by the most recent internal
quality-control review, peer review or by any inquiry or
investigation by governmental or professional authorities,
within the preceding five years, respecting one or more
independent audits carried out by the firm, and any steps
taken to deal with any such issues;

(d) All significant relationships the independent auditors have
with the Company to determine the independent auditors'
objectivity and independence, undertaking or recommending
appropriate action to ensure and continue that independence.

C. Financial Reporting Processes

1. Review the integrity of the Company's financial reporting
process, both internal and external, giving consideration to
consultation with management, the independent auditors and the
internal auditor.

2. Consider and approve, as appropriate, major changes to the
Company's auditing and accounting principals and practices as
suggested by the independent auditors, management or the internal
auditor.

3. Review and approve all related party transactions with the
Company's directors, officers and controlling shareholders,
excluding those transactions between the Company's subsidiaries
and such persons that are in complaince with applicable banking
regulations.

4. Establish and maintain procedures for the receipt, retention and
treatment of complaints regarding accounting, or auditing
matters, including procedures necessary to receive and respond to
confidential and anonymous submissions by Company employees
regarding questionable accounting or auditing matters.

D. Internal Audit

1. Review activities, organizational structure and qualifications of
the Company's internal audit department.

2. Periodically review the head of the Company's internal audit
department and any significant difficulties, disagreements with
management or scope restrictions encountered in the course of
that department's work.

E. Ethical and Legal Compliance

1. Review the Company's Code of Business Conduct, approved by the
Board of Directors, to ensure that management has maintained a
system to comply with expected ethical and legal requirements.

2. Review, with the Company's counsel, legal compliance matters
including corporate securities trading policies.

3. Review, with the Company's counsel, any legal matter that could
have a significant impact on the Company's financial statements.

4. Discuss the Company's major financial and accounting risk
exposures and steps taken by management to control or mitigate
those exposures.

5. Review and approve all "related party transactions," as defined
in Item 404 of SEC Regulation S-K, involving directors, executive
officers and their respective affiliates and immediate family
members.

F. Other

1. Review with the independent auditors, the internal auditing
department and management the extent to which changes or
improvement in financial or accounting practices, as approved by
the Audit Committee, have been implemented.

2. Prepare the report that the SEC requires to be included in the
Company's annual Proxy Statement.

3. Perform an annual self-assessment relative to the Audit
Committee's purpose, duties and responsibilities set forth in
this Charter.

4. To the extent it deems appropriate, and with or without full
Board approval, obtain advice and assistance from outside legal,
accounting or other advisors as deemed appropriate to perform its
duties and responsibilities.

5. Perform any other activities consistent with this Charter, the
Company's Bylaws and governing law, as the Audit Committee or the
Board of Directors deems necessary or appropriate.

6. At least annually, review and reassess the adequacy of this
Charter in light of changes in law, governing rules, and
applicable corporate governance best practices.

APPENDIX B

POLICY REGARDING THE APPROVAL OF AUDIT AND NONAUDIT
SERVICES PROVIDED BY THE INDEPENDENT AUDITOR

I. PURPOSE

Section 10A of the Securities Exchange Act of 1934 and the Charter of the
Company's Audit Committee require that all audit services, as well as all
non-audit services provided by the Company's auditors (the "Audit Firm"), to be
pre-approved by the Company's Audit Committee. This policy sets forth the
guidelines and procedures to be followed by the Company prior to the engagement
of (a) any firm to provide audit services, and (b) the Company's Audit Firm to
perform audit and non-audit services.

II. PRE-APPROVAL REQUIREMENT

A. General. Each audit engagement and each service provided by the Audit
Firm, both audit and non-audit (collectively a "Permitted Service"),
must be pre-approved by the Audit Committee or a Designated Member.
The SEC rules allow the pre-approval to be effected through the use of
pre-approval policies and procedures as long as (1) those policies and
procedures are (a) detailed as to the particular services to be
provided, and (b) do not result in the delegation of the Audit
Committee's authority to management, and (2) the Audit Committee is
informed about each service. The appendices to this Policy describe
the audit, audit-related, tax and all other services that have the
pre-approval of the Audit Committee. Such pre-approval (1) may be
given not more than one year before the commencement of the specified
services, (2) may not exceed the budgeted amount pre-approved (unless
subsequently approved), and (3) may not be given unless the
description of the services to be pre-approved is accompanied by
sufficient back-up documentation regarding the specific services to be
provided. Unless the type of service has received such general
pre-approval, it will require specific pre-approval by the Audit
Committee.

B. Delegation. Subject to the conditions in Section II(A), the Audit
Committee may delegate to one or more member(s) of the Audit Committee
(a "Designated Member"), the authority to grant pre-approvals of
Permitted Services to be provided by the Audit Firm or audit services
provided by another audit firm. The decisions of a Designated Member
to pre-approve a Permitted Service shall be reported to the Audit
Committee at each of its regularly scheduled meetings.

III. DISCLOSURES

The Company shall disclose in each proxy statement filed in connection with
annual meetings of shareholders the aggregate fees billed for (1) audit
services, (2) audit-related services, (3) tax services, and (4) all other
services provided by the Audit Firm.

IV. PROHIBITED SERVICES

The Company may not engage the Audit Firm to provide the non-audit services
described below to the Company (the "Prohibited Services").

A. Bookkeeping or other services related to the Company's accounting
records or financial statements.

B. Financial information systems design and implementation, unless
required to support the audit (i.e., using valuation experts to assist
in auditing a valuation obtained by the Company).

C. Appraisal or valuation services or fairness opinions, unless required
to support the audit (i.e., setting actuarial reserves as opposed to
actuarial audit work).

D. Actuarial services.

E. Internal audit outsourcing.

F. Management functions or human resources.

G. Broker-dealer investment adviser, or investment banking services.

H. Legal services or expert services unrelated to the audit.

The list of Prohibited Services shall be automatically expanded to include
those services that are proscribed by rule by the Securities and Exchange
Commission.

V. AUDIT COMMITTEE REVIEW OF SERVICES

At each regularly scheduled Audit Committee meeting, the Audit Committee
shall review the following:

- A report summarizing the Permitted Services, or grouping of
related services, including fees, provided by the Audit Firm
since the last meeting

- A report summarizing the audit services and fees provided to the
Company by any firm

- A listing of newly pre-approved Permitted Services (and estimated
fees) since its last regularly scheduled meeting

- An updated projection for the current fiscal year, presented in a
manner consistent with the proxy disclosure requirements, of the
estimated annual fees to be paid to the Audit Firm

VI. EFFECTIVE DATE

This policy, as revised, shall be effective immediately upon approval by
the Audit Committee.

APPENDIX C

Independent Bank Corporation is an Ionia, Michigan-based bank holding
company with total assets of $3.1 billion. Our four subsidiary banks principally
serve suburban and rural communities located across Michigan's Lower Peninsula
through over 100 offices. We also provide financing for insurance premiums and
vehicle service contracts across the United States, through our wholly owned
subsidiary, Mepco Insurance Premium Financing, Inc.

We emphasize service and convenience as the principal means of competing in
the delivery of financial services. Accordingly, our community banking
philosophy vests discretion and authority in local management. To support our
service and sales efforts, while providing the controls that are consistent with
our decentralized decision-making structure, we have consolidated many
operational and administrative functions and provide these services to our four
subsidiary banks (and their subsidiaries) on a centralized basis.

CONTENTS
--------

Selected Consolidated Financial Data .................................... A-2
Management's Discussion and Analysis .................................... A-3
Management's Annual Report on Internal Control Over Financial Reporting.. A-20
Report of Independent Registered Public Accounting Firm ................. A-21
Report of Independent Registered Public Accounting Firm ................. A-22
Consolidated Financial Statements ....................................... A-23
Notes to Consolidated Financial Statements .............................. A-27
Quarterly Data .......................................................... A-51
Shareholder Information ................................................. A-52
Executive Officers and Directors ........................................ A-52

A-1

SELECTED CONSOLIDATED FINANCIAL DATA

Year Ended December 31,
--------------------------------------------------------------
2004 2003 2002 2001 2000
---------- ---------- ---------- ---------- ----------
(dollars in thousands, except per share amounts)

SUMMARY OF OPERATIONS
Interest income ................................. $ 162,547 $ 139,366 $ 129,815 $ 134,502 $ 132,841
Interest expense ................................ 45,014 44,113 48,008 62,460 67,865
---------- ---------- ---------- ---------- ----------
Net interest income .......................... 117,533 95,253 81,807 72,042 64,976
Provision for loan losses ....................... 4,309 4,032 3,562 3,737 3,287
Net gains on the sale of real estate
mortgage loans ............................... 5,956 16,269 8,178 6,306 2,209
Other non-interest income ....................... 31,842 26,335 22,733 20,629 16,752
Non-interest expenses ........................... 98,668 82,506 68,293 61,519 53,375
---------- ---------- ---------- ---------- ----------
Income before income tax expense ............. 52,354 51,319 40,863 33,721 27,275
Income tax expense .............................. 13,796 13,727 11,396 9,288 7,266
---------- ---------- ---------- ---------- ----------
Net income before cumulative effect
of change in accounting principle ......... 38,558 37,592 29,467 24,433 20,009
Cumulative effect of change in accounting
principle, net of related tax effect(1) ...... (35)
---------- ---------- ---------- ---------- ----------
Net income ................................ $ 38,558 $ 37,592 $ 29,467 $ 24,398 $ 20,009
========== ========== ========== ========== ==========
PER COMMON SHARE DATA(2)
Net income before cumulative effect of
change in accounting principle
Basic ........................................ $ 1.88 $ 1.92 $ 1.47 $ 1.17 $ .94
Diluted ...................................... 1.84 1.87 1.44 1.15 .93
Net income
Basic ........................................ $ 1.88 $ 1.92 $ 1.47 $ 1.17 $ .94
Diluted ...................................... 1.84 1.87 1.44 1.15 .93
Cash dividends declared ......................... .66 .59 .44 .37 .32
Book value ...................................... 10.87 8.31 7.06 6.43 6.09
SELECTED BALANCES
Assets .......................................... $3,094,027 $2,361,014 $2,058,975 $1,889,876 $1,784,802
Loans ........................................... 2,225,290 1,667,393 1,381,442 1,384,684 1,379,664
Allowance for loan losses ....................... 24,737 16,836 15,830 15,286 13,509
Deposits ........................................ 2,176,947 1,702,806 1,535,603 1,387,367 1,389,900
Shareholders' equity ........................... 230,292 162,216 138,047 131,903 128,336
Long-term debt .................................. 7,000
SELECTED RATIOS
Tax equivalent net interest income
to average earning assets .................... 4.91% 4.88% 4.75% 4.45% 4.21%
Net income to
Average equity ............................... 19.42 24.89 21.34 18.52 16.59
Average assets ............................... 1.42 1.69 1.52 1.35 1.15
Average shareholders' equity to
average assets ............................... 7.31 6.80 7.14 7.28 6.92
Tier 1 capital to average assets ................ 7.36 7.91 6.85 7.46 7.31
Non-performing loans to Portfolio Loans ......... .68 .76 .72 .65 .51

(1) Effect of the implementation of SFAS #133. (See note #15 to the
consolidated financial statements.)

(2) Per share data has been adjusted for a 10% stock dividend in 2003, 5% stock
dividends in 2002, 2001, and 2000 and a three-for-two stock split in 2002.

A-2

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Any statements in this document 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 document 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 document, Independent Bank Corporation claims the
protection of the safe harbor for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995.

The following section presents additional information to assess the
financial condition and results of operations of Independent Bank Corporation
and its subsidiaries. This section should be read in conjunction with the
consolidated financial statements and the supplemental financial data contained
elsewhere in this appendix.

RESULTS OF OPERATIONS

SUMMARY. Net income totaled $38.6 million in 2004 compared to $37.6 million
in 2003 and $29.5 million in 2002. The increases in net income are primarily a
result of increases in net interest income and service charges on deposit
accounts partially offset by increases in non-interest expenses. Mortgage
banking related revenues (net gains on real estate mortgage loan sales, title
insurance fees and real estate mortgage loan servicing) were quite volatile
during the periods presented due primarily to changes in mortgage loan refinance
activity. 2004 results include the operations of Midwest Guaranty Bancorp, Inc.
since the May 31, 2004, date of acquisition and include the operations of North
Bancorp, Inc. since the July 1, 2004, date of acquisition. 2004 and 2003 results
also include the operations of Mepco Insurance Premium Financing, Inc. since the
April 15, 2003, date of acquisition.

KEY PERFORMANCE RATIOS

Year ended December 31,
------------------------
2004 2003 2002
------ ------ ------

Net income to
Average equity ...... 19.42% 24.89% 21.34%
Average assets ...... 1.42 1.69 1.52
Net income per share
Basic ............... $ 1.88 $ 1.92 $ 1.47
Diluted ............. 1.84 1.87 1.44

We believe that our earnings per share growth rate over a long period of
time (five years or longer) is the best single measure of our performance. We
strive to achieve an average annual long term earnings per share growth rate of
approximately 10% to 15%. Accordingly, our focus is our long-term results,
taking into consideration certain components of our revenues that are cyclical
in nature (such as mortgage-banking) which can cause fluctuations in our
earnings per share from year to year. Our primary strategies for achieving
long-term growth in earnings per share include: earning asset growth (both
organic and through acquisitions), diversification of revenues (within the
financial services industry), effective capital management (efficient use of our
shareholders' equity) and sound risk management (credit, interest rate,
liquidity and regulatory risks). Our discussion and analysis of results of
operations and financial condition will focus on these elements.

A-3

NET INTEREST INCOME. Net interest income is the most important source of
our earnings and thus is critical in evaluating our results of operations.
Changes in our tax equivalent net interest income are primarily influenced by
our level of interest-earning assets and the income or yield that we earn on
those assets and the manner and cost of funding our interest-earning assets.
Certain macro-economic factors can also influence our net interest income such
as the level and direction of interest rates, the difference between short-term
and long-term interest rates (the steepness of the yield curve) and the general
strength of the economies in which we are doing business. Finally, risk
management plays an important role in our level of net interest income. The
ineffective management of credit risk and interest-rate risk in particular can
adversely impact our net interest income.

Tax equivalent net interest income totaled $123.2 million during 2004,
compared to $100.4 million and $86.2 million during 2003 and 2002, respectively.
We review yields on certain asset categories and our net interest margin on a
fully taxable equivalent basis. In this presentation, net interest income is
adjusted to reflect tax-exempt interest income on an equivalent before tax
basis. This measure ensures comparability of net interest income arising from
both taxable and tax-exempt sources. The adjustments to determine tax equivalent
net interest income were $5.7 million, $5.1 million and $4.4 million in 2004,
2003 and 2002, respectively, and were computed using a 35% tax rate.

The increase in tax equivalent net interest income in 2004 compared to 2003
reflects a $452.7 million increase in average interest-earning assets and a 3
basis point increase in our tax equivalent net interest income as a percent of
average interest-earning assets ("Net Yield"). The increase in average
interest-earning assets is due to our Midwest and North acquisitions as well as
growth in commercial loans, finance receivables and investment securities. The
Net Yield was equal to 4.91% in 2004 compared to 4.88% in 2003. The tax
equivalent yield on average interest-earning assets declined to 6.71% in 2004
from 7.03% in 2003. This decline is due to the pay down of higher yielding loans
and investment securities and the addition of new loans and new investment
securities at lower interest rates. The decrease in the tax equivalent yield on
average interest-earning assets was more than offset by a 35 basis point decline
in our interest expense as a percentage of average interest-earning assets (the
"cost of funds") to 1.80% in 2004 from 2.15% in 2003. The decline in our cost of
funds was primarily due to the maturity of higher costing time deposits and
borrowings, as well as increased levels of lower cost core deposits (including
those added as a result of the Midwest and North acquisitions).

The 16.4% increase in tax equivalent net interest income in 2003 compared
to 2002 principally reflects a $241.5 million or 13.3% increase in the amount of
average interest earning assets and a 13 basis point increase in Net Yield. This
increase in the amount of average interest-earning assets primarily reflects
growth in commercial loans and finance receivables.

Pursuant to Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities," ("SFAS #133"),
we recorded adjustments, which increased tax equivalent net interest income by
$0.1 million in 2004. This compares to adjustments, which reduced tax equivalent
net interest income by $0.1 million in 2003 and increased tax equivalent net
interest income by approximately $1.0 million in 2002. These adjustments relate
principally to certain derivative financial instruments that are not designated
as hedges. The changes in the fair value of these derivative financial
instruments are recognized currently as adjustments to interest expense.

A-4

2004 2003 2002
AVERAGE ---------------------------- ---------------------------- ----------------------------
BALANCES AND TAX Average Average Average
EQUIVALENT RATES Balance Interest Rate Balance Interest Rate Balance Interest Rate
----------------- ---------- -------- ---- ---------- -------- ---- ---------- -------- ----
(dollars in thousands)

ASSETS
Taxable loans(1) .................. $2,004,544 $139,517 6.96% $1,612,316 $118,277 7.34% $1,426,286 $108,664 7.62%
Tax-exempt loans(1,2) ............. 7,637 507 6.64 11,249 898 7.98 11,639 974 8.37
Taxable securities ................ 266,704 12,497 4.69 239,296 11,687 4.88 211,777 12,211 5.77
Tax-exempt securities(2) .......... 212,441 14,914 7.02 179,668 12,992 7.23 142,320 11,053 7.77
Other investments ................. 16,283 765 4.70 12,341 611 4.95 21,342 1,289 6.04
---------- -------- ---------- -------- ---------- --------
Interest earning assets ........ 2,507,609 168,200 6.71 2,054,870 144,465 7.03 1,813,364 134,191 7.40
-------- -------- --------
Cash and due from banks ........... 55,728 48,839 40,533
Other assets, net ................. 153,245 118,309 79,848
---------- ---------- ----------
Total assets ................... $2,716,582 $2,222,018 $1,933,745
========== ========== ==========

LIABILITIES
Savings and NOW ................... $ 805,885 4,543 0.56 $ 688,697 4,879 0.71 $ 634,357 7,444 1.17
Time deposits ..................... 912,285 23,820 2.61 741,731 22,923 3.09 688,297 27,690 4.02
Long-term debt .................... 4,549 177 3.89
Other borrowings .................. 480,956 16,474 3.43 407,264 16,311 4.01 287,983 12,874 4.47
---------- -------- ---------- -------- ---------- --------
Interest bearing liabilities ... 2,203,675 45,014 2.04 1,837,692 44,113 2.40 1,610,637 48,008 2.98
-------- -------- --------
Demand deposits ................... 240,800 183,032 156,294
Other liabilities ................. 73,574 50,283 28,762
Shareholders' equity .............. 198,533 151,011 138,052
---------- ---------- ----------
Total liabilities and
shareholders' equity ........ $2,716,582 $2,222,018 $1,933,745
========== ========== ==========

Net interest income ............ $123,186 $100,352 $ 86,183
======== ======== ========

Net interest income as
a percent of average
interest earning assets ..... 4.91% 4.88% 4.75%
==== ==== ====

(1) All domestic.

(2) Interest on tax-exempt loans and securities is presented on a fully tax
equivalent basis assuming a marginal tax rate of 35%.

2004 compared to 2003 2003 compared to 2002
CHANGE IN TAX EQUIVALENT --------------------------- ----------------------------
NET INTEREST INCOME Volume Rate Net Volume Rate Net
------------------------ ------- ------- ------- ------- -------- -------
(in thousands)

Increase (decrease) in interest income(1)
Taxable loans(2) .......................... $27,556 $(6,316) $21,240 $13,763 $ (4,150) $ 9,613
Tax-exempt loans(2,3) ..................... (256) (135) (391) (32) (44) (76)
Taxable securities ........................ 1,298 (488) 810 1,475 (1,999) (524)
Tax-exempt securities(3) .................. 2,310 (388) 1,922 2,742 (803) 1,939
Other investments ......................... 187 (33) 154 (475) (203) (678)
------- ------- ------- ------- -------- -------
Total interest income .................. 31,095 (7,360) 23,735 17,473 (7,199) 10,274
------- ------- ------- ------- -------- -------

Increase (decrease) in interest expense(1)
Savings and NOW ........................... 753 (1,089) (336) 593 (3,158) (2,565)
Time deposits ............................. 4,783 (3,886) 897 2,025 (6,792) (4,767)
Long-term debt ............................ 177 177
Other borrowings .......................... 2,714 (2,551) 163 4,889 (1,452) 3,437
------- ------- ------- ------- -------- -------
Total interest expense ................. 8,427 (7,526) 901 7,507 (11,402) (3,895)
------- ------- ------- ------- -------- -------
Net interest income ................. $22,668 $ 166 $22,834 $ 9,966 $ 4,203 $14,169
======= ======= ======= ======= ======== =======

(1) The change in interest due to changes in both balance and rate has been
allocated to change due to balance and change due to rate in proportion to
the relationship of the absolute dollar amounts of change in each.

(2) All domestic.

(3) Interest on tax-exempt loans and securities is presented on a fully tax
equivalent basis assuming a marginal tax rate of 35%.

A-5

COMPOSITION OF AVERAGE INTEREST EARNING ASSETS
AND INTEREST BEARING LIABILITIES

Year ended December 31,
-----------------------
2004 2003 2002
----- ----- -----

As a percent of average interest earning assets
Loans--all domestic ............................ 80.2% 79.0% 79.3%
Other interest earning assets .................. 19.8 21.0 20.7
----- ----- -----
Average interest earning assets ............. 100.0% 100.0% 100.0%
===== ===== =====

Savings and NOW ................................ 32.1% 33.5% 35.0%
Time deposits .................................. 17.5 19.8 24.5
Brokered CDs ................................... 18.9 16.3 13.4
Other borrowings and long-term debt ............ 19.4 19.8 15.9
----- ----- -----
Average interest bearing liabilities ........ 87.9% 89.4% 88.8%
===== ===== =====

Earning asset ratio ............................... 92.3% 92.5% 93.8%
Free-funds ratio .................................. 12.1 10.6 11.2

PROVISION FOR LOAN LOSSES. The provision for loan losses was $4.3 million
during 2004 compared to $4.0 million and $3.6 million during 2003 and 2002,
respectively. Changes in the provision for loan losses reflect our assessment of
the allowance for loan losses. While we use relevant information to recognize
losses on loans, additional provisions for related losses may be necessary based
on changes in economic conditions, customer circumstances and other credit risk
factors. (See "Portfolio Loans and asset quality.")

NON-INTEREST INCOME. Non-interest income is a significant element in
assessing our results of operations. On a long-term basis we are attempting to
grow non-interest income in order to diversify our revenues within the financial
services industry. We regard net gains on real estate mortgage loan sales as a
core recurring source of revenue but they are quite cyclical and volatile. We
regard net gains (losses) on securities as a "non-operating" component of
non-interest income. As a result, we believe it is best to evaluate our success
in growing non-interest income and diversifying our revenues by also comparing
non-interest income when excluding net gains (losses) on assets (real estate
mortgage loans and securities).

Non-interest income totaled $37.8 million during 2004 compared to $42.6
million and $30.9 million during 2003 and 2002, respectively. Excluding net
gains and losses on asset sales, non-interest income grew by 14.3% to $31.0
million during 2004 and by 19.1% to $27.1 million during 2003.

NON-INTEREST INCOME

Year ended December 31,
---------------------------
2004 2003 2002
------- ------- -------
(in thousands)

Service charges on deposit accounts ....................... $17,089 $14,668 $13,049
Net gains (losses) on assets
Real estate mortgage loans ............................. 5,956 16,269 8,178
Securities ............................................. 856 (779) (24)
VISA check card interchange income ........................ 2,054 1,564 1,370
Title insurance fees ...................................... 2,036 3,092 2,474
Bank owned life insurance ................................. 1,486 1,432 403
Manufactured home loan origination fees and commissions ... 1,264 1,769 1,949
Mutual fund and annuity commissions ....................... 1,260 1,227 979
Real estate mortgage loan servicing fees, net ............. 1,427 (294) (870)
Other ..................................................... 4,370 3,656 3,403
------- ------- -------
Total non-interest income ........................... $37,798 $42,604 $30,911
======= ======= =======

Service charges on deposit accounts totaled $17.1 million during 2004,
compared to $14.7 million and $13.0 million during 2003 and 2002, respectively.
The increases in such service charges principally relate to growth in checking
accounts as a result of deposit account promotions, including direct mail
solicitations. The growth in 2004 also reflects our acquisitions of two banks
during the year. We opened approximately 23,000 new checking accounts in 2004
compared to 23,000 in 2003 and 22,000 in 2002. Partially as a result of a
leveling off in our growth rate of new checking accounts and the maturity of our
high performance checking program, we would expect the growth rate of service
charges on deposits to moderate in future periods.

Net gains on the sale of real estate mortgage loans are generally a
function of the volume of loans sold. We realized net gains of $6.0 million on
the sale of such loans during 2004, compared to $16.3 million and $8.2 million
during 2003 and 2002, respectively. The volume of loans sold is dependent upon
our ability to originate real estate mortgage loans as well as the demand for
fixed-rate obligations and other loans that we cannot profitably fund within
established interest-rate risk parameters. (See "Portfolio Loans and asset
quality.") Net gains on real estate mortgage loans are also dependent upon
economic and competitive factors as well as our ability to effectively manage
exposure to changes in interest rates and thus can often be a volatile part of
our overall

A-6

revenues. In 2004, approximately 46% of the $687.9 million of loans originated
was the result of refinancing activity. We estimate that refinancing activities
accounted for approximately 70% and 69% of the real estate mortgage loans
originated during 2003 and 2002, respectively.

NET GAINS ON THE SALE OF REAL ESTATE
MORTGAGE LOANS

Year ended December 31,
--------------------------------
2004 2003 2002
-------- ---------- --------
(dollars in thousands)

Real estate mortgage loans originated .............................. $687,894 $1,123,249 $876,667
Real estate mortgage loans sold .................................... 385,445 892,482 600,300
Real estate mortgage loans sold with servicing rights released ..... 53,082 51,847 165,133
Net gains on the sale of real estate mortgage loans ................ 5,956 16,269 8,178
Net gains as a percent of real estate mortgage loans sold .......... 1.55% 1.82% 1.36%
SFAS #133 adjustments included in the Loan Sale Margin ............. 0.00 0.10 (0.16)

Net gains as a percentage of real estate mortgage loans sold (our "Loan
Sales Margin") are impacted by several factors including competition and the
manner in which the loan is sold (with servicing rights retained or released).
The decrease in the Loan Sales Margin in 2004 primarily reflects increased
pricing competition among mortgage lenders because of reduced demand for real
estate mortgage loans due to a weaker refinance environment. The high demand for
real estate mortgage loans by consumers in 2003 allowed us to increase our Loan
Sales Margin in that period. Based upon our present expectations for real estate
mortgage loan demand, we would expect our 2005 Loan Sales Margin to be similar
to our 2004 level. Our decision to sell or retain real estate mortgage loan
servicing rights is primarily influenced by an evaluation of the price being
paid for real estate mortgage loan servicing by outside third parties compared
to our calculation of the economic value of retaining such servicing. The sale
of real estate mortgage loan servicing rights may result in declines in real
estate mortgage loan servicing income in future periods. Gains on the sale of
real estate mortgage loans can be impacted by recording changes in the fair
value of certain derivative instruments pursuant to SFAS #133. These changes did
not significantly impact the gains recorded in 2004, but did increase gains by
$1.0 million in 2003 and decreased gains by $1.0 million in 2002. Excluding the
aforementioned SFAS #133 adjustments, the Loan Sales Margin would have been
1.55% in 2004, 1.72% in 2003 and 1.52% in 2002.

The purchase or sale of securities is dependent upon our assessment of
investment and funding opportunities as well as asset/liability management
needs. We sold securities with an aggregate market value of $57.4 million during
2004 compared to $20.4 million and $66.4 million during 2003 and 2002,
respectively (See "Securities."). The $0.9 million of securities gains in 2004
include $1.6 million in "other than temporary" impairment charges (thus we
actually had net gains on securities sales of approximately $2.5 million).
Approximately $1.4 million of the other than temporary impairment charges relate
to our Fannie Mae and Freddie Mac preferred stock portfolio. These preferred
stocks are perpetual (i.e. they have no stated maturity date) and as a result
they are treated like equity securities for purposes of impairment analysis.
After the impairment charge our remaining book value in these preferred stocks
was approximately $25.9 million at December 31, 2004. We believe that recent
events at Fannie Mae and Freddie Mac (including a review by regulators of their
accounting practices) as well as the issuance of a large amount of new preferred
securities by Fannie Mae in the fourth quarter of 2004 have resulted in a
decline in the prices of these securities. Because it is difficult to forecast a
recovery of these prices within a reasonable timeframe with any degree of
certainty, we believe that recording the aforementioned other than temporary
impairment charge is appropriate. In addition, we recorded other than temporary
impairment charges of $0.2 million on a mobile home asset backed security (See
"Securities"). The net gains on sales of securities in 2004 relate primarily to
the sale or call of U.S. Treasury, mortgage-backed, corporate and trust
preferred securities. The net loss on securities in 2003 and 2002 includes
impairment charges of $0.75 million in each year on a $1.5 million trust
preferred security that was purchased in 1999, and which was issued by an
unaffiliated bank holding company. This bank holding company had been
experiencing ongoing financial difficulties. As a result of these circumstances
and an ongoing assessment of the market value of this security, the book value
of this asset was written off. In the third quarter of 2004 we were able to sell
this trust preferred security for $0.5 million.

GAINS AND LOSSES ON SECURITIES

Year ended December 31,
-------------------------------------
Proceeds Gains Losses(1) Net
-------- ------ --------- -----
(in thousands)

2004 ... $57,441 $2,540 $1,684 $ 856
2003 ... 20,446 827 1,606 (779)
2002 ... 66,390 809 833 (24)

(1) The losses include impairment charges of: $1.6 million in 2004 and $0.75
million in each of 2003 and 2002.

VISA check card interchange income increased to $2.1 million in 2004
compared to $1.6 million in 2003 and $1.4 million in 2002. These results can be
primarily attributed to an increase in the size of our card base due to growth
in checking accounts as well as the two acquisitions completed in 2004. In
addition, the frequency of use of our VISA check card product by our customer
base has increased.

A-7

Title insurance fees decreased to $2.0 million in 2004 compared to $3.1
million in 2003 and $2.5 million in 2002. The fluctuation in title insurance
fees is primarily a function of the level of real estate mortgage loans that we
originated.

Real estate mortgage loan servicing generated revenue of $1.4 million in
2004, compared to expense of $0.3 million in 2003 and expense of $0.9 million in
2002. These yearly comparative increases or decreases are primarily due to
changes in the impairment reserve on capitalized real estate mortgage loan
servicing rights and the level of amortization of this asset. The period end
impairment reserve is based on a third-party valuation of our real estate
mortgage loan servicing portfolio and the amortization is primarily impacted by
prepayment activity.

CAPITALIZED REAL ESTATE MORTGAGE LOAN SERVICING RIGHTS

2004 2003 2002
------- ------- -------
(in thousands)

Balance at January 1, .......................... $ 8,873 $ 4,455 $ 4,299
Servicing rights acquired ................... 1,138
Originated servicing rights capitalized ..... 3,341 7,700 3,637
Amortization ................................ (1,948) (3,655) (2,386)
(Increase)/decrease in impairment reserve ... (44) 373 (1,095)
------- ------- -------
Balance at December 31, ........................ $11,360 $ 8,873 $ 4,455
======= ======= =======
Impairment reserve at December 31, ............. $ 766 $ 722 $ 1,095
======= ======= =======

At December 31, 2004 we were servicing approximately $1.4 billion in real
estate mortgage loans for others on which servicing rights have been
capitalized. This servicing portfolio had a weighted average coupon rate of
5.87% and a weighted average service fee of approximately 26 basis points.
Remaining capitalized real estate mortgage loan servicing rights at December 31,
2004 totaled $11.4 million, representing approximately 81 basis points on the
related amount of real estate mortgage loans serviced for others.

In August 2002 we acquired $35.0 million in separate account bank owned
life insurance on which we earned $1.5 million in 2004, $1.4 million in 2003 and
$0.4 million in 2002, as a result of increases in cash surrender value. Mutual
fund and annuity commissions have increased over the past two years due
primarily to increased sales of investment related products.

Manufactured home loan origination fees and commissions declined in each
year since 2002. This industry has faced a challenging environment as several
buyers of this type of loan have exited the market or materially altered the
guidelines under which they will purchase such loans. In addition, relatively
low interest rates for real estate mortgage loans have made traditional housing
more affordable and reduced the demand for manufactured homes. Finally,
regulatory changes have reduced the opportunity to generate revenues on the sale
of insurance related to this type of lending. At the present time we do not
anticipate any significant improvement in the circumstances adversely impacting
manufactured home lending as outlined above. However, we do believe that
industry conditions have somewhat stabilized and therefore do not presently
anticipate further declines in this category of revenue below our 2004 level.

Other non-interest income rose to $4.4 million in 2004 from $3.7 million in
2003 and $3.4 million in 2002. Increases in ATM fees, check printing charges and
PMI reinsurance revenues have accounted for the majority of this growth. The
growth is generally reflective of the overall expansion of the organization in
terms of numbers of customers and accounts.

NON-INTEREST EXPENSE. Non-interest expense is an important component of our
results of operations. However, we primarily focus on revenue growth, and while
we strive to efficiently manage our cost structure, our non-interest expenses
will generally increase from year to year because we are expanding our
operations through acquisitions and by opening new branches and loan production
offices.

Non-interest expense totaled $98.7 million during 2004, compared to $82.5
million and $68.3 million during 2003 and 2002, respectively. The aforementioned
two bank acquisitions in mid-2004 and the April 2003 acquisition of Mepco as
well as growth associated with new branch offices and loan production offices
account for much of the increases in non-interest expense. In addition, 2004 and
2003 included certain unusual charges or expenses as further detailed on the
next page.

A-8

NON-INTEREST EXPENSE

Year ended December 31,
---------------------------
2004 2003 2002
------- ------- -------
(in thousands)

Compensation .................................. $35,243 $27,954 $24,891
Performance-based compensation and benefits ... 4,851 6,872 5,247
Other benefits ................................ 9,987 8,732 7,205
------- ------- -------
Compensation and benefits .................. 50,081 43,558 37,343
Occupancy, net ................................ 7,539 6,519 5,424
Furniture and fixtures ........................ 6,122 5,539 4,731
Advertising ................................... 3,787 4,011 2,813
Data Processing ............................... 4,462 3,942 3,209
Loan and collection ........................... 3,556 3,352 3,028
Communications ................................ 3,553 2,895 2,484
Supplies ...................................... 2,140 1,920 1,626
Amortization of intangible assets ............. 2,479 1,721 1,014
Legal and professional ........................ 2,718 1,651 1,238
Mepco claims expense .......................... 2,700
Write-off of uncompleted software ............. 977
Loss on prepayment of borrowings .............. 18 983 59
Other ......................................... 8,536 6,415 5,324
------- ------- -------
Total non-interest expense ................. $98,668 $82,506 $68,293
======= ======= =======

The increases in compensation and benefits in 2004 and 2003 compared to
each prior year are primarily attributable to an increased number of employees
resulting from acquisitions and the addition of new branch and loan production
offices as well as to merit pay increases and increases in certain employee
benefit costs such as health care insurance. Performance based compensation and
benefits declined in 2004 compared to 2003 due primarily to a reduced funding
level for our employee stock ownership plan and lower incentive compensation.
These lower levels of performance based compensation are reflective of our flat
earnings performance in 2004. In addition, compensation expense in 2004 includes
$2.3 million in severance expense related to the termination of employment
contracts for three senior managers at Mepco. In general we do not provide
employment contracts for our employees and substantially all of our employees
are employed on an "at will" basis. The aforementioned employment contracts were
executed in April 2003 as part of our acquisition of Mepco.

We maintain performance-based compensation plans. In addition to
commissions and cash incentive awards, such plans include employee stock
ownership and employee stock option plans. Stock options granted during 2004 and
in prior years did not require the recognition of any expense in our
consolidated statements of operations during those periods. In December 2004 the
Financial Accounting Standards Board ("FASB") issued FASB Statement No. 123
(revised 2004), "Share-Based Payment" ("SFAS #123R) (See "Recent Accounting
Pronouncement"). In general this accounting pronouncement requires that all
share-based payments to employees, including grants of employee stock options,
be recognized in the financial statements based on their fair values. This
requirement will apply to us beginning on July 1, 2005.

Occupancy, furniture and fixtures, data processing, communications and
supplies expenses all generally increased over the periods presented as a result
of the growth of the organization through acquisitions and the opening of new
branch and loan production offices. The increase in amortization of intangible
assets is also a result of acquisitions.

The increases in loan and collection expense reflects costs associated with
holding or disposal of other real estate and collection costs associated with
increases in the level of non-performing loans.

Legal and professional expenses in 2004 include $0.6 million of costs
related to the implementation of Section 404 (internal control over financial
reporting) of the Sarbanes Oxley Act of 2002 and $0.8 million in costs related
to the Mepco investigation.

A-9

$2.7 million amount that we already had accrued. The escrow agreement gives us
the right to have all or a portion of the escrow account distributed to us from
time to time if the aggregate amount that we (together with any of our
affiliates including Mepco) are required to pay to any third parties as a result
of the matters being investigated exceeds $2.7 million. At December 31, 2004,
the escrow account contained 92,766 shares of Independent Bank Corporation
common stock (deposited by the primary former shareholders of Mepco) having an
aggregate market value at that date of approximately $2.8 million. The escrow
agreement contains provisions that require the addition or distribution of
shares of Independent Bank Corporation common stock if the total market value of
such stock in the escrow account falls below $2.25 million or rises above $2.75
million. Consistent with these escrow agreement provisions, 2,000 shares of
Independent Bank Corporation common stock were released from the escrow account
and returned to the former primary shareholders of Mepco in January 2005. As a
result of the aforementioned escrow agreement, as well as the $2.7 million
accrual established in the second quarter of 2004, we do not expect any future
liabilities (other than investigation costs incurred during the first quarter of
2005) related to the Mepco investigation. The terms of the agreement under which
we acquired Mepco obligates the former shareholders of Mepco to indemnify us for
existing and resulting damages and liabilities from pre-acquisition activities
at Mepco. Accordingly, to the extent that we actually incur any damages or
liabilities resulting from these pre-acquisition activities, we believe that we
have reasonable grounds to claim and collect full reimbursement. However, there
can be no assurance that we will successfully prevail with respect to any of
these potential indemnification claims.

The write-off of uncompleted software of $1.0 million relates to previously
capitalized software development costs at Mepco. This software was being
developed over the past three years for internal use in connection with Mepco's
lending activities. With the assistance of a third-party consultant, during the
second quarter of 2004 we determined that this uncompleted internal use software
was not expected to provide substantive service potential due primarily to
performance, functionality and application server platform issues, and as a
result, the capitalized software development costs were written off.

From time to time we may prepay borrowings in order to reduce our cost of
funds. The prepayment of certain borrowings may result in a loss being incurred
due to prepayment penalty or yield maintenance provisions. In determining
whether to prepay a borrowing, we principally evaluate the reduction in future
borrowing costs compared to the loss we expect to incur on the prepayment, as
well as our overall asset liability management needs. During 2003, we prepaid
$5.0 million in FHLB advances with a weighted average cost of 7.45% and a
weighted average remaining maturity of 6.5 years and incurred a loss of $1.0
million. We replaced these FHLB advances with $5.0 million in new borrowings
with a weighted average cost of 3.65% and weighted average maturity of five
years.

Other non-interest expense increased to $8.6 million in 2004 compared to
$6.4 million in 2003 and $5.3 million in 2002. The increase in 2004 over 2003 is
primarily due to increased FDIC deposit insurance costs, an increase in our
Michigan Single Business tax expense, a $0.4 million write-off of receivables at
our mobile home origination subsidiary, and a $0.8 million increase in merchant
(credit card) processing fees at Mepco. The increase in 2003 compared to 2002 is
primarily due to our acquisition of Mepco.

Our federal income tax expense has increased generally commensurate with
our increase in pre-tax earnings. Our actual federal income tax expense is lower
than the amount computed by applying our statutory federal income tax rate to
our pre-tax earnings primarily due to tax-exempt interest income. Our effective
tax rate was 26.4%, 26.7% and 27.9% in 2004, 2003 and 2002, respectively. The
decrease in the effective tax rate in 2004 and 2003 from 2002 is principally
attributed to an increase in tax-exempt interest income and income from bank
owned life insurance.

FINANCIAL CONDITION

SUMMARY. Our total assets grew to $3.1 billion at December 31, 2004, from
$2.4 billion at December 31, 2003. The growth in total assets primarily reflects
increases in securities available for sale and loans. Loans, excluding loans
held for sale ("Portfolio Loans") increased $557.9 million in 2004 due primarily
to the Midwest and North acquisitions as well as growth in commercial, real
estate mortgage and finance receivable loans. Total deposits increased $474.1
million in 2004 primarily as a result of the aforementioned bank acquisitions
and increases in checking and savings deposits and in brokered certificates of
deposit ("Brokered CDs").

SECURITIES. We maintain diversified securities portfolios, which include
obligations of the U.S. Treasury and government-sponsored agencies as well as
securities issued by states and political subdivisions, corporate securities,
mortgage-backed securities and asset-backed securities. We also invest in
capital securities, which include preferred stocks and trust preferred
securities. We regularly evaluate asset/liability management needs and attempt
to maintain a portfolio structure that provides sufficient liquidity and cash
flow. We believe that the unrealized losses on securities available for sale are
temporary in nature and due primarily to changes in interest rates and are
expected to be recovered within a reasonable time period. We also believe that
we have the ability to hold securities with unrealized losses to maturity or
until such time as the unrealized losses reverse. During 2004 we recorded a $1.4
million impairment charge on Fannie Mae and Freddie Mac preferred securities and
a $0.2 million impairment charge on a mobile home asset-backed security. We also
recorded a $1.5 million impairment charge (one-half in 2003 and one-half in
2002) on a trust preferred security issued by a bank holding company. In these
instances we believe that the decline in value is directly due to matters other
than changes in interest rates (such as financial difficulties or accounting
problems encountered by the issuer), are not expected to be recovered within a
reasonable timeframe based upon available information and are therefore other
than temporary in nature. (See "Non-interest income" and "Asset/liability
management.")

A-10

SECURITIES

Unrealized
Amortized ---------------- Fair
Cost Gains Losses Value
--------- ------- ------ --------
(in thousands)

Securities available for sale
December 31, 2004 ........... $539,162 $13,448 $1,702 $550,908
December 31, 2003 ........... 440,060 15,681 1,745 453,996

The increase in securities available for sale was due primarily to
purchases of municipal, corporate, mortgage-backed and asset-backed securities
during the year as well as our two bank acquisitions. Generally we cannot earn
the same interest-rate spread on securities as we can on Portfolio Loans. As a
result, purchases of securities will tend to erode some of our profitability
measures such as our Net Yield and our return on assets.

At December 31, 2004 and 2003 we had $23.6 million and $33.1 million,
respectively, of asset-backed securities included in securities available for
sale. Approximately 87% of our asset-backed securities at December 31, 2004 were
backed by mobile home loans (compared to 86% at December 31, 2003). All of our
asset-backed securities are rated as investment grade (by the major rating
agencies) except for one mobile home loan asset-backed security with a balance
of $2.7 million at December 31, 2004 that was down graded during 2004 to a below
investment grade rating. During 2004 we recorded an impairment charge of $0.2
million on this security due primarily to some further credit related
deterioration on the underlying mobile home loan collateral. We continue to
closely monitor this particular security as well as our entire mobile home loan
asset-backed securities portfolio. We do not foresee, at the present time, any
risk of loss (related to credit issues) with respect to any of our other
asset-backed securities. Currently the FASB is considering certain changes or
clarifications related to the assessment of other than temporary impairment on
investment securities as well as other related accounting matters (See Critical
Accounting Policies and Recent Accounting Pronouncements).

PORTFOLIO LOANS AND ASSET QUALITY. We believe that our decentralized loan
origination structure provides important advantages in serving the credit needs
of our principal lending markets. In addition to the communities served by our
bank branch networks, principal lending markets include nearby communities and
metropolitan areas. Subject to established underwriting criteria, we also
participate in commercial lending transactions with certain non-affiliated banks
and may also purchase real estate mortgage loans from third-party originators.

LOAN PORTFOLIO COMPOSITION

December 31,
-----------------------
2004 2003
---------- ----------
(in thousands)

Real estate (1)
Residential first mortgages ......................... $ 590,949 $ 546,647
Residential home equity and other junior mortgages 215,261 150,346
Construction and land development ................... 261,505 194,340
Other(2) ............................................ 546,789 389,617
Finance receivables .................................... 254,388 147,671
Consumer ............................................... 182,374 139,261
Commercial ............................................. 165,440 88,558
Agricultural ........................................... 8,584 10,953
---------- ----------
Total loans ...................................... $2,225,290 $1,667,393
========== ==========

(1) Includes both residential and non-residential commercial loans secured by
real estate.

(2) Includes loans secured by multi-family residential and non-farm,
non-residential property.

Our 2003 acquisition of Mepco added the financing of insurance premiums and
extended automobile warranties to our lending activities. These are relatively
new lines of business for us and expose us to new risks. Mepco conducts its
lending activities across the United States although its insurance premium
financing business is presently concentrated in California and Illinois. Mepco
generally does not evaluate the creditworthiness of the individual borrower but
instead primarily relies on the loan collateral (the unearned insurance premium
or automobile warranty contract) in the event of default. As a result, we have
established and monitor insurance carrier concentration limits in order to
manage our collateral exposure. The insurance carrier concentration limits are
primarily based on the insurance company's AM Best rating and statutory surplus
level. Mepco also has established procedures for loan servicing and collections,
including the timely cancellation of the insurance policy or automobile warranty
contract in order to protect our collateral position in the event of default.
Mepco also has established procedures to attempt to prevent and detect fraud
since the loan origination activities and initial borrower contact is entirely
done through unrelated third parties (primarily insurance agents and automobile
warranty administrators or automobile dealerships). There can be no assurance
that the aforementioned risk management policies and procedures will prevent us
from the possibility of incurring significant credit or fraud related losses in
this business segment.

Although the management and board of directors of each of our banks retain
authority and responsibility for credit decisions, we have adopted uniform
underwriting standards. Further, our loan committee structure as well as the
centralization of commercial loan credit services and the loan review process,
provides requisite controls and promotes compliance with such established
underwriting standards. Such centralized functions also facilitate compliance
with consumer protection laws and regulations.

A-11

We generally retain loans that may be profitably funded within established
risk parameters. (See "Asset/liability management.") As a result, we may hold
adjustable-rate and balloon real estate mortgage loans as Portfolio Loans, while
15- and 30-year, fixed-rate obligations are generally sold to mitigate exposure
to changes in interest rates. (See "Non-interest income.")

The increase in commercial loans (including real estate construction and
land development and real estate other in the table above) during 2004
principally reflects our acquisitions of Midwest and North as well as emphasis
on lending opportunities within this category of loans and an increase in
commercial lending staff. Loans secured by real estate comprise the majority of
new commercial loans.

The $254.4 million of finance receivables at December 31, 2004 are
comprised principally of loans to businesses to finance insurance premiums and
payment plans offered to individuals to finance extended automobile warranties.
The finance receivables are a result of our acquisition of Mepco.

Future growth of overall Portfolio Loans is dependent upon a number of
competitive and economic factors. Declines in Portfolio Loans or competition
leading to lower relative pricing on new Portfolio Loans could adversely impact
our future operating results. We continue to view loan growth consistent with
prevailing quality standards as a major short- and long-term challenge.

NON-PERFORMING ASSETS

December 31,
---------------------------
2004 2003 2002
------- ------- -------
(dollars in thousands)

Non-accrual loans ................................................ $11,804 $ 9,122 $ 5,738
Loans 90 days or more past due and still accruing interest ....... 3,123 3,284 3,961
Restructured loans ............................................... 218 335 270
------- ------- -------
Total non-performing loans .................................... 15,145 12,741 9,969
Other real estate ................................................ 2,113 3,256 3,908
------- ------- -------
Total non-performing assets ................................ $17,258 $15,997 $13,877
======= ======= =======
As a percent of Portfolio Loans
Non-performing loans .......................................... .68% .76% .72%
Allowance for loan losses ..................................... 1.11 1.01 1.15
Non-performing assets to total assets ............................ .56 .68 .67
Allowance for loan losses as a percent of non-performing loans ... 163 132 159

Non-performing loans totaled $15.1 million, or 0.68% of total Portfolio
Loans at December 31, 2004, a $2.4 million increase from December 31, 2003. This
increase is primarily attributable to growth in the loan portfolio and the
acquisitions of Midwest and North. Non-performing loans as a percent of
Portfolio Loans declined to 0.68% at December 31, 2004 from 0.76% at December
31, 2003.

The increase in non-performing loans in 2003 compared to 2002 is primarily
attributable to $1.9 million of finance receivables added as the result of the
Mepco acquisition and a $1.5 million increase in non-performing commercial
loans. The increase in non-performing commercial loans is primarily due to the
addition of two credits totaling $3.6 million partially offset by the reduction
of certain other non-performing commercial credits from December 31, 2002.

We will place a loan that is 90 days or more past due on non-accrual,
unless we believe the loan is both well secured and in the process of
collection. Accordingly, we have determined that the collection of the accrued
and unpaid interest on any loans that are 90 days or more past due and still
accruing interest is probable.

Other real estate and repossessed assets totaled $2.1 million at December
31, 2004 a decline of $1.1 million from December 31, 2003. The decline in other
real estate and repossessed assets is due primarily to a decrease in the level
of residential homes acquired through foreclosure.

ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES

December 31,
---------------------------
2004 2003 2002
------- ------- -------
(in thousands)

Specific allocations ................................. $ 2,874 $ 1,362 $ 1,313
Other adversely rated loans .......................... 9,395 6,487 6,067
Historical loss allocations .......................... 6,092 3,571 2,813
Additional allocations based on subjective factors ... 6,376 6,308 6,512
------- ------- -------
Total ............................................. $24,737 $17,728 $16,705
======= ======= =======

In determining the allowance and the related provision for credit losses,
we consider four principal elements: (i) specific allocations based upon
probable losses identified during the review of the loan portfolio, (ii)
allocations established for other adversely rated loans, (iii) allocations based
principally on historical loan loss experience, and (iv) additional allowances
based on subjective factors, including local and general economic business
factors and trends, portfolio concentrations and changes in the size, mix and/or
the general terms of the loan portfolios.

A-12

The first element reflects our estimate of probable losses based upon our
systematic review of specific loans. These estimates are based upon a number of
objective factors, such as payment history, financial condition of the borrower,
and discounted collateral exposure.

The second element reflects the application of our loan rating system. This
rating system is similar to those employed by state and federal banking
regulators. Loans that are rated below a certain predetermined classification
are assigned a loss allocation factor for each loan classification category that
is based upon a historical analysis of losses incurred. The lower the rating
assigned to a loan or category, the greater the allocation percentage that is
applied.

The third element is determined by assigning allocations based principally
upon the ten-year average of loss experience for each type of loan. Recent years
are weighted more heavily in this average. Average losses may be further
adjusted based on the current delinquency rate. Loss analyses are conducted at
least annually.

The fourth element is based on factors that cannot be associated with a
specific credit or loan category and reflects our attempt to ensure that the
overall allowance for loan losses appropriately reflects a margin for the
imprecision necessarily inherent in the estimates of expected credit losses. We
consider a number of subjective factors when determining the unallocated
portion, including local and general economic business factors and trends,
portfolio concentrations and changes in the size, mix and the general terms of
the loan portfolios. (See "Provision for credit losses.")

Mepco's allowance for loan losses is determined in a similar manner as
discussed above and takes into account delinquency levels, net charge-offs,
unsecured exposure and other subjective factors deemed relevant to their lending
activities.

ALLOWANCE FOR CREDIT LOSSES
---------------------------

2004 2003 2002
---------------------------------------------------------------------
Loan Unfunded Loan Unfunded Loan Unfunded
Losses Commitments Losses Commitments Losses Commitments
---------------------------------------------------------------------
(in thousands)

Balance at beginning of year ................ $16,836 $ 892 $15,830 $875 $15,286 $881
Allowance on loans acquired .............. 8,236 517
Provision charged to operating expense ... 3,355 954 4,015 17 3,568 (6)
Recoveries credited to allowance ......... 1,251 1,087 733
Loans charged against the allowance ...... (4,941) (4,613) (3,757)
---------------------------------------------------------------------
Balance at end of year ...................... $24,737 $1,846 $16,836 $892 $15,830 $875
=====================================================================

Net loans charged against the allowance
to average Portfolio Loans ............... .19% .23% .22%

In the second quarter of 2004, we began to record the allowance for
unfunded loan commitments in "Accrued expenses and other liabilities."
Previously, this portion of the allowance was included in the allowance for loan
losses and shown as a contra-asset on the Consolidated Statements of Financial
Condition. Prior period amounts have been reclassified. The allowance for losses
on unfunded commitments is determined in a similar manner to the allowance for
loan losses.

DEPOSITS AND BORROWINGS. Our competitive position within many of the
markets served by our branch networks limits our ability to materially increase
deposits without adversely impacting the weighted-average cost of core deposits.
Accordingly, we principally compete on the basis of convenience and personal
service, while employing pricing tactics that are intended to enhance the value
of core deposits.

To attract new core deposits, we have implemented a high-performance
checking program that utilizes a combination of direct mail solicitations,
in-branch merchandising, gifts for customers opening new checking accounts or
referring business to our banks and branch staff sales training. This program
has generated increases in customer relationships as well as deposit service
charges. We believe that the new relationships that result from these marketing
and sales efforts provide valuable opportunities to cross sell related financial
products and services.

A-13

ALTERNATE SOURCES OF FUNDS

December 31,
-----------------------------------------------------------
2004 2003
----------------------------- ---------------------------
Average Average
Amount Maturity Rate Amount Maturity Rate
---------- --------- ---- -------- --------- ----
(dollars in thousands)

Brokered CDs(1) ...................... $ 576,944 1.9 years 2.56% $416,566 2.3 years 2.43%
Fixed-rate FHLB advances(1,2) ........ 59,902 6.4 years 5.55 84,638 5.0 years 3.99
Variable-rate FHLB advances(1) ....... 164,000 0.4 years 2.32 104,150 0.4 years 1.30
Securities sold under agreements to
repurchase(1) ..................... 169,810 0.2 years 2.27 140,969 0.3 years 1.22
Federal funds purchased .............. 117,552 1 day 2.44 53,885 1 day 1.16
---------- --------- ---- -------- --------- ----
Total ............................. $1,088,208 1.4 years 2.63% $800,208 1.8 years 2.15%
========== ========= ==== ======== ========= ====

(1) Certain of these items have had their average maturity and rate altered
through the use of derivative instruments, including pay-fixed and
pay-variable interest-rate swaps.

(2) Advances totaling $10 million at both December 31, 2004 and 2003,
respectively, have provisions that allow the FHLB to convert fixed-rate
advances to adjustable rates prior to stated maturity.

We have implemented strategies that incorporate federal funds purchased,
other borrowings and Brokered CDs to fund a portion of the increases in
securities available for sale and Portfolio Loans. The use of such alternate
sources of funds supplements our core deposits and is an integral part of our
asset/liability management efforts.

Other borrowed funds, principally advances from the Federal Home Loan Bank
(the "FHLB") and securities sold under agreements to repurchase ("Repurchase
Agreements"), totaled $405.4 million at December 31, 2004, compared to $331.8
million a year earlier. The $73.6 million increase in other borrowed funds
principally reflects a $28.8 million increase in Repurchase Agreements, a $35.1
million increase in FHLB advances and a $9.0 million increase in our bank
holding company credit facility. The increase in the outstanding balance of our
bank holding company credit facility principally reflects funds needed for the
cash portion of the Midwest acquisition. The increase in Brokered CDs was
primarily utilized to fund commercial loan and finance receivables growth. In
determining our borrowing sources, we primarily evaluate the interest cost,
payment terms, facility structure and collateral requirements (also see
"Liquidity and capital resources.").

We employ derivative financial instruments to manage our exposure to
changes in interest rates. At December 31, 2004, we employed interest-rate swaps
with an aggregate notional amount of $602.7 million.

LIQUIDITY AND CAPITAL RESOURCES. Liquidity risk is the risk of being unable
to timely meet obligations as they come due at a reasonable funding cost or
without incurring unacceptable losses. Our liquidity management involves the
measurement and monitoring of a variety of sources and uses of funds. Our
Consolidated Statements of Cash Flows categorize these sources and uses into
operating, investing and financing activities. We primarily focus our liquidity
management on developing access to a variety of borrowing sources to supplement
our deposit gathering activities and provide funds for growing our investment
and loan portfolios as well as to be able to respond to unforeseen liquidity
needs.

Our sources of funds include a stable deposit base, secured advances from
the Federal Home Loan Bank of Indianapolis, both secured and unsecured federal
funds purchased borrowing facilities with other commercial banks, an unsecured
holding company credit facility and access to the capital markets (for trust
preferred securities and Brokered CD's).

At December 31, 2004, we had $630.4 million of time deposits that mature in
2005. Historically, a majority of these maturing time deposits are renewed by
our customers or are Brokered CD's that we expect to replace. Additionally
$1.137 billion of our deposits at December 31, 2004, were in account types from
which the customer could withdraw the funds on demand. Changes in the balances
of deposits that can be withdrawn upon demand are usually predictable, and the
total balances of these accounts have generally grown over time as a result of
our marketing and promotional activities. There can be no assurance that
historical patterns of renewing time deposits or overall growth in deposits will
continue in the future.

We have developed contingency funding plans that stress tests our liquidity
needs that may arise from certain events such as an adverse credit event, rapid
loan growth or a disaster recovery situation. Our liquidity management also
includes periodic monitoring of each bank that segregates assets between liquid
and illiquid and classifies liabilities as core and non-core. This analysis
compares our total level of illiquid assets to our core funding. It is our goal
to have core funding sufficient to finance illiquid assets.

Over the past several years our Portfolio Loans have grown more rapidly
than our core deposits. In addition, much of this growth has been in loan
categories that cannot generally be used as collateral for FHLB advances (such
as commercial loans and finance receivables). As a result, we have become more
dependent on wholesale funding sources (such as brokered CD's and Repurchase
Agreements). In order to reduce this greater reliance on wholesale funding we
intend to explore the potential securitization of both commercial loans and
finance receivables during 2005. It is likely that a securitization facility
would have a higher all in cost than our current wholesale funding sources which
would adversely impact our future net interest income. However we believe that
the benefits from a liquidity risk management standpoint will likely outweigh
the adverse impact on our net interest income.

A-14

In the normal course of business, we enter into certain contractual
obligations. Such obligations include obligations to make future payments on
debt and lease arrangements, contractual commitments for capital expenditures,
and service contracts. The table below summarizes our significant contractual
obligations at December 31, 2004.

CONTRACTUAL COMMITMENTS

December 31, 2004
1 year or less 1-3 years 3-5 years After 5 years Total
--------------------------------------------------------------------
(dollars in thousands)

Time deposit maturities ........................ $ 630,387 $217,507 $113,751 $ 78,520 $1,040,165
Federal funds purchased and other borrowings ... 464,154 14,037 15,935 28,812 522,938
Operating lease obligations .................... 1,309 2,259 935 4,503
Purchase obligations(1) ........................ 1,084 1,355 2,439
------------------------------------------------------------------
Total ....................................... $1,096,934 $235,158 $130,621 $107,332 $1,570,045
==================================================================

(1) Includes contracts with a minimum annual payment of $1.0 million and are
not cancellable within one year.

Effective management of capital resources is critical to our mission to
create value for our shareholders. The cost of capital is an important factor in
creating shareholder value and, accordingly, our capital structure includes
unsecured debt and cumulative trust preferred securities.

We believe that a diversified portfolio of quality loans will provide
superior risk-adjusted returns. Accordingly, we have implemented balance sheet
management strategies that combine efforts to originate Portfolio Loans with
disciplined funding strategies. Acquisitions are also an integral component of
our capital management strategies.

CAPITALIZATION

December 31,
2004 2003
-------------------
(in thousands)

Unsecured debt ................................ $ 9,000
-------------------
Subordinated debentures ....................... 64,197 $ 52,165
Amount not qualifying as regulatory capital ... (1,847) (1,565)
-------------------
Amount qualifying as regulatory capital .... 62,350 50,600
-------------------
Shareholders' equity
Common stock ............................... 21,195 19,521
Capital surplus ............................ 158,797 119,401
Retained earnings .......................... 41,795 16,953
Accumulated other comprehensive income ..... 8,505 6,341
-------------------
Total shareholders' equity .............. 230,292 162,216
-------------------
Total capitalization .................... $301,642 $212,816
===================

In March 2003, a special purpose entity, IBC Capital Finance II (the
"trust") issued $1.6 million of common securities to Independent Bank
Corporation and $50.6 million of trust preferred securities to the public.
Independent Bank Corporation issued $52.2 million of subordinated debentures to
the trust in exchange for the proceeds from the public offering. These
subordinated debentures represent the sole asset of the trust.

Prior to 2004, the trust was consolidated in our financial statements and
the common securities and subordinated debentures were eliminated in
consolidation. Under new accounting guidance, FASB Interpretation No. 46, as
revised in December 2003 ("FIN 46R"), the trust is no longer consolidated with
Independent Bank Corporation. Accordingly, we no longer report the $50.6 million
of trust preferred securities issued by the trust as liabilities, but instead
report the common securities of $1.6 million held by Independent Bank
Corporation in other assets and the $52.2 million of subordinated debentures
issued by Independent Bank Corporation in the liability section of our
Consolidated Statements of Financial Condition. Amounts reported at December 31,
2003 were reclassified to conform to the current presentation. The effect of no
longer consolidating the trust had no material impact on our operating results.

In connection with our acquisition of Midwest, we assumed all of the
duties, warranties and obligations of Midwest as the sponsor and sole holder of
the common securities of Midwest Guaranty Trust I ("MGT"). In 2002, MGT, a
special purpose entity, issued $0.2 million of common securities to Midwest and
$7.5 million of trust preferred securities as part of a pooled offering. Midwest
issued $7.7 million of subordinated debentures to the trust in exchange for the
proceeds of the offering, which debentures represent the sole asset of MGT. Both
the common securities and subordinated debentures are included in our
Consolidated Statement of Financial Condition at December 31, 2004.

In connection with our acquisition of North, we assumed all of the duties,
warranties and obligations of North as the sole general partner of Gaylord
Partners, Limited Partnership ("GPLP"), a special purpose entity. In 2002, North
contributed an aggregate of $0.1 million to the capital of GPLP and GPLP issued
$5.0 million of floating rate cumulative preferred securities as part of a
private placement offering. North issued $5.1 million of subordinated debentures
to GPLP in exchange for the proceeds of the offering, which debentures represent
the sole asset of GPLP. Independent Bank purchased $0.8 million of the GPLP
floating rate cumulative

A-15

preferred securities during the private placement offering. This investment
security at Independent Bank and a corresponding amount of subordinated
debentures are eliminated in consolidation. The remaining subordinated
debentures as well as our capital investment in GPLP are included in our
Consolidated Statement of Financial Condition at December 31, 2004.

In March 2005, the Federal Reserve Board issued a final rule that would
retain trust preferred securities in the Tier 1 capital of bank holding
companies. After a transition period ending March 31, 2009, the aggregate amount
of trust preferred securities and certain other capital elements will be limited
to 25 percent of Tier 1 capital elements, net of goodwill (less any associated
deferred tax liability). The amount of trust preferred securities and certain
other elements in excess of the limit could be included in the Tier 2 capital,
subject to restrictions. Based upon our existing levels of Tier 1 capital, trust
preferred securities and goodwill, this final Federal Reserve Board rule would
have reduced our Tier 1 capital to average assets ratio by approximately 25
basis points at December 31, 2004 (this calculation assumes no transition
period).

We have supplemented our balance-sheet management activities with purchases
of our common stock. We repurchased 0.1 million shares of our common stock at an
average price of $24.53 in 2004 compared to 0.6 million shares of our common
stock at an average price of $21.97 per share in 2003 and compared to 1.2
million shares at an average price of $18.82 per share in 2002. The level of
share repurchases in a given year generally reflects changes in our need for
capital associated with our balance sheet growth. In February 2005 we announced
that our board of directors had authorized the repurchase of up to 0.8 million
shares. This authorization expires on December 31, 2005.

Shareholders' equity totaled $230.3 million at December 31, 2004. The
increase from $162.2 million at December 31, 2003 primarily reflects the
retention of earnings (net of cash dividends paid), the issuance of common stock
for the Midwest and North acquisitions and pursuant to various equity-based
incentive compensation plans, and an increase in accumulated other comprehensive
income. Shareholders' equity was equal to 7.44% of total assets at December 31,
2004, compared to 6.87% a year earlier.

CAPITAL RATIOS

December 31,
-------------
2004 2003
-------------

Equity capital ................................... 7.44% 6.87%
Average shareholders' equity to average assets ... 7.31 6.80
Tier 1 capital to average assets ................. 7.36 7.91
Tier 1 risk-based capital ........................ 9.39 10.55
Total risk-based capital ......................... 10.53 11.57

ASSET/LIABILITY MANAGEMENT. Interest-rate risk is created by differences in
the cash flow characteristics of our assets and liabilities. Options embedded in
certain financial instruments, including caps on adjustable-rate loans as well
as borrowers' rights to prepay fixed-rate loans also create interest-rate risk.

Our asset/liability management efforts identify and evaluate opportunities
to structure the balance sheet in a manner that is consistent with our mission
to maintain profitable financial leverage within established risk parameters. We
evaluate various opportunities and alternative balance-sheet strategies
carefully and consider the likely impact on our risk profile as well as the
anticipated contribution to earnings. The marginal cost of funds is a principal
consideration in the implementation of our balance-sheet management strategies,
but such evaluations further consider interest-rate and liquidity risk as well
as other pertinent factors. We have established parameters for interest-rate
risk. We regularly monitor our interest-rate risk and report quarterly to our
respective banks' boards of directors.

We employ simulation analyses to monitor each Bank's interest-rate risk
profiles and evaluate potential changes in our Bank's net interest income and
market value of portfolio equity that result from changes in interest rates. The
purpose of these simulations is to identify sources of interest-rate risk
inherent in our balance sheets. The simulations do not anticipate any actions
that we might initiate in response to changes in interest rates and,
accordingly, the simulations do not provide a reliable forecast of anticipated
results. The simulations are predicated on immediate, permanent and parallel
shifts in interest rates and generally assume that current loan and deposit
pricing relationships remain constant. The simulations further incorporate
assumptions relating to changes in customer behavior, including changes in
prepayment rates on certain assets and liabilities.

CHANGES IN MARKET VALUE OF PORTFOLIO EQUITY
AND TAX EQUIVALENT NET INTEREST INCOME
--------------------------------------

December 31, 2004
Market Value of Percent Tax Equivalent Percent
Change in Interest Rates Portfolio Equity(1) Change Net Interest Income(2) Change
--------------------------------------------------------------------------------------------------------------
(dollars in thousands)

200 basis point rise ...................... $210,000 (5.41)% $139,200 3.03%
100 basis point rise ...................... 220,800 (0.54) 137,700 1.92
Base-rate scenario ........................ 222,000 135,100
100 basis point decline ................... 214,400 (3.42) 132,800 (1.70)
200 basis point decline ................... 205,200 (7.57) 133,000 (1.55)

(1) Simulation analyses calculate the change in the net present value of our
assets and liabilities, including debt and related financial derivative
instruments, under parallel shifts in interest rates by discounting the
estimated future cash flows using a market-based discount rate. Cash flow
estimates incorporate anticipated changes in prepayment speeds and other
embedded options.

(2) Simulation analyses calculate the change in net interest income under
immediate parallel shifts in interest rates over the next twelve months,
based upon a static balance sheet, which includes debt and related
financial derivative instruments, and do not consider loan fees.

A-16

ACQUISITIONS

On July 1, 2004, we completed the acquisition of North. We issued 345,391
shares of common stock to the North shareholders. 2004 includes the results of
North's operations beginning on July 1, 2004. At the time of acquisition, North
had total assets of $155.1 July 1, million, total loans of $103.6 million, total
deposits of $123.8 million and total stockholders' equity of $3.3 million. We
recorded purchase accounting adjustments related to the North acquisition
including recording goodwill of $2.9 million and establishing a core deposit
intangible of $2.2 million.

On May 31, 2004, we completed the acquisition of Midwest. We issued 997,700
shares of common stock and paid $16.6 million in cash to the Midwest
shareholders. 2004 includes the results of Midwest's operations subsequent to
May 31, 2004. At the time of acquisition, Midwest had total assets of $238.0
million, total loans of $205.0 million, total deposits of $198.9 million and
total stockholders' equity of $18.7 million. We recorded purchase accounting
adjustments related to the Midwest acquisition including recording goodwill of
$23.1 million, establishing a core deposit intangible of $4.9 million, and a
covenant not to compete of $1.3 million.

On April 15, 2003, we completed the acquisition of Mepco, a 40-year old
Chicago-based company, that specializes in financing insurance premiums for
businesses and providing payment plans to consumers for the purchase of vehicle
service contracts.

CRITICAL ACCOUNTING POLICIES

Our accounting and reporting policies are in accordance with accounting
principles generally accepted in the United States of America and conform to
general practices within the banking industry. Accounting and reporting policies
for other than temporary impairment of investment securities, the allowance for
loan losses, originated real estate mortgage loan servicing rights, derivative
financial instruments, income taxes and goodwill are deemed critical since they
involve the use of estimates and require significant management judgments.
Application of assumptions different than those that we have used could result
in material changes in our financial position or results of operations.

We are required to assess our investment securities for "other than
temporary impairment" on a periodic basis. The determination of other than
temporary impairment for an investment security requires judgment as to the
cause of the impairment, the likelihood of recovery and the projected timing of
the recovery. Our assessment process during 2004 resulted in recording a $1.6
million impairment charge for other than temporary impairment on various
investment securities within our portfolio. Currently the accounting profession
(FASB) is considering the meaning of other than temporary impairment with
respect to debt securities and has delayed the effective date of certain
portions of a recent accounting pronouncement (see "Recent Accounting
Pronouncements"). We believe that our assumptions and judgments in assessing
other than temporary impairment for our investment securities are reasonable and
conform to general industry practices.

Our methodology for determining the allowance and related provision for
loan losses is described above in "Portfolio Loans and asset quality." In
particular, this area of accounting requires a significant amount of judgment
because a multitude of factors can influence the ultimate collection of a loan
or other type of credit. It is extremely difficult to precisely measure the
amount of losses that are probable in our loan portfolio. We use a rigorous
process to attempt to accurately quantify the necessary allowance and related
provision for loan losses, but there can be no assurance that our modeling
process will successfully identify all of the losses that are probable in our
loan portfolio. As a result, we could record future provisions for loan losses
that may be significantly different than the levels that we have recorded in the
past three-year period.

At December 31, 2004 we had approximately $11.4 million of real estate
mortgage loan servicing rights capitalized on our balance sheet. There are
several critical assumptions involved in establishing the value of this asset
including estimated future prepayment speeds on the underlying real estate
mortgage loans, the interest rate used to discount the net cash flows from the
real estate mortgage loan servicing, the estimated amount of ancillary income
that will be received in the future (such as late fees) and the estimated cost
to service the real estate mortgage loans. We utilize an outside third party
(with expertise in the valuation of real estate mortgage loan servicing rights)
to assist us in our valuation process. We believe the assumptions that we
utilize in our valuation are reasonable based upon accepted industry practices
for valuing mortgage servicing rights and represent neither the most
conservative or aggressive assumptions.

We use a variety of derivative instruments to manage our interest rate
risk. These derivative instruments include interest rate swaps, collars, floors
and caps and mandatory forward commitments to sell real estate mortgage loans.
Under SFAS #133 the accounting for increases or decreases in the value of
derivatives depends upon the use of the derivatives and whether the derivatives
qualify for hedge accounting. In particular, we use pay fixed interest-rate
swaps to convert the variable rate cash flows on short-term or variable rate
debt obligations to fixed rates. At December 31, 2004 we had approximately
$369.5 million in fixed pay interest rate swaps being accounted for as cash flow
hedges, thus permitting us to report the related unrealized gains or losses in
the fair market value of these derivatives in other comprehensive income and
subsequently reclassify such gains or losses into earnings as yield adjustments
in the same period in which the related interest on the hedged item (primarily
short-term or variable rate debt obligations) affect earnings. The fair market
value of our fixed pay interest-rate swaps being accounted for as cash flow
hedges is approximately $1.3 million at December 31, 2004.

Our accounting for income taxes involves the valuation of deferred tax
assets and liabilities primarily associated with differences in the timing of
the recognition of revenues and expenses for financial reporting and tax
purposes. At December 31, 2004 we had recorded a net deferred tax asset of $8.7
million, which included a net operating loss carryforward of $6.8 million. We
have recorded

A-17

no valuation allowance on our net deferred tax asset because we believe that the
tax benefits associated with this asset will more likely than not, be realized.
However, changes in tax laws, changes in tax rates and our future level of
earnings can adversely impact the ultimate realization of our net deferred tax
asset.

At December 31, 2004 we had recorded $53.4 million of goodwill. Under SFAS
#142, amortization of goodwill ceased, and instead this asset must be
periodically tested for impairment. Our goodwill primarily arose from the 2004
acquisitions of Midwest and North, the 2003 acquisition of Mepco and the past
acquisitions of other banks and a mobile home loan origination company. We test
our goodwill for impairment utilizing the methodology and guidelines established
in SFAS #142. This methodology involves assumptions regarding the valuation of
the business segments that contain the acquired entities. We believe that the
assumptions we utilize are reasonable and even utilizing more conservative
assumptions on valuation would not presently result in any impairment in the
amount of goodwill that we have recorded. However, we may incur impairment
charges related to our goodwill in the future due to changes in business
prospects or other matters that could affect our valuation assumptions.

RECENT ACCOUNTING PRONOUNCEMENTS

In December 2004, the FASB issued Statement of Financial Accounting
Standards No. 123 (revised 2004), "Share Based Payment," ("SFAS #123R") which is
a revision of Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation," ("SFAS #123"). SFAS #123R supersedes Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees,"
("APB #25") and amends Statement of Financial Accounting Standards No. 95,
"Statement of Cash Flows." Generally the requirements of SFAS #123R are similar
to the requirements described in SFAS #123. However, SFAS #123R requires all
share-based payments to employees, including grants of employee stock options,
to be recognized in the statement of operations based on their fair values. Pro
forma disclosure is no longer an alternative. Statement #123R is effective at
the beginning of the first interim or annual period beginning after June 15,
2005. Early adoption is permitted in periods in which financial statements have
not yet been issued. We expect to adopt SFAS #123R on July 1, 2005.

SFAS #123R permits companies to adopt its requirements using one of two
methods. First, a "modified prospective" method in which compensation cost is
recognized beginning with the effective date (a) based on the requirements of
SFAS #123R for all share-based payments granted after the effective date and (b)
based on the requirements of SFAS #123 for all awards granted to employees prior
to the effective date of SFAS #123R that remain unvested on the effective date.
Second, a "modified retrospective" method which includes the requirements of the
modified prospective method described above, but also permits entities to
restate based on the amounts previously recognized under SFAS #123 for purposes
of pro forma disclosures either (a) all prior periods presented or (b) prior
interim periods of the year of adoption. We plan to adopt SFAS #123R using the
modified prospective method described above.

As permitted by SFAS #123, we currently account for share-based payments to
employees using APB #25's intrinsic value method and, as such, generally
recognize no compensation cost for employee stock options. Accordingly, the
adoption of SFAS 123R's fair value method will have a significant impact on our
results overall financial position. The impact of SFAS #123R cannot be predicted
at this time because it will depend on the level and type of share-based
payments granted in the future. However, had we adopted SFAS #123R in prior
periods, the impact of that standard would have approximated the impact of SFAS
#123 as described in the disclosure of pro forma net income and earnings per
share in Note #14 to our consolidated financial statements.

In March 2004, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin No. 105, "Application of Accounting Principles to Loan
Commitments," ("SAB #105") which provides guidance about the measurement of loan
commitments required to be accounted for as derivative instruments and
recognized at fair value under SFAS #133. SAB #105 also requires companies to
disclose their accounting policy for those loan commitments including methods
and assumptions used to estimate fair value and associated hedging strategies.
SAB #105 is effective for all loan commitments accounted for as derivatives that
are entered into after March 31, 2004. Our current policies are consistent with
the guidance issued in SAB #105.

In 2003, the Emerging Issues Task Force ("EITF") issued Issue No. 03-1,
"The Meaning of Other-Than-Temporary Impairment and Its Application to Certain
Investments." The recognition and measurement guidance in EITF 03-1 should be
applied in other-than-temporary impairment evaluations performed in reporting
periods beginning after June 15, 2004. Disclosures were effective in annual
financial statements for fiscal years ending after December 15, 2003, for
investments accounted for under FASB Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities," and
No. 124, "Accounting for Certain Investments Held by Not-for-Profit
Organizations". The disclosure requirements for all other investments are
effective in annual financial statements for fiscal years ending after June 15,
2004. Comparative information for periods prior to initial application is not
required. On September 15, 2004, the FASB staff proposed two FASB Staff
Positions ("FSP"). The first, proposed FSP EITF Issue 03-1-a, "Implementation
Guidance for the Application of Paragraph 16 of EITF Issue No. 03-1, "The
Meaning of Other-Than-Temporary Impairment and its Application to Certain
Investments," would provide guidance for the application of paragraph 16 of
EITF 03-1 to debt securities that are impaired because of interest rate and/or
sector spread increases. The second, proposed FSP EITF Issue 03-1-b, "Effective
Date of Paragraph 16 of EITF Issue No. 03-1, "The Meaning of
Other-Than-Temporary Impairment and its Application to Certain Investments,"
would delay the effective date of EITF 03-1 for debt securities that are
impaired because of interest rate and/or sector spread increases. Other
investments within the scope of EITF 03-1 remain subject to its recognition and
measurement provisions for interim and annual periods beginning after June 15,
2004. The disclosure provisions of EITF 03-1 also would not be affected by the
two proposed FSPs.

A-18

In December 2003, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 03-03, "Accounting for Certain
Loans or Debt Securities Acquired in a Transfer". This SOP addresses accounting
for differences between contractual cash flows and cash flows expected to be
collected from an investor's initial investment in loans or debt securities
(loans) acquired in a transfer if those differences are attributable, at least
in part, to credit quality. It includes loans acquired in purchase business
combinations. This SOP does not apply to loans originated by us and is effective
for loans acquired in fiscal years beginning after December 15, 2004. This SOP
is expected to have a significant impact on our future acquisitions as it will
require the allocation of the acquired entity's allowance for loan losses to
individual loans.

In December 2003, the FASB issued Interpretation No. 46 (revised December
2003), "Consolidation of Variable Interest Entities," ("FIN 46R"), which
addresses how a business enterprise should evaluate whether it has a controlling
financial interest in an entity through means other than voting rights and
accordingly should consolidate the entity. FIN 46R replaces FIN 46. Under the
general transition provisions of FIN 46R all public entities are required to
fully implement FIN 46R no later than the end of the first reporting period
ending after March 15, 2004. The adoption of FIN 46R during the quarter ended
March 31, 2004 did not have a material impact on our financial condition or
results of operations.

In May 2003, the FASB issued Statement of Financial Accounting Standards
No. 150, "Accounting for Certain Financial Instruments with Characteristics of
both Liabilities and Equity," ("SFAS #150") which requires issuers of financial
instruments to classify as liabilities certain freestanding financial
instruments that embody obligations for the issuer. SFAS #150 was effective for
all freestanding financial instruments entered into or modified after May 31,
2003 and was otherwise effective at the beginning of the first interim period
beginning after June 15, 2003. On October 29, 2003, the FASB voted to defer for
an indefinite period the application of the guidance in SFAS #150, to
non-controlling interests that are classified as equity in the financial
statements of a subsidiary but would be classified as a liability on the
parent's financial statements. The adoption of the sections of this Statement
that have not been deferred did not have a significant impact on our financial
condition or results of operations. The section noted above that has been
deferred indefinitely is not expected to have a material impact on our financial
condition or results of operations.

A-19

MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL
OVER FINANCIAL REPORTING

The management of Independent Bank Corporation is responsible for
establishing and maintaining adequate internal control over financial reporting.
Our internal control system was designed to provide reasonable assurance to us
and the board of directors regarding the preparation and fair presentation of
published financial statements.

All internal control systems, no matter how well designed, have inherent
limitations. Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial statement
preparation and presentation.

We assessed the effectiveness of our internal control over financial
reporting as of December 31, 2004. In making this assessment, we used the
criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control - Integrated Framework. Based on our
assessment, management has concluded that as of December 31, 2004, the Company's
internal control over financial reporting was effective to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally
accepted accounting principles.

Our independent auditor's have issued an audit report on our assessment of
the Company's internal control over financial reporting. Their report
immediately follows our report.

Independent Bank Corporation
March 4, 2005

A-20

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders
Independent Bank Corporation
Ionia, Michigan

We have audited management's assessment, included in the accompanying
Management's Annual Report on Internal Control over Financial Reporting, that
Independent Bank Corporation maintained effective internal control over
financial reporting as of December 31, 2004, based on criteria established in
Internal Control--Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Independent Bank Corporation's
management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal
control over financial reporting. Our responsibility is to express an opinion on
management's assessment and an opinion on the effectiveness of the Company's
internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating management's assessment, testing
and evaluating the design and operating effectiveness of internal control, and
performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our
opinion.

A company's internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

In our opinion, management's assessment that Independent Bank Corporation
maintained effective internal control over financial reporting as of December
31, 2004, is fairly stated, in all material respects, based on criteria
established in Internal Control--Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Also, in our opinion,
Independent Bank Corporation maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2004, based on
criteria established in Internal Control--Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the consolidated statements
of financial condition of Independent Bank Corporation and subsidiaries as of
December 31, 2004 and 2003, and the related consolidated statements of
operations, shareholders' equity, comprehensive income, and cash flows for each
of the years in the three-year period ended December 31, 2004, and our report
dated March 4, 2005, expressed an unqualified opinion on those consolidated
financial statements.

/s/ KPMG LLP

Detroit, Michigan
March 4, 2005

A-21

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders
Independent Bank Corporation
Ionia, Michigan

We have audited the accompanying consolidated statements of financial
condition of Independent Bank Corporation and subsidiaries as of December 31,
2004 and 2003, and the related consolidated statements of operations,
shareholders' equity, comprehensive income, and cash flows for each of the years
in the three-year period ended December 31, 2004. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express our opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Independent
Bank Corporation and subsidiaries as of December 31, 2004 and 2003, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 2004, in conformity with U.S. generally
accepted accounting principles.

We also have audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the effectiveness of
Independent Bank Corporation's internal control over financial reporting as of
December 31, 2004, based on criteria established in Internal Control--Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) and our report dated March 4, 2005 expressed an unqualified
opinion on management's assessment of and the effective operation of internal
control over financial reporting.

/s/ KPMG LLP

Detroit, Michigan
March 4, 2005

A-22

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

December 31,
-----------------------
2004 2003
---------- ----------
(in thousands,
except share amounts)

ASSETS
Cash and due from banks ................................... $ 72,815 $ 61,741
Securities available for sale ............................. 550,908 453,996
Federal Home Loan Bank stock, at cost ..................... 17,322 13,895
Loans held for sale ....................................... 38,756 32,642
Loans
Commercial ............................................. 931,251 603,558
Real estate mortgage ................................... 773,609 681,602
Installment ............................................ 266,042 234,562
Finance receivables .................................... 254,388 147,671
---------- ----------
Total loans ......................................... 2,225,290 1,667,393
Allowance for loan losses ................................. (24,737) (16,836)
---------- ----------
Net Loans ........................................... 2,200,553 1,650,557
Property and equipment, net ............................... 56,569 43,979
Bank owned life insurance ................................. 38,337 36,850
Goodwill .................................................. 53,354 16,696
Other intangibles ......................................... 13,503 7,523
Accrued income and other assets ........................... 51,910 43,135
---------- ----------
Total Assets ..................................... $3,094,027 $2,361,014
========== ==========

LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Non-interest bearing ................................... $ 287,672 $ 192,733
Savings and NOW ........................................ 849,110 700,541
Time ................................................... 1,040,165 809,532
---------- ----------
Total Deposits ...................................... 2,176,947 1,702,806
Federal funds purchased ................................... 117,552 53,885
Other borrowings .......................................... 405,386 331,819
Subordinated debentures ................................... 64,197 52,165
Financed premiums payable ................................. 48,160 26,340
Accrued expenses and other liabilities .................... 51,493 31,783
---------- ----------
Total Liabilities ................................... 2,863,735 2,198,798
---------- ----------
Commitments and contingent liabilities

Shareholders' Equity
Preferred stock, no par value-200,000 shares authorized;
none issued or outstanding
Common stock, $1.00 par value-30,000,000 shares
authorized; issued and outstanding; 21,194,651 shares
at December 31, 2004 and 19,521,137 shares
at December 31, 2003 ................................ 21,195 19,521
Capital surplus ........................................ 158,797 119,401
Retained earnings ...................................... 41,795 16,953
Accumulated other comprehensive income ................. 8,505 6,341
---------- ----------
Total Shareholders' Equity .......................... 230,292 162,216
---------- ----------
Total Liabilities and Shareholders' Equity ....... $3,094,027 $2,361,014
========== ==========

See accompanying notes to consolidated financial statements

A-23

CONSOLIDATED STATEMENTS OF OPERATIONS

Year ended December 31,
----------------------------------------
2004 2003 2002
-------- -------- --------
(in thousands, except per share amounts)

INTEREST INCOME
Interest and fees on loans ............................... $139,846 $118,861 $109,297
Securities available for sale ............................
Taxable ............................................... 12,497 11,687 12,211
Tax-exempt ............................................ 9,439 8,207 7,018
Other investments ........................................ 765 611 1,289
-------- -------- --------
Total Interest Income ................................. 162,547 139,366 129,815
-------- -------- --------
INTEREST EXPENSE
Deposits ................................................. 28,363 27,802 35,134
Other borrowings ......................................... 16,651 16,311 12,874
-------- -------- --------
Total Interest Expense ................................ 45,014 44,113 48,008
-------- -------- --------
Net Interest Income ................................... 117,533 95,253 81,807
Provision for loan losses ................................ 4,309 4,032 3,562
-------- -------- --------
Net Interest Income After Provision for Loan Losses ... 113,224 91,221 78,245
-------- -------- --------
NON-INTEREST INCOME
Service charges on deposit accounts ...................... 17,089 14,668 13,049
Net gains (losses) on assets
Real estate mortgage loans ............................ 5,956 16,269 8,178
Securities ............................................ 856 (779) (24)
VISA check card interchange income ....................... 2,054 1,564 1,370
Title insurance fees ..................................... 2,036 3,092 2,474
Manufactured home loan origination fees and commissions... 1,264 1,769 1,949
Real estate mortgage loan servicing ...................... 1,427 (294) (870)
Other income ............................................. 7,116 6,315 4,785
-------- -------- --------
Total Non-interest Income ............................. 37,798 42,604 30,911
-------- -------- --------
NON-INTEREST EXPENSE
Compensation and employee benefits ....................... 50,081 43,558 37,343
Occupancy, net ........................................... 7,539 6,519 5,424
Furniture and fixtures ................................... 6,122 5,539 4,731
Other expenses ........................................... 34,926 26,890 20,795
-------- -------- --------
Total Non-interest Expense ............................ 98,668 82,506 68,293
-------- -------- --------
Income Before Income Tax .............................. 52,354 51,319 40,863
Income tax expense ....................................... 13,796 13,727 11,396
-------- -------- --------
Net Income ............................................ $ 38,558 $ 37,592 $ 29,467
======== ======== ========
Net income per share
Basic ................................................. $ 1.88 $ 1.92 $ 1.47
======== ======== ========
Diluted ............................................... $ 1.84 $ 1.87 $ 1.44
======== ======== ========
Cash dividends declared per common share ................. $ .66 $ .59 $ .44
======== ======== ========

See accompanying notes to consolidated financial statements

A-24

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Accumulated
Other
Compre- Total
Common Capital Retained hensive Shareholders'
Stock Surplus Earnings Income (Loss) Equity
---------------------------------------------------------------------------------------------------------------
(in thousands)

Balances at January 1, 2002 ................... $17,749 $ 76,628 $ 39,355 $(1,829) $131,903
Net income for 2002 ........................... 29,467 29,467
Cash dividends declared, $.44 per share ....... (8,756) (8,756)
5% stock dividend ............................. 853 17,407 (18,281) (21)
Issuance of 291,891 shares of common stock .... 292 3,168 3,460
Repurchase and retirement of 1,120,070
shares of common stock ..................... (1,120) (22,071) (23,191)
Cash in lieu of fractional shares for
three-for-two stock split .................. (8) (8)
Net change in accumulated other
comprehensive income, net of
$2.8 million of related tax effect ......... 5,193 5,193
-------------------------------------------------------------
Balances at December 31, 2002 ................. 17,774 75,124 41,785 3,364 138,047
Net income for 2003 ........................... 37,592 37,592
Cash dividends declared, $.59 per share ....... (11,642) (11,642)
10% stock dividend ............................ 1,776 48,969 (50,782) (37)
Issuance of 491,818 shares of common stock .... 492 7,365 7,857
Repurchase and retirement of 520,607
shares of common stock ..................... (521) (12,057) (12,578)
Net change in accumulated other
comprehensive income, net of
$1.6 million of related tax effect ......... 2,977 2,977
-------------------------------------------------------------
Balances at December 31, 2003 ................. 19,521 119,401 16,953 6,341 162,216
Net income for 2004 ........................... 38,558 38,558
Cash dividends declared, $.66 per share ....... (13,716) (13,716)
Issuance of 1,755,114 shares of common stock .. 1,755 41,317 43,072
Repurchase and retirement of 81,600
shares of common stock ..................... (81) (1,921) (2,002)
Net change in accumulated other
comprehensive income, net of
$1.2 million of related tax effect ......... 2,164 2,164
-------------------------------------------------------------
Balances at December 31, 2004 ........... $21,195 $158,797 $ 41,795 $ 8,505 $230,292
=============================================================

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

2004 2003 2002
---------------------------------------------------------------------------------------------------------------
(in thousands)

Net income ...................................................................... $38,558 $37,592 $29,467
Other comprehensive income
Net change in unrealized gain (loss) on securities available for sale, net of
related tax effect ........................................................ (1,423) 545 6,087
Net change in unrealized gain (loss) on derivative instruments, net of related
tax effect ................................................................ 3,587 2,432 (894)
---------------------------
Comprehensive Income ................................................... $40,722 $40,569 $34,660
===========================

See accompanying notes to consolidated financial statements

A-25

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended December 31,
---------------------------------
2004 2003 2002
--------- --------- ---------
(in thousands)

Net Income ............................................................... $ 38,558 $ 37,592 $ 29,467
--------- --------- ---------
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
FROM (USED IN) OPERATING ACTIVITIES
Proceeds from sales of loans held for sale ............................ 391,401 908,751 608,478
Disbursements for loans held for sale ................................. (391,559) (795,547) (652,661)
Provision for loan losses ............................................. 4,309 4,032 3,562
Deferred federal income tax expense ................................... 2,185 4,428 974
Deferred loan fees .................................................... (568) (620) 443
Depreciation, amortization of intangible assets and premiums and
accretion of discounts on securities and loans ..................... (3,001) 1,254 6,511
Net gains on sales of real estate mortgage loans ...................... (5,956) (16,269) (8,178)
Net (gains) losses on securities ...................................... (856) 779 24
Write-off of uncompleted software ..................................... 977
Increase in accrued income and other assets ........................... (11,432) (12,077) (3,438)
Increase in accrued expenses and other liabilities .................... 40,366 1,021 225
--------- --------- ---------
Total Adjustments .................................................. 25,866 95,752 (44,060)
--------- --------- ---------
Net Cash Provided by (Used in) Operating Activities ................ 64,424 133,344 (14,593)
--------- --------- ---------

CASH FLOW USED IN INVESTING ACTIVITIES
Proceeds from the sale of securities available for sale ............... 57,441 20,446 66,390
Proceeds from the maturity of securities available for sale ........... 24,489 22,740 4,315
Principal received on securities available for sale ................... 46,672 96,037 49,676
Purchases of securities available for sale ............................ (132,190) (226,898) (181,228)
Portfolio loans originated, net of principal payments ................. (295,899) (191,266) (24,730)
Principal received on portfolio loans purchased ....................... 3,668 8,598 24,509
Acquisition of businesses, less cash received ......................... 12,905 (3,062)
Purchase of bank owned life insurance ................................. (35,000)
Purchases of property and equipment ................................... (11,720) (7,272) (9,480)
--------- --------- ---------
Net Cash Used in Investing Activities .............................. (294,634) (280,677) (105,548)
--------- --------- ---------

CASH FLOW FROM FINANCING ACTIVITIES
Net increase in total deposits ........................................ 150,930 167,203 148,236
Net increase (decrease) in other borrowings and federal funds purchased 88,306 (23,168) 39,165
Proceeds from Federal Home Loan Bank advances ......................... 509,100 645,650 485,090
Payments of Federal Home Loan Bank advances ........................... (503,525) (650,924) (513,112)
Proceeds from issuance of long-term debt .............................. 10,000
Repayment of long-term debt ........................................... (1,000)
Dividends paid ........................................................ (12,500) (11,040) (8,406)
Proceeds from issuance of subordinated debentures net of cash paid for
common securities .................................................. 48,712
Redemption of subordinated debentures net of cash receipt for common
securities ......................................................... (17,250)
Repurchase of common stock ............................................ (2,002) (12,578) (23,191)
Proceeds from issuance of common stock ................................ 1,975 1,738 2,565
--------- --------- ---------
Net Cash From Financing Activities ................................. 241,284 148,343 130,347
--------- --------- ---------
Net Increase in Cash and Cash Equivalents .......................... 11,074 1,010 10,206
Cash and Cash Equivalents at Beginning of Year ........................... 61,741 60,731 50,525
--------- --------- ---------
Cash and Cash Equivalents at End of Year ........................... $ 72,815 $ 61,741 $ 60,731
========= ========= =========

Cash paid during the year for
Interest .............................................................. $ 43,253 $ 44,692 $ 48,052
Income taxes .......................................................... 5,666 10,738 11,693
Transfer of loans to other real estate ................................... 2,096 4,106 5,399
Real estate loans securitized ............................................ 50,593

See accompanying notes to consolidated financial statements

A-26

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ACCOUNTING POLICIES
-------------------

The accounting and reporting policies and practices of Independent Bank
Corporation and subsidiaries conform with accounting principles generally
accepted in the United States of America and prevailing practices within the
banking industry. Our critical accounting policies include the assessment for
other than temporary impairment on investment securities, the determination of
the allowance for loan losses, the valuation of derivative financial
instruments, the valuation of originated mortgage servicing rights, the
valuation of deferred tax assets and the valuation of goodwill. We are required
to make material estimates and assumptions that are particularly susceptible to
changes in the near term as we prepare the consolidated financial statements and
report amounts for each of these items. Actual results may vary from these
estimates.

Our Banks transact business in the single industry of commercial banking.
Our Banks' cover traditional phases of commercial banking, including checking
and savings accounts, commercial lending, direct and indirect consumer
financing, mortgage lending as well as insurance premium and extended automobile
warranty financing. The principal markets are the rural and suburban communities
across lower Michigan that are served by our Banks' branches and loan production
offices. The economies of these communities are relatively stable and reasonably
diversified. Our financing for insurance premiums and extended automobile
warranties is provided across the United States through our wholly owned
subsidiary, Mepco Insurance Premium Financing, Inc. Subject to established
underwriting criteria, our Banks also participate in commercial lending
transactions with certain non-affiliated banks and purchase real estate mortgage
loans from third-party originators. At December 31, 2004, 72% of our Banks' loan
portfolios were secured by real estate.

PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
---------------------------
the accounts of Independent Bank Corporation and its subsidiaries. The income,
expenses, assets and liabilities of the subsidiaries are included in the
respective accounts of the consolidated financial statements, after elimination
of all material intercompany accounts and transactions.

STATEMENTS OF CASH FLOWS - For purposes of reporting cash flows, cash and
------------------------
cash equivalents include cash on hand, amounts due from banks, and federal funds
sold. Generally, federal funds are sold for one-day periods. We report net cash
flows for customer loan and deposit transactions.

COMPREHENSIVE INCOME - Statement of Financial Accounting Standards, No.
--------------------
130, "Reporting Comprehensive Income," established standards for reporting
comprehensive income, which consists of unrealized gains and losses on
securities available for sale and derivative instruments. The net change in
unrealized gain or loss on securities available for sale in 2004 reflects a net
gain reclassified into earnings of $0.9 million and reflects net losses
reclassified into earnings of $0.8 million and $24,000, in 2003 and 2002,
respectively. The reclassification of these amounts from comprehensive income
resulted in income tax expense of $0.3 million in 2004 and an income tax benefit
of $0.3 million and $8,000 in 2003 and 2002, respectively.

LOANS HELD FOR SALE - Loans held for sale are carried at the lower of
-------------------
aggregate amortized cost or market value. Lower of cost or market value
adjustments, as well as realized gains and losses, are recorded in current
earnings. We recognize as separate assets the rights to service mortgage loans
for others. The fair value of originated mortgage servicing rights has been
determined based upon market value indications for similar servicing. These
mortgage servicing rights are amortized in proportion to and over the period of
estimated net loan servicing income. The Banks assess mortgage servicing rights
for impairment based on the fair value of those rights. For purposes of
measuring impairment, the primary characteristics used by the Banks include
interest rate, term and type.

SECURITIES - We classify our securities as trading, held to maturity or
----------
available for sale. Trading securities are bought and held principally for the
purpose of selling them in the near term and are reported at fair value with
realized and unrealized gains and losses included in earnings. We do not have
any trading securities. Securities held to maturity represent those securities
for which our Banks have the positive intent and ability to hold until maturity
and are reported at cost, adjusted for amortization of premiums and accretion of
discounts computed on the level-yield method. We did not have any securities
held to maturity at December 31, 2004 and 2003. Securities available for sale
represent those securities not classified as trading or held to maturity and are
reported at fair value with unrealized gains and losses, net of applicable
income taxes reported in comprehensive income. We determine whether a decline in
fair value below the amortized cost basis is other than temporary. If the
decline in value is judged to be other than temporary, the cost basis of the
security is written down to fair value as a new cost basis and the amount of the
write-down is recognized as a charge to non-interest income. Gains and losses
realized on the sale of securities available for sale are determined using the
specific identification method and are recognized on a trade-date basis.
Premiums and discounts are recognized in interest income computed on the
level-yield method.

LOAN REVENUE RECOGNITION - Interest on loans is accrued based on the
------------------------
principal amounts outstanding. The accrual of interest income is discontinued
when a loan becomes 90 days past due and the borrower's capacity to repay the
loan and collateral values appear insufficient. A non-accrual loan may be
restored to accrual status when interest and principal payments are current and
the loan appears otherwise collectible. Delinquency status is based on
contractual terms of the loan agreement.

Certain loan fees and direct loan origination costs are deferred and
recognized as an adjustment of yield generally over the contractual life of the
related loan. Fees received in connection with loan commitments are deferred
until the loan is advanced and are then recognized generally over the
contractual life of the loan as an adjustment of yield. Fees on commitments that
expire unused are recognized at expiration. Fees received for letters of credit
are recognized as revenue over the life of the commitment.

A-27

ALLOWANCE FOR LOAN LOSSES - Some loans will not be repaid in full.
Therefore, an allowance for loan losses is maintained at a level which
represents our best estimate of losses incurred. In determining the allowance
and the related provision for loan losses, we consider four principal elements:
(i) specific allocations based upon probable losses identified during the review
of the loan portfolio, (ii) allocations established for other adversely rated
loans, (iii) allocations based principally on historical loan loss experience,
and (iv) additional allowances based on subjective factors, including local and
general economic business factors and trends, portfolio concentrations and
changes in the size and/or the general terms of the loan portfolios. Increases
in the allowance are recorded by a provision for loan losses charged to expense.
Although we periodically allocate portions of the allowance to specific loans
and loan portfolios, the entire allowance is available for incurred losses. We
generally charge-off homogenous residential mortgage, installment and finance
receivable loans when they are deemed uncollectible or reach a predetermined
number of days past due based on loan product, industry practice and other
factors. Collection efforts may continue and recoveries may occur after a loan
is charged against the allowance.

While we use relevant information to recognize losses on loans, additional
provisions for related losses may be necessary based on changes in economic
conditions, customer circumstances and other credit risk factors.

We measure our investment in an impaired loan based on one of three
methods: the loan's observable market price, the fair value of the collateral or
the present value of expected future cash flows discounted at the loan's
effective interest rate. We do not measure impairment on homogenous residential
mortgage and installment loans.

The allowance for loan losses on unfunded commitments is determined in a
similar manner to the allowance for loan losses and is recorded in accrued
expenses and other liabilities.

PROPERTY AND EQUIPMENT - Property and equipment is stated at cost less
accumulated depreciation and amortization. Depreciation and amortization is
computed using both straight-line and accelerated methods over the estimated
useful lives of the related assets. Buildings are generally depreciated over a
period not exceeding 39 years and equipment is generally depreciated over
periods not exceeding 7 years. Leasehold improvements are depreciated over the
shorter of their estimated useful life or lease period.

OTHER REAL ESTATE - Other real estate at the time of acquisition is
recorded at the lower of cost of acquisition or fair value, less estimated costs
to sell, which becomes the property's new basis. Fair value is typically
determined by a third party appraisal of the property. Any write-downs at date
of acquisition are charged to the allowance for loan losses. Expense incurred in
maintaining assets and subsequent write-downs to reflect declines in value are
recorded as other expense.

During 2004 and 2003 we foreclosed on certain loans secured by real estate
and transferred approximately $2.1 million and $4.1 million, respectively to
other real estate. At the time of acquisition amounts were charged-off against
the allowance for loan losses to bring the carrying amount of these properties
to their estimated fair market values, less estimated costs to sell. During 2004
and 2003, we sold other real estate with book balances of approximately $4.6
million and $4.8 million, respectively. Gains or losses on the sale of other
real estate are recorded in other expense on the income statement.

Other real estate and repossessed assets totaling $2.1 million and $3.3
million at December 31, 2004 and 2003, respectively, are included in accrued
income and other assets.

INTANGIBLE ASSETS - Statement of Financial Accounting Standards No. 141,
"Business Combinations," ("SFAS #141") and Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets," ("SFAS #142") have a
profound effect on how organizations account for business combinations and for
the purchased goodwill and intangible assets that arise from those combinations
or are acquired otherwise. SFAS #141 requires that combinations be accounted for
using the purchase method of accounting. SFAS #142 requires goodwill and
intangible assets be reviewed for impairment. Based on our review of goodwill
and intangible assets recorded on the Statement of Condition, no impairment
existed as of December 31, 2004.

Other intangible assets, including core deposit, customer relationship
intangibles, and covenants not to compete are amortized using both straight-line
and accelerated methods over 5 to 15 years.

INCOME TAXES - We employ the asset and liability method of accounting for
income taxes. This method establishes deferred tax assets and liabilities for
the temporary differences between the financial reporting basis and the tax
basis of our assets and liabilities at tax rates expected to be in effect when
such amounts are realized or settled. Under this method, the effect of a change
in tax rates is recognized in the period that includes the enactment date. The
deferred tax asset is subject to a valuation allowance for that portion of the
asset for which it is more likely than not that it will not be realized.

We file a consolidated federal income tax return. Intercompany tax
liabilities are settled as if each subsidiary filed a separate return.

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE - Securities sold under
agreements to repurchase are treated as debt and are reflected as a liability in
the consolidated statements of financial condition. The book value of securities
pledged to secure the repurchase agreements remains in the securities portfolio.

DERIVATIVE FINANCIAL INSTRUMENTS - Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities," ("SFAS #133") which was subsequently amended by SFAS #138, requires
companies to record derivatives on the balance sheet as assets and liabilities
measured at their fair value. The accounting for increases and decreases in the
value of derivatives depends upon the use of derivatives and whether the
derivatives qualify for hedge accounting.

We record the fair value of cash-flow hedging instruments ("Cash Flow
Hedges") in accrued income and other assets and accrued expenses and other
liabilities. On an ongoing basis, our Banks adjust their balance sheets to
reflect the then current fair value of the Cash Flow Hedges. The related gains
or losses are reported in other comprehensive income and are subsequently
reclassified into earnings, as a yield adjustment in the same period in which
the related interest on the hedged items (primarily

A-28

variable-rate debt obligations) affect earnings. It is anticipated that no
unrealized gains on Cash Flow Hedges at December 31, 2004, will be reclassified
to earnings over the next twelve months. To the extent that the Cash Flow Hedges
are not effective, the ineffective portion of the Cash Flow Hedges are
immediately recognized as interest expense. The maximum term of any Cash Flow
Hedge at December 31, 2004 is 4.6 years.

We also record fair-value hedging instruments ("Fair Value Hedges") at fair
value in accrued income and other assets and accrued expenses and other
liabilities. The hedged items (primarily fixed-rate debt obligations) are also
recorded at fair value through the statement of operations, which offsets the
adjustment to the Fair Value Hedges. On an ongoing basis, our Banks adjust their
balance sheets to reflect the then current fair value of both the Fair Value
Hedges and the respective hedged items. To the extent that the change in value
of the Fair Value Hedges do not offset the change in the value of the hedged
items, the ineffective portion is immediately recognized as interest expense.

Certain derivative financial instruments are not designated as hedges. The
fair value of these derivative financial instruments have been recorded on our
balance sheet and are adjusted on an ongoing basis to reflect their then current
fair value. The changes in the fair value of derivative financial instruments
not designated as hedges, are recognized currently in earnings.

When hedge accounting is discontinued because it is determined that a
derivative financial instrument no longer qualifies as a fair-value hedge, we
continue to carry the derivative financial instrument on the balance sheet at
its fair value, and no longer adjust the hedged item for changes in fair value.
The adjustment of the carrying amount of the previously hedged item is accounted
for in the same manner as other components of similar instruments. When hedge
accounting is discontinued because it is probable that a forecasted transaction
will not occur, we continue to carry the derivative financial instrument on the
balance sheet at its fair value, and gains and losses that were included in
accumulated other comprehensive income are recognized immediately in earnings.
In all other situations in which hedge accounting is discontinued, we continue
to carry the derivative financial instrument at its fair value on the balance
sheet and recognize any changes in its fair value in earnings.

STOCK BASED COMPENSATION - We apply APB Opinion No. 25 in accounting for
our stock based compensation plans. We provide pro forma disclosures for our net
income and earnings per share as if we had adopted the fair value accounting
method for stock-based compensation. For purposes of pro forma disclosures, we
recognized compensation cost on stock options with pro rata vesting on a
straight-line basis. Our stock based compensation plans are described more fully
in Note #14.

COMMON STOCK - At December 31, 2004, 0.5 million shares of common stock
were reserved for issuance under the dividend reinvestment plan and 1.3 million
shares of common stock were reserved for issuance under stock option plans.

RECLASSIFICATION - Certain amounts in the 2003 and 2002 consolidated
financial statements have been reclassified to conform with the 2004
presentation.

NOTE 2 - ACQUISITIONS

On July 1, 2004, we completed our acquisition of North Bancorp, Inc.
("North"), with the purpose of expanding our presence in northern Michigan.
North was a publicly held bank holding company primarily doing business as a
commercial bank. As a result of the closing of this transaction, we issued
345,391 shares of common stock to the North shareholders. 2004 includes the
results of North's operations beginning on July 1, 2004.

A condensed balance sheet of North at the date of acquisition follows:

(in thousands)
--------------

Cash ........................... $ 21,505
Securities ..................... 26,418
Loans, net ..................... 97,573
Property and equipment ......... 2,318
Intangible assets .............. 2,240
Goodwill ....................... 2,948
Other assets ................... 9,299
--------
Total assets acquired ....... 162,301

Deposits ....................... 124,088
Borrowings ..................... 27,090
Other liabilities .............. 2,350
--------
Total liabilities assumed ... 153,528
--------
Net assets acquired ......... $ 8,773
========

We recorded purchase accounting adjustments related to the North
acquisition including recording goodwill of $2.9 million (non-deductible for
federal income tax purposes), and establishing a core deposit intangible of $2.2
million. The core deposit intangible is being amortized on an accelerated basis
over eight years. Included in 2004 results of operations was $0.2 million for
amortization of the core deposit intangible.

A-29

The unaudited pro-forma information presented in the following table has
been prepared based on our historical results combined with North. The
information has been combined to present the results of operations as if the
acquisition had occurred at the beginning of the periods presented. The proforma
results are not necessarily indicative of the results which would have actually
been attained if the acquisition had been consummated in the past or what may be
attained in the future:

Year Ended December 31,
-----------------------
2004 2003
-------- --------
(in thousands)

Total revenue ........ $205,300 $195,900
======== ========
Net income ........... $ 38,100 $ 33,800
======== ========
Earnings per share ... $ 1.81 $ 1.66
======== ========

On May 31, 2004, we completed our acquisition of Midwest Guaranty Bancorp,
Inc. ("Midwest"), with the purpose of expanding our presence in southeastern
Michigan. Midwest was a closely held bank holding company primarily doing
business as a commercial bank. As a result of the closing of this transaction,
we issued 997,700 shares of common stock and paid $16.6 million in cash to the
Midwest shareholders. 2004 results include Midwest's operations subsequent to
May 31, 2004.

A condensed balance sheet of Midwest at the date of acquisition follows:

(in thousands)
--------------

Cash ........................... $ 8,390
Securities ..................... 19,557
Loans, net ..................... 201,476
Property and equipment ......... 5,674
Intangible assets .............. 6,219
Goodwill ....................... 23,074
Other assets ................... 1,824
--------
Total assets acquired ....... 266,214
--------

Deposits ....................... 199,123
Borrowings ..................... 20,046
Other liabilities .............. 2,931
--------
Total liabilities assumed ... 222,100
--------
Net assets acquired ......... $ 44,114
========

We recorded purchase accounting adjustments related to the Midwest
acquisition including recording goodwill of $23.1 million, (non-deductible for
federal income tax purposes), establishing a core deposit intangible of $4.9
million, and a covenant not to compete of $1.3 million. The core deposit
intangible is being amortized on an accelerated basis over ten years and the
covenant not to compete on a straight-line basis over five years. Included in
2004 results of operations was $0.5 million for amortization of the core deposit
intangible and the covenant not to compete.

The unaudited pro-forma information presented in the following table has
been prepared based on our historical results combined with Midwest. The
information has been combined to present the results of operations as if the
acquisition had occurred at the beginning of the periods presented. The proforma
results are not necessarily indicative of the results which would have actually
been attained if the acquisition had been consummated in the past or what may be
attained in the future:

Year Ended December 31,
-----------------------
2004 2003
-------- --------
(in thousands)

Total revenue ........ $206,400 $196,600
======== ========
Net income ........... $ 38,900 $ 39,100
======== ========
Earnings per share ... $ 1.83 $ 1.86
======== ========

On April 15, 2003, we completed the acquisition of Mepco Insurance Premium
Financing, Inc. with the purpose of adding a high margin business with good
growth prospects and to take advantage of our relatively lower cost of funds and
greater access to capital. Mepco is a 40-year old Chicago-based company that
specializes in financing insurance premiums for businesses and extended
automobile warranties for consumers. As a result of the closing of this
transaction we issued 272,439 shares of common stock, and paid out $5.0 million
in cash on April 15, 2003 as the initial consideration. Under the terms of the
agreement and plan of

A-30

merger additional contingent consideration may be paid in the future pursuant to
an earn-out. During 2004 we issued 43,929 shares of common stock and paid out
$1.1 million in cash associated with the first year of the earn-out.

As a result of the termination of the employment contracts of certain Mepco
officers in December 2004, the former shareholders of Mepco have the right,
under the terms of our acquistition, to accelerate the earn-out amount payable
to those shareholders rather than receive payments in annual installments
through April, 2008. The precise earn-out amount of that accelerated payment is
dependent upon the time of exercise of the shareholders' option to accelerate.
That option expires on March 30, 2006. The payment of the earn-out amount,
whether or not accelerated, will be recorded by us as goodwill. At December 31,
2004 we accrued approximately $8.4 million (included in accrued expenses and
other liabilities) and recorded a corresponding increase in goodwill for this
accelerated earn-out option. Included in our 2003 results are Mepco's operations
subsequent to April 15, 2003.

A condensed balance sheet of Mepco at the date of acquisition follows:

(in thousands)
--------------

Cash ........................... $ 2,217
Finance receivables, net ....... 99,156
Property and equipment ......... 1,233
Intangible assets .............. 2,824
Goodwill ....................... 9,390
Other assets ................... 3,011
--------
Total assets acquired ....... 117,831
--------

Short-term borrowings .......... 79,893
Financed premiums payable ...... 24,628
Other liabilities .............. 3,028
--------
Total liabilities assumed ... 107,549
--------
Net assets acquired ......... $ 10,282
--------
========

We recorded purchase accounting adjustments related to the Mepco
acquisition including recording goodwill of $9.4 million (nondeductible for
federal income tax purposes), establishing a customer relationship intangible of
$2.6 million, a covenant not to compete of $0.2 million and writing down fixed
assets (software in the process of development) by $2.3 million. The customer
relationship intangible is being amortized on an accelerated basis over ten
years and the covenant not to compete on a straight-line basis over five years.
Included in 2004 and 2003 results of operations were $0.7 million and $0.6
million, respectively, for amortization of the customer relationship intangible
and the covenant not to compete.

The unaudited pro-forma information presented in the following table has
been prepared based on our historical results combined with Mepco. The
information has been combined to present the results of operations as if the
acquisition had occurred at the beginning of the periods presented. The proforma
results are not necessarily indicative of the results which would have actually
been attained if the acquisition had been consummated in the past or what may be
attained in the future:

Year Ended December 31,
-----------------------
2003 2002
-------- --------
(in thousands)

Total revenue ........ $185,100 $172,700
======== ========
Net income ........... $ 37,800 $ 30,300
======== ========
Earnings per share ... $ 1.87 $ 1.46
======== ========

NOTE 3 - RESTRICTIONS ON CASH AND DUE FROM BANKS

Our Banks' legal reserve requirements were satisfied by average vault cash
and non-intrest earning balance with the Federal Reserve Bank of $19.0 million
and $18.8 million during 2004 and 2003, respectively. Our Banks do not maintain
compensating balances with correspondent banks.

A-31

NOTE 4 - SECURITIES
-------------------

Securities available for sale consist of the following at December 31:

Unrealized
Amortized ---------------- Fair
Cost Gains Losses Value
-------------------------------------------------------------------------------------------------
(in thousands)

2004
U.S. Treasury ...................................... $ 9,949 $ 25 $ 9,924
Mortgage-backed .................................... 221,920 $ 1,209 675 222,454
Other asset-backed ................................. 22,951 903 277 23,577
Obligations of states and political subdivisions ... 235,559 9,534 605 244,488
Trust preferred .................................... 18,296 1,623 3 19,916
Preferred stock .................................... 25,885 141 113 25,913
Corporate .......................................... 1,966 34 2,000
Other .............................................. 2,636 2,636
--------------------------------------
Total ........................................... $539,162 $13,444 $1,698 $550,908
======================================

2003
U.S. Treasury ...................................... $ 300 $ 1 $ 301
Mortgage-backed .................................... 137,839 1,396 $ 249 138,986
Other asset-backed ................................. 32,721 648 239 33,130
Obligations of states and political subdivisions ... 188,076 10,570 855 197,791
Trust preferred .................................... 29,041 2,186 149 31,078
Preferred stock .................................... 30,374 142 253 30,263
Corporate .......................................... 21,171 738 21,909
Other .............................................. 538 538
--------------------------------------
Total ........................................... $440,060 $15,681 $1,745 $453,996
======================================

Our investments' gross unrealized losses and fair values aggregated by
investment type and length of time that individual securities have been at a
continuous unrealized loss position, at December 31, 2004 follows:

Less Than Twelve Months Twelve Months or More Total
---------------------------------------------------------------------------
Unrealized Unrealized Unrealized
Fair Value Losses Fair Value Losses Fair Value Losses
---------------------------------------------------------------------------------------------------------------------
(in thousands)

U.S. Treasury ......................... $ 9,924 $ 25 $ 9,924 $ 25
Mortgage-backed ....................... 55,082 534 $10,904 $141 65,986 675
Other asset-backed .................... 2,668 277 2,668 277
Obligations of states and political
subdivisions ....................... 10,183 93 8,644 512 18,827 605
Trust preferred securities ............ 606 3 606 3
Preferred stock ....................... 1,091 113 1,091 113
---------------------------------------------------------------------------
Total .............................. $76,280 $765 $22,822 $933 $99,102 $1,698
===========================================================================

We believe that the unrealized losses on securities available for sale are
temporary in nature and due primarily to changes in interest rates and not a
result of credit related issues. We also believe that we have the ability to
hold securities with unrealized losses to maturity or until such time as the
unrealized losses reverse.

A-32

The amortized cost and fair value of securities available for sale at
December 31, 2004, by contractual maturity, follow. The actual maturity will
differ from the contractual maturity because issuers may have the right to call
or prepay obligations with or without call or prepayment penalties.

Amortized Fair
Cost Value
--------- --------
(in thousands)

Maturing within one year ......................... $ 10,251 $ 10,412
Maturing after one year but within five years .... 50,948 53,082
Maturing after five years but within ten years ... 61,505 65,046
Maturing after ten years ......................... 143,066 147,788
-------- --------
265,770 276,328
Mortgage-backed .................................. 221,920 222,454
Other asset-backed ............................... 22,951 23,577
Preferred stock .................................. 25,885 25,913
Other ............................................ 2,636 2,636
-------- --------
Total ......................................... $539,162 $550,908
======== ========

A summary of proceeds from the sale of securities and gains and losses
follows:

Realized
------------------
Proceeds Gains Losses(1)
-------- ------ ---------
(in thousands)

2004 ... $57,441 $2,540 $1,684
2003 ... 20,446 827 1,606
2002 ... 66,390 809 833

(1) Losses in 2004 include a $1.6 million other than temporary impairment
charge on preferred stock and other asset-backed securities and losses in
2003 and 2002 include a $0.8 million other than temporary impairment charge
on a trust-preferred security.

Securities with a book value of $271.9 million and $186.3 million at
December 31, 2004 and 2003, respectively, were pledged to secure borrowings,
public deposits and for other purposes as required by law. There were no
investment obligations of state and political subdivisions that were payable
from or secured by the same source of revenue or taxing authority that exceeded
10% of consolidated shareholders' equity at December 31, 2004 or 2003.

NOTE 5 - LOANS

Our loan portfolios at December 31 follow:

2004 2003
---------- ----------
(in thousands)

Real estate(1)
Residential first mortgages .......................... $ 590,949 $ 546,647
Residential home equity and other junior mortgages ... 215,261 150,346
Construction and land development .................... 261,505 194,340
Other(2) ............................................. 546,789 389,617
Finance receivables ..................................... 254,388 147,671
Consumer ................................................ 182,374 139,261
Commercial .............................................. 165,440 88,558
Agricultural ............................................ 8,584 10,953
---------- ----------
Total loans .......................................... $2,225,290 $1,667,393
========== ==========

(1) Includes both residential and non-residential commercial loans secured by
real estate.

(2) Includes loans secured by multi-family residential and non-farm,
non-residential property.

A-33

An analysis of the allowance for loan losses for the years ended December
31 follows:

2004 2003 2002
--------------------- --------------------- ---------------------
Loan Unfunded Loan Unfunded Loan Unfunded
Losses Commitments Losses Commitments Losses Commitments
------- ----------- ------- ----------- ------- -----------
(in thousands)

Balance at beginning of year ................ $16,836 $ 892 $15,830 $875 $15,286 $881
Allowance on loans acquired .............. 8,236 517
Provision charged to operating expense ... 3,355 954 4,015 17 3,568 (6)
Recoveries credited to allowance ......... 1,251 1,087 733
Loans charged against the allowance ...... (4,941) (4,613) (3,757)
------- ------ ------- ---- ------- ----
Balance at end of year ...................... $24,737 $1,846 $16,836 $892 $15,830 $875
======= ====== ======= ==== ======= ====

Loans are presented net of deferred loan fees of $1.2 million at December
31, 2004, and $1.8 million at December 31, 2003. Finance receivables totaling
$123.4 million and $58.4 million at December 31, 2004 and 2003, respectively,
are presented net of purchased discount of $7.0 million and $2.4 million, at
December 31, 2004 and 2003, respectively. These finance receivables had
effective interest rates at December 31, 2004 and 2003 of 17.0% and 18.7%,
respectively. These receivables have various due dates through August, 2007.

Non-performing loans at December 31 follows:

2004 2003 2002
------- ------- ------
(dollars in thousands)

Non-accrual loans ............................................ $11,804 $ 9,122 $5,738
Loans 90 days or more past due and still accruing interest ... 3,123 3,284 3,961
Restructured loans ........................................... 218 335 270
------- ------- ------
Total non-performing loans ................................ $15,145 $12,741 $9,969
======= ======= ======

If these loans had continued to accrue interest in accordance with their
original terms, approximately $1.1 million, $0.7 million, and $0.9 million of
interest income would have been recognized in 2004, 2003 and 2002, respectively.
Interest income recorded on these loans was approximately $0.3 million, $0.3
million and $0.3 million in 2004, 2003 and 2002, respectively.

Impaired loans totaled approximately $14.4 million, $13.5 million and $5.4
million at December 31, 2004, 2003 and 2002, respectively. Our Banks' average
investment in impaired loans was approximately $14.8 million, $10.1 million and
$6.8 million in 2004, 2003 and 2002, respectively. Cash receipts on impaired
loans on non-accrual status are generally applied to the principal balance.
Interest income recognized on impaired loans was approximately $0.6 million,
$0.4 million and $0.2 million in 2004, 2003 and 2002, respectively. Certain
impaired loans with a balance of approximately $10.8 million, $9.6 million and
$3.1 million had specific allocations of the allowance for loan losses totaling
approximately $2.9 million, $1.4 million and $1.3 million at December 31, 2004,
2003 and 2002, respectively.

At December 31, 2004, 2003 and 2002, our Banks serviced residential
mortgage loans totaling $1.418 billion, $1.179 billion and $0.882 billion,
respectively, for the benefit of third parties.

An analysis of capitalized mortgage servicing rights for the years ended
December 31 follows:

2004 2003 2002
---------- ---------- --------
(in thousands)

Balance at beginning of year ......................................... $ 8,873 $ 4,455 $ 4,299
Servicing rights acquired from acquistion of business ............. 1,138
Originated servicing rights capitalized ........................... 3,341 7,700 3,637
Amortization ...................................................... (1,948) (3,655) (2,386)
Change in impairment reserve ...................................... (44) 373 (1,095)
---------- ---------- --------
Balance at end of year ............................................... $ 11,360 $ 8,873 $ 4,455
========== ========== ========

Impairment reserve ................................................... $ 766 $ 722 $ 1,095
========== ========== ========
Loans sold and serviced that have had servicing rights capitalized ... $1,392,400 $1,140,600 $793,700
========== ========== ========

Capitalized mortgage servicing rights are included on the consolidated
statement of financial position in accrued income and other assets.

A-34

NOTE 6 - PROPERTY AND EQUIPMENT

A summary of property and equipment at December 31 follows:

2004 2003
-------- --------
(in thousands)

Land ........................................ $ 12,788 $ 9,202
Buildings ................................... 48,040 39,954
Equipment ................................... 46,503 39,881
-------- --------
107,331 89,037
Accumulated depreciation and amortization ... (50,762) (45,058)
-------- --------
Property and equipment, net .............. $ 56,569 $ 43,979
======== ========

During 2004 we incurred a $1.0 million impairment charge for the write-off
of previously capitalized software development costs. This software was being
developed by Mepco over the past three years for internal use in connection with
its lending activities. With the assistance of a third-party consultant, we
determined that this uncompleted internal use software was not expected to
provide substantive service potential due primarily to performance,
functionality and application server platform issues. This amount is recorded in
other non-interest expense.

NOTE 7 - INTANGIBLE ASSETS

Intangible assets, net of amortization, at December 31 follows:

2004 2003
----------------------- -----------------------
Gross Gross
Carrying Accumulated Carrying Accumulated
Amount Amortization Amount Amortization
-------- ------------ -------- ------------
(in thousands)

Amortized intangible assets
Core deposit ............................ $20,545 $ 9,685 $13,386 $ 8,067
Customer relationship ................... 2,604 1,254 2,604 589
Covenants not to compete ................ 1,520 227 220 31
------- ------- ------- -------
Total ................................ $24,669 $11,166 $16,210 $ 8,687
======= ======= ======= =======
Unamortized intangible assets - Goodwill ... $53,354 $16,696
======= =======

The $36.7 million, $7.2 million and $1.3 million increases in the gross
carrying amount of goodwill, core deposit intangibles and covenants not to
compete, respectively, are the result of the acquisitions of Midwest and North,
as well as estimated minimum payments under the earn-out relating to the Mepco
acquisition discussed in Note 2. The core deposit intangibles are being
amortized on an accelerated basis over eight to ten years and the covenant not
to compete is being amortized straight-line over five years.

A summary of estimated intangible amortization, primarily amortization of
core deposit, customer relationship and covenant not to compete intangibles, at
December 31, 2004, follows:

(in thousands)
--------------

2005 .................. $ 2,774
2006 .................. 2,572
2007 .................. 2,382
2008 .................. 2,061
2009 .................. 966
2010 and thereafter ... 2,748
-------
Total .............. $13,503
=======

A-35

Changes in the carrying amount of goodwill and amortizing intangibles by
reporting segment for the year ended December 31, 2004, follows:

IB IBWM IBSM IBEM Mepco Other(1) Total
------ ---- ----- ------- ------- -------- -------
(in thousands)

Goodwill
Balance at beginning of year $6,754 $ 32 $ 180 $ 9,397 $333 $16,696
Acquired during the year ............. 2,948(2) 23,025(3) 10,638(4) 47(3) 36,658
------ ---- ------- ------- ---- -------
Balance at end of year .................. $9,702 $ 32 $23,205 $20,035 $380 $53,354
====== ==== ======= ======= ==== =======

Core Deposit Intangible, net
Balance at beginning of year ............ $ 584 $ 95 $ 594 $ 3,973 $ 73 $ 5,319
Acquired during the year ............. 2,240(2) 4,919(3) 7,159
Amortization ......................... (268) (26) (143) (1,165) (16) (1,618)
------ ---- ----- ------- ---- -------
Balance at end of year .................. $2,556 $ 69 $ 451 $ 7,727 $ 57 $10,860
====== ==== ===== ======= ==== =======

Customer Relationship Intangible, net
Balance at beginning of year ............ $ 2,015 $ 2,015
Amortization ......................... (665) (665)
------- -------
Balance at end of year .................. $ 1,350 $ 1,350
======= =======

Covenants Not to Compete Intangible, net
Balance at beginning of year ............ $ 189 $ 189
Acquired during year ................. $ 1,300(3) 1,300
Amortization ......................... (152) (44) (196)
------- ------- -------
Balance at end of year .................. $ 1,148 $ 145 $ 1,293
======= ======= =======

(1) Includes items relating to our parent company and certain insignificant
operations.

(2) Goodwill and intangible assets associated with the acquisition of North.
See note #2.

(3) Goodwill and intangible assets associated with the acquisition of Midwest.
See note #2.

(4) Goodwill associated with contingent consideration paid or accrued pursuant
to an earn-out. See note #2.

NOTE 8 - DEPOSITS

A summary of interest expense on deposits for the years ended December 31
follows:

2004 2003 2002
------- ------- -------
(in thousands)

Savings and NOW ..................... $ 4,543 $ 4,879 $ 7,444
Time deposits under $100,000 ........ 7,972 9,841 14,219
Time deposits of $100,000 or more ... 15,848 13,082 13,471
------- ------- -------
Total ............................ $28,363 $27,802 $35,134
======= ======= =======

Aggregate time deposits in denominations of $100,000 or more amounted to
$704.4 million, $496.2 million, and $347.5 million at December 31, 2004, 2003
and 2002, respectively.

A summary of the maturity of time deposits at December 31, 2004, follows:

(in thousands)
--------------

2005 .................. $ 630,387
2006 .................. 135,727
2007 .................. 81,780
2008 .................. 35,823
2009 .................. 77,928
2010 and thereafter ... 78,520
----------
Total .............. $1,040,165
==========

A-36

NOTE 9 - OTHER BORROWINGS

A summary of other borrowings at December 31 follows:

2004 2003
-------- --------
(in thousands)

Advances from Federal Home Loan Bank ... $223,902 $188,788
Repurchase agreements .................. 169,810 140,969
Notes payable .......................... 9,000
U.S. Treasury demand notes ............. 2,460 1,858
Other .................................. 214 204
-------- --------
Total ............................... $405,386 $331,819
======== ========

Advances from the Federal Home Loan Bank ("FHLB") are secured by our Banks'
unencumbered qualifying mortgage and home equity loans equal to at least 160%
and 300%, respectively of outstanding advances. Advances are also secured by
FHLB stock owned by the Banks. As of December 31, 2004, our Banks had unused
borrowing capacity with the FHLB (subject to the FHLB's credit requirements and
policies) of $172.5 million. Interest expense on advances amounted to $5.2
million, $5.4 million and $5.2 million for the years ended December 31, 2004,
2003 and 2002, respectively. During 2004, 2003 and 2002 we prepaid $11.5
million, $5.0 million and $4.0 million, respectively, of FHLB advances and
incurred losses during those same periods of $0.02 million, $1.0 million and
$0.1 million, respectively. These losses were recorded in other expenses.

As members of the FHLB, our Banks must own FHLB stock equal to the greater
of 1.0% of the unpaid principal balance of residential mortgage loans or 5.0% of
its outstanding advances. At December 31, 2004, our Banks were in compliance
with the FHLB stock ownership requirements.

Certain fixed-rate advances have provisions that allow the FHLB to convert
the advance to an adjustable rate prior to stated maturity. At December 31,
2004, advances totaling $10.0 million, with a stated maturity of 2008 are
convertible in 2005 and beyond.

The maturity and weighted average interest rates of FHLB advances at
December 31 follow:

2004 2003
--------------- ---------------
Amount Rate Amount Rate
-------- ---- -------- ----
(dollars in thousands)

Fixed-rate advances
2004 .............................. $ 34,000 1.44%
2005 .............................. $ 8,118 4.88% 3,100 4.10
2006 .............................. 3,046 3.94 1,500 2.32
2007 .............................. 6,991 3.20 5,000 2.83
2008 .............................. 11,462 5.22 11,000 5.43
2009 .............................. 1,473 5.93 1,000 7.27
2010 and thereafter ............... 28,812 6.59 29,038 6.59
-------- ---- -------- ----
Total fixed-rate advances ...... 59,902 5.55 84,638 3.99
-------- ---- -------- ----
Variable-rate advances
2004 .............................. 104,150 1.30
2005 .............................. 164,000 2.32
-------- ----
Total variable-rate advances ... 164,000 2.32 104,150 1.30
-------- ---- -------- ----
Total advances .............. $223,902 3.18% $188,788 2.51%
======== ==== ======== ====

Repurchase agreements are secured by U.S. Treasury, mortgage-backed,
asset-backed and corporate securities with a book value of approximately $183.7
million and $161.0 million at December 31, 2004 and 2003, respectively which are
being held by the counterparty to the repurchase agreement. The yield on
repurchase agreements at December 31, 2004 and 2003 approximated 2.3% and 1.2%,
respectively.

Repurchase agreements averaged $155.6 million, $122.4 million and $93.1
million during 2004, 2003 and 2002, respectively. The maximum amounts
outstanding at any month end during 2004, 2003 and 2002 were $173.3 million,
$141.0 million and $109.2 million, respectively. Interest expense on repurchase
agreements totaled $2.3 for the year ended 2004 and $1.7 million, for the years
ended 2003 and 2002.

Interest expense on Federal funds purchased totaled $1.3 million, $0.6
million and $0.5 million for the years ended December 31, 2004, 2003 and 2002,
respectively.

We have established an unsecured credit facility comprised of a $9.0
million term loan and a $10.0 million revolving credit agreement. At December
31, 2004, there was no balance outstanding on the revolving credit facility. The
term loan and revolving credit agreement accrue interest at three month libor
plus 90 basis points, which was 2.87% at December 31, 2004. We are also

A-37

charged 28 basis points on the unused balance of the revolving credit facility.
Under the credit facility, we are subject to certain restrictive covenants. As
of December 31, 2004, we were in compliance with all covenants. Under the term
loan we are required to make quarterly installments of $0.5 million through June
30, 2009. Interest expense on the term loan totaled $0.1 million during 2004.

Assets, including securities available for sale and loans, pledged to
secure other borrowings totaled $933.4 million at December 31, 2004.

NOTE 10 - SUBORDINATED DEBENTURES

In March 2003 a special purpose entity, IBC Capital Finance II (the
"trust") issued $1.6 million of common securities to Independent Bank
Corporation and $50.6 million of cumulative trust preferred securities
("Preferred Securities") to the public. Independent Bank Corporation issued
$52.2 million of subordinated debentures to the trust in exchange for the
proceeds from the public offering. These subordinated debentures represent the
sole asset of the trust. The Preferred Securities have a liquidation preference
of $25 per security and represent an interest in the subordinated debentures,
which have terms that are similar to the Preferred Securities. Distributions on
the securities are payable quarterly at the annual rate of 8.25% of the
liquidation preference and are included in interest expense in the consolidated
financial statements.

The Preferred Securities are subject to mandatory redemption at the
liquidation preference, in whole or in part, upon repayment of the subordinated
debentures at maturity or their earlier redemption. The subordinated debentures
are redeemable prior to the maturity date of March 31, 2033, at our option after
March 31, 2008, in whole at any time or in part from time to time. The
subordinated debentures are also redeemable at any time, in whole, but not in
part, upon the occurrence of specific events defined within the trust indenture.
We have the option to defer distributions on the subordinated debentures from
time to time for a period not to exceed 20 consecutive quarters.

Prior to the first quarter of 2004 the trust was consolidated in our
financial statements and the common securities and subordinated debentures were
eliminated in consolidation. Under new accounting guidance, FASB Interpretation
No. 46, as revised in December 2003 ("FIN 46R"), the trust is no longer
consolidated with Independent Bank Corporation. Accordingly, we no longer report
the $50.6 million of trust preferred securities issued by the trust as
liabilities, but instead report the common securities of $1.6 million held by
Independent Bank Corporation in other assets and the $52.2 million of
subordinated debentures issued by Independent Bank Corporation in the liability
section of our Consolidated Statements of Financial Condition. Amounts reported
at December 31, 2003 were reclassified to conform to the current presentation.

During 2004, we acquired North and its special purpose entity, Gaylord
Partners, Limited Partnership (the "Partnership"). The Partnership is a
subsidiary of Independent Bank Corporation, but similar to IBC Capital Finance
II is not consolidated with Independent Bank Corporation. The Partnership has
issued $.1 million of common securities to Independent Bank Corporation and
privately placed $5.0 million of cumulative trust preferred securities ("GP
Preferred Securities"). Independent Bank Corporation has $5.1 million of
subordinated debentures issued to the Partnership. The subordinated debentures
are the sole asset of the Partnership. The GP Preferred Securities have a
liquidation preference of $25 per security and represent an interest in the
subordinated debentures, which have terms that are similar to the GP Preferred
Securities. The GP Preferred Securities were sold in two series. Series A
totaled $1.2 million and carries a variable interest rate equal to one month
LIBOR plus 3.6 percent. Series B totaled $3.9 million and carries a variable
interest rate equal to the prime rate, plus 1 percent. For both Series A and
Series B, the interest rates reprice quarterly and are not to exceed 12 percent
annually. Distributions are payable quarterly and are included in interest
expense in the consolidated financial statements.

The GP Preferred Securities are subject to mandatory redemption at the
liquidation preference, in whole or in part, upon repayment of the subordinated
debentures at maturity or their earlier redemption. The subordinated debentures
are redeemable prior to the maturity date of May 31, 2032, at our option after
May 31, 2007, in whole at any time or in part from time to time. The
subordinated debentures are also redeemable at any time, in whole, but not in
part, upon the occurrence of specific events defined within the trust indenture.
We have the option to defer distributions on the subordinated debentures from
time to time for a period not to exceed 20 consecutive quarters.

During 2004 we acquired Midwest and its special purpose entity, Midwest
Guaranty Trust I (the "MG Trust"). The MG Trust is a subsidiary of Independent
Bank Corporation, but similar to IBC Capital Finance II, is not consolidated
with Independent Bank Corporation. The MG Trust has issued $.2 million of common
securities to Independent Bank Corporation and $7.5 of cumulative trust
preferred securities ("MG Preferred Securities") as part of a pooled offering.
Independent Bank Corporation has $7.7 million of subordinated debentures issued
to the MG Trust. The subordinated debentures are the sole asset of the MG Trust.
The MG Preferred Securities have a liquidation preference of $1,000 per security
and represent an interest in the subordinated debentures, which have terms that
are similar to the MG Preferred Securities. Distributions on the securities are
payable quarterly based upon a floating rate equal to three month LIBOR plus
3.45%, not to exceed 12.5% through November 7, 2007 and are included in interest
expense in the consolidated financial statements.

The MG Preferred Securities are subject to mandatory redemption at the
liquidation preference, in whole or in part, upon repayment of the subordinated
debentures at maturity or their earlier redemption. The subordinated debentures
are redeemable prior to the maturity date of November 7, 2032, at our option
after November 7, 2007, in whole at any time or in part from time to time. The
subordinated debentures are also redeemable at any time, in whole, but not in
part, upon the occurrence of specific events defined within the trust indenture.
We have the option to defer distributions on the subordinated debentures from
time to time for a period not to exceed 20 consecutive quarters.

A-38

Issue costs have been capitalized and are being amortized on a
straight-line basis over a period not exceeding 30 years and are included in
interest expense in the consolidated financial statements.

NOTE 11 - COMMITMENTS AND CONTINGENT LIABILITIES

We and our Banks are routinely engaged in legal proceedings and regulatory
matters that have occurred in the ordinary course of business and do not involve
amounts in the aggregate that are believed to be material to our financial
condition or results of operations.

In the normal course of business, our Banks enter into financial
instruments with off-balance sheet risk to meet the financing needs of customers
or to reduce exposure to fluctuations in interest rates. These financial
instruments may include commitments to extend credit and standby letters of
credit. Financial instruments involve varying degrees of credit and
interest-rate risk in excess of amounts reflected in the consolidated balance
sheets. Exposure to credit risk in the event of non-performance by the
counterparties to the financial instruments for loan commitments to extend
credit and letters of credit is represented by the contractual amounts of those
instruments. We do not, however, anticipate material losses as a result of these
financial instruments.

A summary of financial instruments with off-balance sheet risk at December
31 follows:

2004 2003
-------- --------
(in thousands)

Financial instruments whose risk is represented
by contract amounts
Commitments to extend credit .................. $250,607 $146,265
Standby letters of credit ..................... 20,365 27,850

Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and generally require payment of a fee. Since commitments may expire without
being drawn upon, the commitment amounts do not represent future cash
requirements. Commitments are issued subject to similar underwriting standards,
including collateral requirements, as are generally involved in the extension of
credit facilities.

Standby letters of credit are written conditional commitments issued to
guarantee the performance of a customer to a third party. The credit risk
involved in such transactions is essentially the same as that involved in
extending loan facilities and, accordingly, standby letters of credit are issued
subject to similar underwriting standards, including collateral requirements, as
are generally involved in the extension of credit facilities. The majority of
the letters of credit are to corporations and mature during 2005.

In May 2004 we received an unsolicited anonymous letter regarding certain
business practices at Mepco, which was acquired in April 2003 and is now a
wholly-owned subsidiary of Independent Bank. We processed this letter in
compliance with our Policy Regarding the Resolution of Reports on the Company's
Accounting, Internal Controls and Other Business Practices. Under the direction
of our Audit Committee, special legal counsel was engaged to investigate the
matters raised in the anonymous letter. This investigation was completed during
the first quarter of 2005 and we have determined that any amounts or issues
relating to the period after our April 2003 acquisition of Mepco were not
significant. The potential amount of liability related to periods prior to our
April 2003 acquisition date primarily encompasses funds that may be due to
former customers of Mepco related to loan overpayments or unclaimed funds that
may be subject to escheatment. At this time we believe this potential liability
to third parties will not exceed approximately $5 million. Prior to our
acquisition, Mepco had erroneously recorded these amounts as revenue over a
period of several years. The final liability may, however, be less, depending on
the facts related to each loan account, the application of the law to those
facts and the applicable state escheatment requirements for unclaimed funds. In
the second quarter of 2004 we recorded a liability of $2.7 million with a
corresponding charge to earnings (included in non-interest expenses) for
potential amounts due to third parties (either former loan customers or to
states for the escheatment of unclaimed funds). Further on September 30, 2004 we
entered into an escrow agreement with the primary former shareholders of Mepco.
This escrow agreement was entered into for the sole purpose of funding any
obligations beyond the $2.7 million amount that we already had accrued. The
escrow agreement gives us the right to have all or a portion of the escrow
account distributed to us from time to time if the aggregate amount that we
(together with any of our affiliates including Mepco) are required to pay to any
third parties as a result of the matters being investigated exceeds $2.7
million. At December 31, 2004 the escrow account contained 92,766 shares of
Independent Bank Corporation common stock (deposited by the primary former
shareholders of Mepco) having an aggregate market value at that date of
approximately $2.8 million. The escrow agreement contains provisions that
require the addition or distribution of shares of Independent Bank Corporation
common stock if the total market value of such stock in the escrow account falls
below $2.25 million or rises above $2.75 million. Consistent with these escrow
agreement provisions 2,000 shares of Independent Bank Corporation common stock
were released from the escrow account and returned to the former primary
shareholders of Mepco in January 2005. As a result of the aforementioned escrow
agreement as well as the $2.7 million accrual established in the second quarter
of 2004, we do not expect any future liabilities (other than certain
investigation costs incurred during the first quarter of 2005) related to the
Mepco investigation. The terms of the agreement under which we acquired Mepco,
obligates the former shareholders of Mepco to indemnify us for existing and

A-39

resulting damages and liabilities from pre-acquisition activities at Mepco.
Accordingly, to the extent that we actually incur any damages or liabilities
resulting from these pre-acquisition activities, we believe that we have
reasonable grounds to claim and collect full reimbursement. However, there can
be no assurance that we will successfully prevail with respect to any of these
potential idemnification claims.

NOTE 12 - EARNINGS PER SHARE

A reconciliation of basic and diluted earnings per share for the years
ended December 31 follows:

2004 2003 2002
------- ------- -------
(in thousands, except per
share amounts)

Net income .................................. $38,558 $37,592 $29,467
======= ======= =======
Shares outstanding(1) ....................... 20,462 19,588 20,089
Effect of stock options................... 392 424 385
Stock units for deferred compensation plan
for non-employee directors ............ 46 47 42
------- ------- -------
Shares outstanding for calculation of
diluted earnings per share(1) ......... 20,900 20,059 20,516
======= ======= =======
Net income per share
Basic .................................... $ 1.88 $ 1.92 $ 1.47
======= ======= =======
Diluted .................................. $ 1.84 $ 1.87 $ 1.44
======= ======= =======

(1) Shares outstanding have been adjusted for a 10% stock dividend in 2003 and
a 5% stock dividend and three-for-two stock split in 2002.

NOTE 13 - INCOME TAX

The composition of income tax expense for the years ended December 31
follows:

2004 2003 2002
------- ------- -------
(in thousands)

Current ................. $11,611 $ 9,299 $10,422
Deferred ................ 2,185 4,428 974
------- ------- -------
Income tax expense ... $13,796 $13,727 $11,396
======= ======= =======

A reconciliation of income tax expense to the amount computed by applying
the statutory federal income tax rate of 35% in each year presented to income
before income tax for the years ended December 31 follows:

2004 2003 2002
------- ------- -------
(in thousands)

Statutory rate applied to income
before income tax ................ $18,324 $17,962 $14,302
Tax-exempt interest income .......... (3,732) (3,358) (2,848)
Bank owned life insurance ........... (520) (501) (141)
Dividends paid to Employee Savings
and Stock Ownership Plan ......... (262) (188)
Other, net .......................... (14) (188) 83
------- ------- -------
Income tax expense ............... $13,796 $13,727 $11,396
======= ======= =======

A-40

The deferred income tax expense of $2.2 million, $4.4 million and $1.0
million in 2004, 2003 and 2002, respectively can be attributed to tax effects of
temporary differences. The tax benefit related to the exercise of stock options
recorded in shareholders' equity was $1.5 million, $1.1 million and $0.9 million
during 2004, 2003 and 2002, respectively. The tax effects of temporary
differences that give rise to significant portions of the deferred tax assets
and deferred tax liabilities at December 31 follow:

2004 2003
------- -------
(in thousands)

Deferred tax assets
Allowance for loan losses ................................. $ 8,931 $ 6,264
Net operating loss carryforward ........................... 6,815 7,194
Mepco claims expense ...................................... 1,142
Severance payable ......................................... 970
Deferred compensation ..................................... 927 634
Other than temporary impairment charge on securities
available for sale ..................................... 580
Deferred insurance premiums ............................... 268 520
Loans held for sale ....................................... 208 171
Deferred loan fees ........................................ 180 170
Unrealized loss on derivative financial instruments ....... 1,614
Fixed assets .............................................. 545
Other ..................................................... 129 385
------- -------
Gross deferred tax assets .............................. 20,150 17,497
Deferred tax liabilities
Unrealized gain on securities available for sale .......... 4,111 4,875
Mortgage servicing rights ................................. 3,976 3,105
Purchase premiums, net .................................... 2,440 491
Fixed assets .............................................. 560
Unrealized gain on derivative financial instruments ....... 360
------- -------
Gross deferred tax liabilities ......................... 11,447 8,471
------- -------
Net deferred tax assets ............................. $ 8,703 $ 9,026
======= =======

At December 31, 2004, the Company had a net operating loss ("NOL")
carryforward of approximately $19.5 million which, if not used against taxable
income, will expire as follows:

(in thousands)
--------------

2008 ........................... $ 5,849
2009 ........................... 81
2010 ........................... 6,779
2011 ........................... 929
2012 ........................... 411
2013 ........................... 3,437
2014 ........................... 189
2019 ........................... 1,437
2020 ........................... 359
-------
Total ....................... $19,471
=======

The use of the $19.5 million NOL carryforward, which was acquired through
the acquisitions of Mutual Savings Bank, f.s.b. and North, is limited to $3.3
million per year as the result of a change in control as defined in the Internal
Revenue Code.

We believe that a valuation reserve is not necessary for any of the
deferred tax assets since it is more likely than not that these assets will be
realized principally through carry back to taxable income in prior years, future
reversals of existing taxable temporary differences and to future taxable
income. Our conclusion that it is "more likely than not" that the deferred tax
assets will be realized is based on federal taxable income in excess of $90
million in the carry-back period as well as a history of growth in earnings and
the prospects for continued earnings growth.

NOTE 14 - EMPLOYEE BENEFIT PLANS

We maintain stock option plans for our non-employee directors as well as
certain of our officers and those of our Banks or other subsidiaries. Options
that were granted under these plans were granted with vesting periods of up to
one year, at a price equal to the fair market value of the common stock on the
date of grant, and expire not more than ten years after the date of grant.

A-41

The per share weighted-average fair value of stock options was obtained
using the Black Scholes options pricing model. A summary of the assumptions used
and values obtained follows:

2004 2003 2002
------ ------ ------

Expected dividend yield .......................... 2.37% 2.53% 2.48%
Risk-free interest rate .......................... 4.26 4.04 5.11
Expected life (in years) ......................... 9.6 9.4 9.9
Expected volatility .............................. 32.53% 33.20% 35.91%
Per share weighted-average fair value ............ $10.56 $ 7.57 $ 6.87

The following table summarizes the impact on our net income had
compensation cost included the fair value of options at the grant date:

2004 2003 2002
------- ------- -------
(in thousands, except
per share amounts)

Net income - as reported ........................... $38,558 $37,592 $29,467
Stock based compensation expense determined under
fair value based method, net of
related tax effect ........................... (2,273) (1,355) (1,572)
------- ------- -------
Pro-forma net income ............................ $36,285 $36,237 $27,895
======= ======= =======
Income per share
Basic
As reported ..................................... $ 1.88 $ 1.92 $ 1.47
Pro-forma ....................................... 1.77 1.85 1.39
Diluted
As reported ..................................... $ 1.84 $ 1.87 $ 1.44
Pro-forma ....................................... 1.74 1.81 1.36

A summary of outstanding stock option grants and transactions follows:

Number Average
of Exercise
Shares Price
--------- --------

Outstanding at December 31, 2001 ....... 1,218,188 $ 9.38
Granted ............................. 376,624 16.77
Exercised ........................... (384,981) 8.96
--------- ------
Outstanding at December 31, 2002 ....... 1,209,831 11.82
Granted ............................. 306,136 21.06
Exercised ........................... (384,344) 11.75
Forfeited ........................... (10,992) 18.13
--------- ------
Outstanding at December 31, 2003 ....... 1,120,631 14.30
Granted ............................. 391,854 22.28
Exercised ........................... (340,364) 11.73
Forfeited ........................... (2,500) 26.12
--------- ------
Outstanding at December 31, 2004 ....... 1,169,621 $17.69
========= ======

A summary of stock options outstanding at December 31, 2004 follows:

Options Outstanding Options Exercisable
----------------------------------- -----------------------------------
Weighted-Average Weighted-Average
Number ----------------------- Number -----------------------
of Remaining Exercise of Remaining Exercise
Range of Exercise Prices Shares Life (years) Price Shares Life (years) Price
------------------------ --------- ------------ -------- --------- ------------ --------

$3.52 to $8.26 .......... 153,859 4.92 $ 6.79 153,859 4.92 $ 6.79
$8.88 to $13.12 ......... 216,446 6.03 10.79 216,446 6.03 10.79
$13.19 to $17.03 ........ 271,318 7.26 16.50 271,318 7.26 16.50
$17.26 to $19.22 ........ 122,247 8.12 19.09 122,247 8.12 19.09
$19.30 to $30.40 ........ 405,751 8.25 25.89 336,587 8.42 25.86
--------- ---- ------ --------- ---- ------
1,169,621 7.16 $17.69 1,100,457 7.14 $17.17
========= ==== ====== ========= ==== ======

We maintain 401(k) and employee stock ownership plans covering
substantially all of our full-time employees. We match employee contributions to
the 401(k) up to a maximum of 3% of participating employees' eligible wages.
Contributions to the employee stock ownership plan are determined annually and
require approval of our Board of Directors. The maximum

A-42

contribution is 6% of employees' eligible wages. During 2004, 2003 and 2002,
$1.5 million, $2.8 million and $2.4 million respectively, and was expensed for
these retirement plans.

Our officers participate in various performance-based compensation plans.
Amounts expensed for all incentive plans totaled $2.2 million, $3.2 million, and
$2.6 million, in 2004, 2003 and 2002, respectively.

We also provide certain health care and life insurance programs to
substantially all full-time employees. Amounts expensed for these programs
totaled $4.2 million, $3.5 million and $2.8 million, in 2004, 2003 and 2002,
respectively. These insurance programs are also available to retired employees
at their expense.

NOTE 15 - DERIVATIVE FINANCIAL INSTRUMENTS

Our derivative financial instruments according to the type of hedge in
which they are designated at December 31 follow:

2004
Average
Notional Maturity Fair
Amount (years) Value
-------- -------- ------
(dollars in thousands)

Fair Value Hedge - pay variable interest-rate swap agreements ... $193,159 3.4 $ (341)
======== === ======

Cash Flow Hedge - pay-fixed interest-rate swap agreements ....... $369,500 1.4 $1,339
======== === ======

No hedge designation
Pay-fixed interest-rate swap agreements ...................... $ 15,000 .8 $ 86
Pay-variable interest-rate swap agreements ................... 25,000 .6 (68)
Rate-lock real estate mortgage loan commitments .............. 17,465 .1 92
Mandatory commitments to sell real estate mortgage loans ..... 54,438 .1 (60)
======== === ======
Total ..................................................... $111,903 0.3 $ 50
======== === ======

2003
Average
Notional Maturity Fair
Amount (years) Value
-------- -------- -------
(dollars in thousands)

Fair Value Hedge - pay variable interest-rate swap agreements ... $ 81,159 4.5 $ 141
======== === =======

Cash Flow Hedge - pay-fixed interest-rate swap agreements ....... $343,500 1.5 $(4,180)
======== === =======

No hedge designation
Pay-fixed interest-rate swap agreements ...................... $ 30,000 1.0 $ (83)
Rate-lock real estate mortgage loan commitments .............. 15,400 .1 194
Mandatory commitments to sell real estate mortgage loans ..... 46,200 .1 (140)
-------- --- -------
Total ..................................................... $ 91,600 .4 $ (29)
======== === =======

Our Banks have established management objectives and strategies that
include interest-rate risk parameters for maximum fluctuations in net interest
income and market value of portfolio equity. We monitor our Bank's interest rate
risk position via simulation modeling reports. The goal of our Banks'
asset/liability management efforts is to maintain profitable financial leverage
within established risk parameters.

Our Banks use variable-rate and short-term fixed-rate (less than 12 months)
debt obligations to fund a portion of their balance sheets, which expose our
Banks to variability in interest rates. To meet their objectives, our Banks may
periodically enter into derivative financial instruments to mitigate exposure to
fluctuations in cash flows resulting from changes in interest rates. Cash Flow
Hedges currently include certain pay-fixed interest-rate swaps.

Pay-fixed interest-rate swaps convert the variable-rate cash flows on debt
obligations to fixed-rates. Under interest-rate collars, our Banks will receive
cash if interest rates rise above a predetermined level while our Banks will
make cash payments if interest rates fall below a predetermined level. As a
result, our Banks effectively have variable-rate debt with an established
maximum and minimum rate.

Our Banks also use long-term, fixed-rate brokered CDs to fund a portion of
their balance sheets. These instruments expose our Banks to variability in fair
value due to changes in interest rates. To meet their objectives, our Banks may
enter into derivative financial instruments to mitigate exposure to fluctuations
in fair values of such fixed-rate debt instruments. Fair Value Hedges currently
include pay-variable interest-rate swaps.

A-43

Certain financial derivative instruments have not been designated as
hedges. The fair value of these derivative financial instruments have been
recorded on our balance sheet and are adjusted on an ongoing basis to reflect
their then current fair value. The changes in fair value of derivative financial
instruments not designated as hedges, are recognized in earnings.

In the ordinary course of business, our Banks enter into rate-lock real
estate mortgage loan commitments with customers ("Rate Lock Commitments"). These
commitments expose our Banks to interest rate risk. Our Banks also enter into
mandatory commitments to sell real estate mortgage loans ("Mandatory
Commitments") to reduce the impact of price fluctuations of mortgage loans held
for sale and Rate Lock Commitments. Mandatory Commitments help protect our
Bank's loan sale profit margin from fluctuations in interest rates. The changes
in the fair value of Rate Lock Commitments and Mandatory Commitments are
recognized currently as part of gains on the sale of real estate mortgage loans.
We obtain market prices from an outside third party on Mandatory Commitments and
Rate Lock Commitments. Net gains on the sale of real estate mortgage loans, as
well as net income may be more volatile as a result of these derivative
instruments, which are not designated as hedges.

The impact of SFAS #133 on net income and other comprehensive income is as
follows:

Other
Comprehensive
Net Income Income Total
---------- -------------- -------
(in thousands)

Change in fair value during the year ended December 31, 2004
Interest rate swap agreements not designated as hedges ...... $ 101 $ 101
Rate-lock real estate mortgage loan commitments ............. (102) (102)
Mandatory commitments to sell real estate mortgage loans .... 80 80
Ineffectiveness of cash flow hedges ......................... 16 16
Cash flow hedges ............................................ $ 704 704
Reclassification adjustment ................................. 4,815 4,815
------- ------- -------
Total .................................................... 95 5,519 5,614
Federal income tax .......................................... 33 1,932 1,965
------- ------- -------
Total, net of federal income tax ......................... $ 62 $ 3,587 $ 3,649
======= ======= =======
Change in fair value during the year ended December 31, 2003
Interest rate swap agreements not designated as hedges ...... $ (83) $ (83)
Rate-lock real estate mortgage loan commitments ............. (310) (310)
Mandatory commitments to sell real estate mortgage loans .... 1,352 1,352
Ineffectiveness of cash flow hedges ......................... (33) (33)
Cash flow hedges ............................................ (24) $(3,178) (3,202)
Reclassification adjustment ................................. 6,920 6,920
------- ------- -------
Total .................................................... 902 3,742 4,644
Federal income tax .......................................... 316 1,310 1,626
------- ------- -------
Total, net of federal income tax ......................... $ 586 $ 2,432 $ 3,018
======= ======= =======
Change in fair value during the year ended December 31, 2002
Interest rate swap agreements not designated as hedges ...... $ 848 $ 848
Rate-lock real estate mortgage loan commitments ............. 2,129 2,129
Mandatory commitments to sell real estate mortgage loans .... (4,045) (4,045)
Fair value hedges ........................................... 22 22
Ineffectiveness of cash flow hedges ......................... 72 72
Cash flow hedges ............................................ 43 $(8,182) (8,139)
Reclassification adjustment ................................. 6,807 6,807
------- ------- -------
Total .................................................... (931) (1,375) (2,306)
Federal income tax .......................................... (326) (481) (807)
------- ------- -------
Total, net of federal income tax ......................... $ (605) $ (894) $(1,499)
======= ======= =======

A-44

NOTE 16 - RELATED PARTY TRANSACTIONS

Certain of our directors and executive officers, including companies in
which they are officers or have significant ownership, were loan and deposit
customers of the Banks during 2004 and 2003.

A summary of loans to directors and executive officers whose borrowing
relationship exceeds $60,000, and to entities in which they own a 10% or more
voting interest for the years ended December 31 follows:

2004 2003
-------- --------
(in thousands)

Balance at beginning of year ... $ 26,759 $ 26,000
New loans and advances ...... 4,263 23,611
Repayments .................. (19,265) (22,852)
-------- --------
Balance at end of year ......... $ 11,757 $ 26,759
======== ========

Deposits held by us for directors and executive officers totaled $3.4
million and $4.9 million at December 31, 2004 and 2003, respectively.

All loans and commitments included in the table above were made in the
ordinary course of business on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with other persons and do not involve an unusual risk of
collectibility or present other unfavorable features.

NOTE 17 - OTHER NON-INTEREST EXPENSES

Other non-interest expenses for the years ended December 31 follow:

2004 2003 2002
------- ------- -------
(in thousands)

Data processing ..................... $ 4,462 $ 3,942 $ 3,209
Advertising ......................... 3,787 4,011 2,813
Loan and collection ................. 3,556 3,352 3,028
Communications ...................... 3,553 2,895 2,484
Legal and professional .............. 2,718 1,651 1,238
Mepco claims expense ................ 2,700
Amortization of intangible assets ... 2,479 1,721 1,014
Supplies ............................ 2,140 1,920 1,626
Other ............................... 9,531 7,398 5,383
------- ------- -------
Total non-interest expense ....... $34,926 $26,890 $20,795
======= ======= =======

NOTE 18 - LEASES

We have non-cancelable operating leases for office facilities that provide
for renewal options.

A summary of future minimum lease payments under non-cancelable operating
leases at December 31, 2004, follows:

(in thousands)
--------------

2005 ................. $1,309
2006 ................. 1,194
2007 ................. 1,065
2008 ................. 576
2009 ................. 359
2010 and thereafter...
------
Total ............. $4,503
======

Rental expense on operating leases totaled $1.1 million, $0.8 million and
$0.4 million in 2004, 2003 and 2002, respectively.

NOTE 19 - CONCENTRATIONS OF CREDIT RISK

Credit risk is the risk to earnings and capital arising from an obligor's
failure to meet the terms of any contract with our organization, or otherwise
fail to perform as agreed. Credit risk can occur outside of our traditional
lending activities and can exist in any activity where success depends on
counter-party, issuer or borrower performance. Concentrations of credit risk
(whether on- or off-balance sheet) arising from financial instruments can exist
in relation to individual borrowers or groups of borrowers, certain types of
collateral, certain types of industries or certain geographic regions. Credit
risk associated with these concentrations could arise when a significant amount
of loans or other financial instruments, related by similar characteristics, are
simultaneously impacted by changes in economic or other conditions that cause
their probability of repayment or other type of settlement to be adversely
affected. Our major concentrations of credit risk arise by collateral type in
relation to loans and commitments. The significant concentrations by collateral
type at December 31, 2004 include loans secured by residential real estate which
totaled

A-45

$806.2 million and construction and development loans which totaled $261.5
million. Additionally, within our commercial real estate and commercial loan
portfolio we had significant standard industry classification concentrations in
the following categories as of December 31, 2004: Operators of Nonresidential
Buildings; Operators of Apartment Buildings; Construction and General
Contractors; and Land Subdividers and Developers. A geographic concentration
arises because the Company primarily conducts its lending activities in the
State of Michigan.

NOTE 20 - REGULATORY MATTERS

Capital guidelines adopted by Federal and State regulatory agencies and
restrictions imposed by law limit the amount of cash dividends our Banks can pay
to us. At December 31, 2004, using the most restrictive of these conditions for
each Bank, the aggregate cash dividends that our Banks can pay us without prior
approval was $66.2 million. It is not our intent to have dividends paid in
amounts which would reduce the capital of our Banks to levels below those which
we consider prudent and in accordance with guidelines of regulatory authorities.

We are also subject to various regulatory capital requirements.
Quantitative measures established by regulation to ensure capital adequacy
require minimum amounts and ratios of total and Tier 1 capital to risk-weighted
assets and Tier 1 capital to average assets. Failure to meet minimum capital
requirements can initiate certain mandatory, and possibly discretionary, actions
by regulators that could have a material effect on our consolidated financial
statements. Under capital adequacy guidelines, we must meet specific capital
requirements that involve quantitative measures as well as qualitative judgments
by the regulators. The most recent notification from the FDIC categorized each
of our Banks as well capitalized. Management is not aware of any conditions or
events that would have changed the most recent FDIC categorization.

Our actual capital amounts and ratios at December 31, 2004 follow:

Actual Minimum Ratio Minimum Ratio
---------------- for Adequately for Well-Capitalized
Amount Ratio Capitalized Institutions Institutions
-------- ----- ------------------------ --------------------
(dollars in thousands)

2004
Total capital to risk-weighted assets
Consolidated .......................... $243,876 10.55% 8.00% 10.00%
Independent Bank ...................... 115,909 10.68 8.00 10.00
Independent Bank West Michigan ........ 41,440 10.48 8.00 10.00
Independent Bank South Michigan ....... 32,365 10.69 8.00 10.00
Independent Bank East Michigan ........ 55,000 10.67 8.00 10.00

Tier 1 capital to risk-weighted assets
Consolidated .......................... $217,280 9.40% 4.00% 6.00%
Independent Bank ...................... 102,850 9.48 4.00 6.00
Independent Bank West Michigan ........ 36,824 9.31 4.00 6.00
Independent Bank South Michigan ....... 29,719 9.82 4.00 6.00
Independent Bank East Michigan ........ 48,680 9.44 4.00 6.00

Tier 1 capital to average assets
Consolidated .......................... $217,280 7.36% 4.00% 5.00%
Independent Bank ...................... 102,850 7.41 4.00 5.00
Independent Bank West Michigan ........ 36,824 7.44 4.00 5.00
Independent Bank South Michigan ....... 29,719 7.11 4.00 5.00
Independent Bank East Michigan ........ 48,680 7.65 4.00 5.00

A-46

2003
Total capital to risk-weighted assets
Consolidated .......................... $199,823 11.57% 8.00% 10.00%
Independent Bank ...................... 93,029 10.76 8.00 10.00
Independent Bank West Michigan ........ 38,566 10.83 8.00 10.00
Independent Bank South Michigan ....... 27,351 10.78 8.00 10.00
Independent Bank East Michigan ........ 26,529 10.81 8.00 10.00

Tier 1 capital to risk-weighted assets
Consolidated .......................... $182,145 10.55% 4.00% 6.00%
Independent Bank ...................... 84,592 9.78 4.00 6.00
Independent Bank West Michigan ........ 34,152 9.59 4.00 6.00
Independent Bank South Michigan ....... 24,859 9.80 4.00 6.00
Independent Bank East Michigan ........ 24,080 9.81 4.00 6.00

Tier 1 capital to average assets
Consolidated .......................... $182,145 7.91% 4.00% 5.00%
Independent Bank ...................... 84,592 7.46 4.00 5.00
Independent Bank West Michigan ........ 34,152 7.42 4.00 5.00
Independent Bank South Michigan ....... 24,859 7.06 4.00 5.00
Independent Bank East Michigan ........ 24,080 6.85 4.00 5.00

NOTE 21 - FAIR VALUES OF FINANCIAL INSTRUMENTS

Most of our assets and liabilities are considered financial instruments.
Many of these financial instruments lack an available trading market and it is
our general practice and intent to hold the majority of our financial
instruments to maturity. Significant estimates and assumptions were used to
determine the fair value of financial instruments. These estimates are
subjective in nature, involving uncertainties and matters of judgment, and
therefore, fair values cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.

Estimated fair values have been determined using available data and
methodologies that are considered suitable for each category of financial
instrument. For instruments with adjustable-interest rates which reprice
frequently and without significant credit risk, it is presumed that estimated
fair values approximate the recorded book balances.

Financial instrument assets actively traded in a secondary market, such as
securities, have been valued using quoted market prices while recorded book
balances have been used for cash and due from banks and accrued interest.

The fair value of loans is calculated by discounting estimated future cash
flows using estimated market discount rates that reflect credit and
interest-rate risk inherent in the loans.

We have purchased a "stable value wrap" for our bank owned life insurance
that permits a surrender of this investment at the greater of its fair market or
book value.

Financial instrument liabilities with a stated maturity, such as
certificates of deposit, have been valued based on the discounted value of
contractual cash flows using a discount rate approximating current market rates
for liabilities with a similar maturity.

Capitalized mortgage servicing rights have been valued based upon a
valuation performed by an independent third party.

Derivative financial instruments have principally been valued based on
discounted value of contractual cash flows using a discount rate approximating
current market rates.

Financial instrument liabilities without a stated maturity, such as demand
deposits, savings, NOW and money market accounts, have a fair value equal to the
amount payable on demand.

A-47

The estimated fair values and recorded book balances at December 31 follow:

2004 2003
----------------------- -----------------------
Estimated Recorded Estimated Recorded
Fair Book Fair Book
Value Balance Value Balance
---------- ---------- ---------- ----------
(in thousands)

Assets
Cash and due from banks ................. $ 72,800 $ 72,800 $ 61,700 $ 61,700
Securities available for sale ........... 550,900 550,900 454,000 454,000
Net loans and loans held for sale ....... 2,223,900 2,239,300 1,690,700 1,683,200
Bank owned life insurance ............... 38,300 38,300 36,900 36,900
Accrued interest receivable ............. 12,600 12,600 11,100 11,100
Capitalized mortgage servicing rights ... 12,800 11,400 10,100 8,900
Derivative financial instruments ........ 1,000 1,000

Liabilities
Deposits with no stated maturity ........ $1,136,800 $1,136,800 $ 893,300 $ 893,300
Deposits with stated maturity ........... 1,038,100 1,040,200 816,100 809,500
Other borrowings ........................ 595,800 587,100 449,500 436,300
Accrued interest payable ................ 5,800 5,800 4,100 4,100
Derivative financial instruments ........ 4,100 4,100

The fair values for commitments to extend credit and standby letters of
credit are estimated to approximate their aggregate book balance.

Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
These estimates do not reflect any premium or discount that could result from
offering for sale the entire holdings of a particular financial instrument.

Fair value estimates are based on existing on- and off-balance sheet
financial instruments without attempting to estimate the value of anticipated
future business, the value of future earnings attributable to off-balance sheet
activities and the value of assets and liabilities that are not considered
financial instruments.

Fair value estimates for deposit accounts do not include the value of the
substantial core deposit intangible asset resulting from the low-cost funding
provided by the deposit liabilities compared to the cost of borrowing funds in
the market.

NOTE 22 - OPERATING SEGMENTS

Our reportable segments are based upon legal entities. We have five
reportable segments: Independent Bank ("IB"), Independent Bank West Michigan
("IBWM"), Independent Bank South Michigan ("IBSM"), Independent Bank East
Michigan ("IBEM") and Mepco Insurance Premium Financing, Inc. ("Mepco"). The
accounting policies of the segments are the same as those described in Note 1 to
the Consolidated Financial Statements. We evaluate performance based principally
on net income of the respective reportable segments. Certain operational and
administrative functions have been consolidated at the parent company and the
costs of these functions are allocated to each segment.

A-48

A summary of selected financial information for our reportable segments follows:

IB IBWM IBSM IBEM Mepco Other(1) Elimination Total
---------- -------- --------- -------- -------- --------- ----------- -----------
(in thousands)

2004
Total assets ................ $1,183,924 $507,574 $433,573 $674,799 $282,680 $321,436 $309,959 $3,094,027
Interest income ............. 63,317 28,539 20,780 29,063 20,856 61 69 162,547
Net interest income ......... 45,223 22,568 14,500 22,685 17,496 (4,939) 117,533
Provision for loan losses ... 2,095 681 466 644 423 4,309
Income (loss) before
income tax ............... 24,085 14,751 8,858 9,515 3,045 (7,279) 621 52,354
Net income (loss) ........... 17,816 10,480 6,567 7,232 1,999 (4,915) 621 38,558

2003
Total assets ................ $1,008,409 $464,927 $360,059 $352,933 $164,707 $224,858 $214,879 $2,361,014
Interest income ............. 60,821 28,508 18,473 20,073 11,534 35 78 139,366
Net interest income ......... 40,762 21,081 12,454 14,339 10,474 (3,857) 95,253
Provision for loan losses ... 2,060 1,056 (118) 630 404 4,032
Income (loss) before
income tax ............... 23,317 15,249 7,857 6,196 3,942 (4,311) 931 51,319
Net income (loss) ........... 17,212 10,681 5,816 5,076 2,412 (2,674) 931 37,592

2002
Total assets ................ $ 965,653 $427,578 $322,118 $342,069 $176,548 $174,991 $2,058,975
Interest income ............. 61,450 27,678 19,622 21,112 29 76 129,815
Net interest income ......... 37,698 19,682 12,511 13,754 (1,838) 81,807
Provision for loan losses ... 1,657 890 390 625 3,562
Income (loss) before
income tax ............... 19,970 11,716 6,697 5,615 (2,432) 703 40,863
Net income (loss) ........... 14,628 8,125 4,849 4,539 (1,971) 703 29,467

(1) Includes amounts relating to our parent company and certain insignificant
operations.

NOTE 23 - INDEPENDENT BANK CORPORATION (PARENT COMPANY ONLY) FINANCIAL
INFORMATION

Presented below are condensed financial statements for our parent company.

CONDENSED STATEMENTS OF FINANCIAL CONDITION

December 31,
-------------------
2004 2003
-------- --------
(in thousands)

ASSETS
Cash and due from banks ............................... $ 12,688 $ 10,894
Investment in subsidiaries ............................ 295,585 200,070
Other assets .......................................... 11,450 9,900
-------- --------
Total Assets ....................................... $319,723 $220,864
======== ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable ......................................... $ 9,000
Subordinated debentures ............................... 64,947 $ 52,165
Other liabilities ..................................... 15,484 6,483
Shareholders' equity .................................. 230,292 162,216
-------- --------
Total Liabilities and Shareholders' Equity ......... $319,723 $220,864
======== ========

A-49

CONDENSED STATEMENTS OF OPERATIONS

Year ended December 31,
----------------------------
2004 2003 2002
------- ------- -------
(in thousands)

OPERATING INCOME
Dividends from subsidiaries ........................................... $26,350 $26,775 $26,450
Management fees from subsidiaries and other income .................... 20,246 19,252 17,708
------- ------- -------
Total Operating Income ............................................. 46,596 46,027 44,158
------- ------- -------

OPERATING EXPENSES
Interest expense ...................................................... 5,000 3,892 1,867
Administrative and other expenses ..................................... 23,467 21,084 19,340
------- ------- -------
Total Operating Expenses ........................................... 28,467 24,976 21,207
------- ------- -------
Income Before Income Tax and Undistributed Net Income
of Subsidiaries ................................................. 18,129 21,051 22,951
Income tax credit ..................................................... 2,685 2,119 825
------- ------- -------
Income Before Equity in Undistributed Net Income of Subsidiaries ... 20,814 23,170 23,776
Equity in undistibuted net income of subsidiaries ..................... 17,744 14,422 5,691
------- ------- -------
Net Income ................................................... $38,558 $37,592 $29,467
======= ======= =======

CONDENSED STATEMENTS OF CASH FLOWS

Year Ended December 31,
------------------------------
2004 2003 2002
-------- -------- --------
(in thousands)

Net Income ..................................................... $ 38,558 $ 37,592 $ 29,467
-------- -------- --------
ADJUSTMENTS TO RECONCILE NET INCOME
TO NET CASH FROM OPERATING ACTIVITIES
Depreciation, amortization of intangible assets and premiums,
and accretion of discounts on securities and loans ....... 1,238 1,191 1,087
Gain on sale of securities .................................. (146)
Increase in other assets .................................... (457) (1,093) (886)
Increase in other liabilities ............................... 2,930 1,925 1,388
Equity in undistributed net income of subsidiaries .......... (17,744) (14,422) (5,691)
-------- -------- --------
Total Adjustments ........................................ (14,033) (12,399) (4,248)
-------- -------- --------
Net Cash from Operating Activities ....................... 24,525 25,193 25,219
-------- -------- --------

CASH FLOW USED IN INVESTING ACTIVITIES
Proceeds from the sale of securities available for sale ..... 206
Investment in subsidiaries .................................. (16,889) (15,610) (1,824)
Capital expenditures ........................................ (2,315) (799) (1,833)
-------- -------- --------
Net Cash Used in Investing Activities .................... (19,204) (16,409) (3,451)
-------- -------- --------

CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings ......................... 2,100
Proceeds from long-term debt ................................ 10,000
Repayment of long-term debt ................................. (1,000)
Repayment of other borrowings ............................... (12,600)
Proceeds from issuance of subordinated debentures net of cash
paid for common securities ............................... 48,712
Redemption of subordinated debentures net of cash receipt
for common securities .................................... (17,250)
Dividends paid .............................................. (12,500) (11,040) (8,406)
Repurchase of common stock .................................. (2,002) (12,578) (23,191)
Proceeds from issuance of common stock ...................... 1,975 1,738 2,565
-------- -------- --------
Net Cash Used in Financing Activities .................... (3,527) (3,018) (26,932)
-------- -------- --------
Net Increase (Decrease) in Cash and Cash Equivalents ..... 1,794 5,766 (5,164)
Cash and Cash Equivalents at Beginning of Year ................. 10,894 5,128 10,292
-------- -------- --------
Cash and Cash Equivalents at End of Year .............. $ 12,688 $ 10,894 $ 5,128
======== ======== ========

A-50

QUARTERLY FINANCIAL DATA (UNAUDITED)

A summary of selected quarterly results of operations for the years ended
December 31 follows:

Three Months Ended
----------------------------------------
March June September December
31, 30, 30, 31,
------- ------- --------- --------
(in thousands, except per share amounts)

2004
Interest income .................... $35,615 $37,732 $43,469 $45,731
Net interest income ................ 25,375 27,748 31,456 32,954
Provision for loan losses .......... 801 709 2,456 343
Income before income tax expense ... 11,353 12,080 14,313 14,608
Net income ......................... 8,443 8,983 10,318 10,814

Income per share
Basic ........................... $ .43 $ .45 $ .49 $ .51
Diluted ......................... .42 .44 .48 .50

2003
Interest income .................... $31,620 $35,458 $35,971 $36,317
Net interest income ................ 20,807 23,467 25,259 25,720
Provision for loan losses .......... 1,000 785 606 1,641
Income before income tax expense ... 12,167 12,521 14,210 12,421
Net income ......................... 8,817 9,131 10,320 9,324

Income per share
Basic ........................... $ .45 $ .46 $ .53 $ .48
Diluted ......................... .44 .45 .51 .47

During the fourth quarter of 2004 we recognized $2.3 million of severance
costs as a result of the termination of the employment contracts of certain
Mepco officers in December 2004. These costs are included in compensation and
benefits in the consolidated statements of operations.

QUARTERLY SUMMARY

Reported Sale Prices of Common Shares
--------------------------------------------------- Cash Dividends
2004 2003 Declared
------------------------ ------------------------ --------------
High Low Close High Low Close 2004 2003
------ ------ ------ ------ ------ ------ ---- ----

First quarter .... $29.50 $26.55 $27.86 $19.55 $17.41 $18.27 $.16 $.13
Second quarter ... 28.37 23.77 25.40 25.00 17.96 23.36 .16 .15
Third quarter .... 27.09 24.41 27.00 27.95 22.96 26.62 .17 .16
Fourth quarter ... 30.85 25.82 29.83 31.00 26.61 28.36 .17 .16

We have approximately 2,700 holders of record of our common stock. Our
common stock trades on the Nasdaq National Market System under the symbol
"IBCP." The prices shown above are supplied by Nasdaq and reflect the
inter-dealer prices and may not include retail markups, markdowns or
commissions. There may have been transactions or quotations at higher or lower
prices of which the Company is not aware.

In addition to the provisions of the Michigan Business Corporation Act, our
ability to pay dividends is limited by our ability to obtain funds from our
Banks and by regulatory capital guidelines applicable to us. (See Note #20 to
the Consolidated Financial Statements.)

A-51

SHAREHOLDER INFORMATION

HOW TO ORDER FORM 10-K

Shareholders may obtain, without charge, a copy of Form 10-K, the 2004
Annual Report to the Securities and Exchange Commission, through our website at
www.ibcp.com or by writing to the Chief Financial Officer, Independent Bank
Corporation, P.O. Box 491, Ionia, Michigan 48846 or by e-mail at info@ibcp.com.

PRESS RELEASES

Our press releases, including earnings and dividend announcements as well
as other financial information, are available on our website at www.ibcp.com.

NOTICE OF ANNUAL MEETING

Our Annual Meeting of Shareholders will be held at 3:00 p.m. on April 26,
2005, in the Ionia Theater located at 205 West Main Street, Ionia, Michigan,
48846.

TRANSFER AGENT AND REGISTRAR

EquiServe, P.O. Box 43010, Providence, RI 02940-3011, 800/426-5523,
www.equiserve.com, serves as transfer agent and registrar of our common stock.

DIVIDEND REINVESTMENT

We maintain an Automatic Dividend Reinvestment and Stock Purchase Plan
which provides an opportunity for shareholders of record to reinvest cash
dividends into our common stock. Optional cash purchases up to $10,000 per
quarter are also permitted. A prospectus is available by writing to our Chief
Financial Officer.

EXECUTIVE OFFICERS AND DIRECTORS

EXECUTIVE OFFICERS

Charles C. Van Loan, Chairman of the Board, Independent Bank Corporation

Michael M. Magee, Jr., President and Chief Executive Officer, Independent
Bank Corporation

William B. Kessel, President and Chief Executive Officer, Independent Bank

Ronald L. Long, President and Chief Executive Officer, Independent Bank
East Michigan

David C. Reglin, President and Chief Executive Officer, Independent Bank
West Michigan

Edward B. Swanson, President and Chief Executive Officer, Independent Bank
South Michigan

Robert N. Shuster, Executive Vice President and Chief Financial Officer,
Independent Bank Corporation

Richard E. Butler, Senior Vice President, Independent Bank Corporation
Peter R. Graves, Senior Vice President, Independent Bank Corporation

James J. Twarozynski, Senior Vice President and Controller, Independent
Bank Corporation

DIRECTORS

Jeffrey A. Bratsburg, Retired, former President and Chief Executive
Officer, Independent Bank West Michigan

Stephen L. Gulis, Jr., Excutive Vice President and Chief Financial Officer,
Wolverine World Wide, Inc., Rockford

Terry L. Haske, President, Ricker & Haske, C.P.A.s, P.C., Marlette

Robert L. Hetzler, Retired, former President, Monitor Sugar Company, Food
Processor, Bay City

Michael M. Magee, Jr., President and Chief Executive Officer, Independent
Bank Corporation

James E. McCarty, President, McCarty Communications, Graphic Design and
Commercial Printing, Saranac

Charles A. Palmer, Professor of Law, Thomas M. Cooley Law School, Lansing

Charles C. Van Loan, Chairman of the Board, Independent Bank Corporation,
Ionia

A-52

INDEPENDENT BANK CORPORATION
P.O. Box 491, 230 West Main Street
Ionia, Michigan 48846
616-527-9450

INDEPENDENT BANK CORPORATION

Dear Shareholder,

Please take note of the important information enclosed with this Proxy. Your
vote counts, and you are strongly encouraged to exercise your right to vote your
shares.

Mark the boxes on this proxy card to indicate how your shares will be voted.
Then sign the card, detach it and return your proxy vote in the enclosed postage
paid envelope. If you wish to register your vote by touch-tone telephone or the
Internet see the reverse side for instructions.

Your vote must be received prior to the Annual Meeting of Shareholders to be
held April 26, 2005.

Thank you in advance for your prompt consideration of these matters.

Sincerely,

The Board of Directors
INDEPENDENT BANK CORPORATION

DETACH HERE ZIBC62

INDEPENDENT BANK CORPORATION

230 WEST MAIN STREET, IONIA, MICHIGAN

PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 26, 2005

The undersigned hereby appoints Charles C. Van loan and Robert N. Shuster and
each of them, Proxies, with power of substitution, to vote all shares of common
stock of Independent Bank Corporation, which the undersigned is entitled to vote
at the Annual Meeting of Shareholders to be held at the Ionia Theater, located
at 205 West Main Street, Ionia, Michigan 48846 on Tuesday, April 26, 2005 at
3:00 p.m. (local time), and at all adjournments thereof, as directed on the
reverse side.

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" THE NOMINEES AS DIRECTORS AND FOR PROPOSAL 2.

PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.

Please sign this Proxy exactly as your name(s) appear(s) hereon. Joint owners
should each sign personally. Trustees and other fiduciaries should indicate the
capacity in which they sign, and where more than one name appears, a majority
must sign. If a corporation, this signature should be that of an authorized
officer who should state his or her title.

HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?

---------------------------------------- -------------------------------------

(INDEPENDENT BANK CORPORATION LOGO)

P.O. BOX 491
IONIA, MI 48846

YOUR VOTE IS IMPORTANT. PLEASE VOTE IMMEDIATELY.

VOTE-BY-INTERNET (COMPUTER GRAPHIC) VOTE-BY-TELEPHONE (TELEPHONE GRAPHIC)
LOG ON TO THE INTERNET AND GO TO OR CALL TOLL-FREE
HTTP://WWW.EPROXYVOTE.COM/IBCP 1-877-PRX-VOTE (1-877-779-8683)

IF YOU VOTE OVER THE INTERNET OR BY TELEPHONE, PLEASE DO NOT MAIL YOUR CARD.

DETACH HERE IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL ZIBC61

3567

[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE.

INDEPENDENT BANK CORPORATION

FOR AGAINST ABSTAIN
1. Election of Directors. 2. To consider and vote upon a [ ] [ ] [ ]
proposal to amend our Long-Term
NOMINEE FOR ONE-YEAR TERM EXPIRING IN 2006: Incentive Plan to make an
(01) Michael M. Magee, Jr. additional 750,000 shares of
NOMINEES FOR THREE-YEAR TERMS EXPIRING IN 2008: our common stock available for
(02) Stephen L. Gulis, Jr., (03) Terry L. Haske, issuance under that plan.
(04) Charles A. Palmer
3. To transact such other business that may properly
FOR WITHHELD come before the meeting or any adjournments thereof.
ALL [ ] [ ] FROM ALL
NOMINEES NOMINEES

[ ]
--------------------------------------
For all nominees except as noted above

Mark box at right if an address change or comment has [ ]
been noted on the reverse side of this card.

PLEASE BE SURE TO SIGN AND DATE THIS PROXY.

Signature: Date: Signature: Date:
-------------------- ----------- -------------------- -----------