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    Independent Bank Coporation (MI)($IBCP) Crosses $1Mark

    Independent Bank Corporation (MI) ($IBCP) Crosses $1 Mark

    Independent Bank Corporation (MI) (NASDAQ: IBCP), a bank holding company is based in Ionia, Michigan, crossed the $1 mark today’s trading, surging nearly 70% in mid-day trading to reaching a high of $1.95.

    Today’s surge comes on the back of an 8K filing by the bank on Wednesday. According to the filing, the bank entered into an exchange agreement with the U.S. Treasury Department on April 2, 2010. Following this, the bank closed the transaction mentioned in the exchange agreement with the Treasury on April 16. The bank issued to the Treasury 74,426 shares of the newly issued Series B Fixed Rate Cumulative Mandatorily Convertible Preferred Stock. It also issued an Amended and Restated Warrant to purchase 3,461,538 shares of the bank’s Common Stock at an exercise price of $0.7234 per share. According to the terms of the agreement, the Treasury can convert the Series B Preferred Stock into Common Stock at any time.

    The bank’s NPA’s stand at 7.06%, compared with a peer average of 3.98%. Net charge-offs at 3.22% of average loans is also higher than per average. The loan/deposit ratio for the bank stands at 89.62%. Tier capital at 7.11% is also lower than the peer average of 11.66%. In its 10K filing, the bank says that it has put forth a Capital Plan under which it intends to raise capital by issuing a significant number of common shares. This will lead to dilution for current shareholders. The filing also mentions another point. Supposing the U.S. Treasury agrees on its exchange proposal, it will become a majority shareholder of the bank. This will happen when the exchange is completed, but before any public offering. It should be noted that the Treasury has indeed agreed to the bank’s exchange proposal now.

    Also, there is possibility that the Treasury could pass on its shares once the exchange takes place. Another possibility is that if the bank goes for a public offering, one or more large investors could end up with a large stake in it. All this should result in a lot of volatility and price fluctuation for the stock, just as we have seen the huge surge and high volume in trading today. We expect further volatility and price fluctuation in the stock in the near-term due to the uncertainty created by the Exchange agreement and the bank’s proposed Capital plan.

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