Hello and welcome to the Independent Bank Corporation third quarter 2008 earnings conference call. All participants will be in a listen-only mode. There will be an opportunity for you to ask questions at the end of today’s presentation. (Operator instructions) Now, I would like to turn the conference over to Mr. Michael Magee, President and CEO. Sir, you may begin.

Thank you. Good morning and welcome to our third quarter 2008 earnings conference call. I am Mike Magee, President and CEO of Independent Bank. Joining me on the call today are Rob Shuster, our Chief Financial Officer, and Stefanie Kimball, our Chief Lending Officer. Following my introductory comments, Rob will provide a detailed review of our financial performance during the third quarter. Following Rob’s comments, Stefanie will provide an update on our commercial and retail loan portfolios. We will conclude the call with a brief question-and-answer question. Also, please note that in the company PowerPoint presentation will be referenced throughout the day’s call. To access this presentation, please go to the investor relation section of our website at www.ibcp.com. Please also note that this presentation may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Please refer to our Safe Harbor Provision on slide two of the presentation for additional information and forward-looking statements. I will begin today’s discussion with the review of our third quarter financial results which are summarized on slide four of the company presentation. Certainly, the third quarter was a challenging period for Independent Bank. The continuing credit turmoil evolved into a financial markets crisis which prompted government action of historic proportions and our results were not entirely immune to these negative broader economic factors. Although we are disappointed in our bottom line results for the quarter, we continue to make progress at a number of fronts and we remain optimistic that we will emerge from this period even stronger. When the third quarter ended September 30, 2008, we reported a net loss of $5.3 million or $0.23 per share compared to net income of $3.7 million or $0.16 per share in the third quarter of 2007. The decline in…

Thanks, Mike. Good morning, everyone. I am starting at slide seven of our PowerPoint presentation. I will focus my comments on net interest income in our margin, certain components of non-interest income and non-interest expense, asset quality, and conclude by making a few comments about capital in the TARP Capital Purchase Program. As outlined on page seven, there were some positive factors evident in our third quarter 2008 results. Most notable was the continued strength of our net interest margin. However, the positives were overshadowed by security losses and the rise in credit costs. AJ outlines a few unusual items impacting the third quarter including the aforementioned security losses and increment charge on capitalized mortgage loans servicing the rights and write-downs of ORE properties. As noted in our first quarter 2008 conference call, effective January 1, 2008, we elected fair value accounting for several preferred stocks that we own. Slide nine provides details on these preferred stocks. The decline in the fair value of the preferred stocks and particularly the conservatorship of Fannie Mae and Freddy Mac led to large security losses in the third quarter. Partially offsetting this fair value declines were gains of $1.1 million on the sale of $48.4 million of municipal securities. Page 10 has details on our securities available for sale at September 30, 2008 and provides both the cost basis and current market values. In the third quarter, we did record a $125,000 other than temporary impairment charge on a $250,000 trust preferred position in a small Michigan Community Bank. All of our CMOs are investment grade and we have not had any credit downgrades. We have one relatively small sub-investment grade as setback [ph] security on which we recorded impairment charges a few years ago. But the market value of this security continues…

Thanks, Rob. My remarks would follow slides 25 through 41. I will be discussing our credit quality results and lending initiatives which are designed to enable Independent Bank to navigate through this challenging credit cycle. Starting with page 25, highlights are outlined with regard to commercial lending. As we have discussed on previous conference calls, credit quality best practices in a new direction for this business line was put in place mid 2007. That direction emphasizes lower risk clients who utilize a broad spectrum of bank services particularly deposits. The results from executing this strategy are now becoming more tangible and measurable. There are several notable approvements [ph] in the third quarter that demonstrate the benefits of the credit quality best practices we’ve implemented as well as the intense focus on our lending initiatives that we have had in place now for the past five quarters. For example, our overall level of watch credits declined by 8%. This is the first decline we’ve experienced in two years. Commercial loan delinquency rates declined to their lowest level since 2005. There was a slight $300,000 decline in the non-accrual loans with several larger credits moving into ORE. Given our progress in moving credits through the workout cycle, we experienced a higher level of charge-offs in ORE this quarter with charge-offs increasing $4 million and ORE increasing $8 million, both of which are primarily attributable to one large relationship which we will discuss further. Each of these items will be discussed in more detail as we look at the graph later in the presentation. Further, we have had a number of short and long term initiatives in place to manage through the slow economy and potential recession. Longer term, we believe that as the market stabilizes, there will be resurgence in community banking…

Thank you Stefanie and thank you Rob. Thank you for your patience during this detailed and lengthy presentation. However, we feel that during these extraordinary times, it is important to show as much transparency to the market as possible. As one of the oldest and most well-respected banking brands in Michigan and we remain dedicated to our overall goal of providing not only the best community banking services in the industry, the financial results that make IBC a strong addition to your investment portfolio. Rest assure, we intend to weather the current storm and continue to distinguish ourselves as the community bank of choice in the markets we serve. That concludes our prepared comments. At this time, we will open the line for questions from investors and analysts.

(Operator instructions) Our first question will come from Terry McEvoy from Oppenheimer & Company. Please go ahead. Terry McEvoy – Oppenheimer & Company: Hi, good morning.

Hi Terry.

Good morning. Terry McEvoy – Oppenheimer & Company: I have a quick question on page 25, that last bullet, maintained restriction on new CRE coupled with increased focus on C&I loans, what specifically do you mean by increased focuses? Does that mean it is an area you would like to grow or you are going to increase your focus on managing the credit risk on C&I? I did not know how to read that statement.

Terry that is a great question and really, the intention is both. Obviously, our focus is to move towards more C&I loans and we also have to enhance our monitoring and following of those credits. Terry McEvoy – Oppenheimer & Company: And Rob, what happens if you do not get this $72 million of TARP-related credit? Is there a plan B, does there need to be a plan B?

Well, A, I am confident we will get it but you always need to have a plan B regardless. Again, I think our plan B would be to continue to deleverage the balance sheet. You can see we made progress on that in the third quarter. I think it would allow us to continue to boost our capital ratios. This quarter, obviously we had the security losses which we think were fairly unusual in nature. Absent those, we would have had a much smaller loss and the provision was quite a bit higher than where we have been running so the combination of eliminating the security losses and even bringing the provision down a bit but to still very high levels would have us in the black and we combine that with some deleveraging and I think we would be able to grow our capital ratios in stages fine while we weather the storm. We would look at if there are alternatives but frankly, the terms on the TARP CPP program are very attractive and I think the terms with the private equity offering or some type of public transaction would be not as attractive but depending on the length of the downturn and the pressure on the loan portfolio, we would look at all options but we think the deleveraging option is the best because it allows us to weather the storm, keep our capital ratio strong and not have to go to plan B. That would be our plan B. Like I said, I am confident that we will qualify for the TARP program. Terry McEvoy – Oppenheimer & Company: One just last quick question. The $400,000 increase in advertising was that Independent Bank playing offense or defense? And by defense, I mean just putting out more brochures for the branches and the commercial runners [ph] to make sure your customers feel comfortable and understand the safety and soundness of the bank.

Terry, this is Mike and I will answer that. In working with our marketing department, the executive management team made a decision that we actually need to implement both strategies to our marketing collateral, and that is it is that we need to reassure our current customer base that their deposits are safe and they are doing business with any bank corporation is still something that they do not need to worry about. And then a lot of that had to do with the failure of Indy Mac and then the takedown of the negotiated sales of WaMu and other financial institutions. It heightened the concerns of our customer base considerably because at least with any Indy Mac we have a feel of who is the bad banks and who are the good banks but with the negotiated sales that took place of WaMu and Wachovia, it made our customer base extremely nervous about – they could not tell anymore who is the good bank and who are the bad banks. So for that reason, we needed to spend quite a bit of time working with a lot of our large depositors and also improving our marketing programs to our current customer base and then also to take advantage of these unprecedented times to basically grow our deposits through customers. There are certain customers that no matter what you tell them or how much information you give them, their minds made up and they are going to move their money to where it is insured, and so we are taking advantage of those customers from other financial institutions as well. So basically, I would answer that question, it was an increased marketing expense to cover both strategies. Terry McEvoy – Oppenheimer & Company: Thank you.

Thank you. Our next question will come from Brad Millsaps from Sandler O’Neill. Please go ahead. Brad Millsaps – Sandler O’Neill: Good morning.

Good morning, Brad. Brad Millsaps – Sandler O’Neill: Stefanie, I am just curious, do you have a sense of what you might be able to get back in terms of property during the fourth quarter. I am just curious where your balances might end up at the end at the end of the year.

Well, Brad, a couple of things. We are in negotiations with a number of other clients but it is really too early to tell what would move in to ORE other than there are a number of things in foreclosure that will move but nothing that would be as significant as the jump that we saw in this quarter. Brad Millsaps – Sandler O’Neill: Yes, I know the foreclosure process in Michigan. This can be fairly lengthy but I guess I am a little surprised that you have not taken more property back at this point.

Well Brad what has made it very difficult on a lot of this large relationships has been the amount of second, third, and fourth liens that have been placed against the properties. And so as much as we would like to negotiate with the borrower to get a deed in lieu of foreclosure when we performed a title search on the property we find that (inaudible) and then their multiple relationships with other financial institutions. Everybody is throwing liens against everything in individual loans right now just to cloud the title so that may be they can – they’re desperate that they will be able to obtain some type of proceeds to help go against their loan. So as much as we would like to accelerate the process unfortunately, we find ourselves in many cases, having to go foreclosure route so that our first mortgage position by – through the foreclosure we can wipe out all of the additional liens that have been placed against the property. Brad Millsaps – Sandler O’Neill: Okay, you have answered my next question at some respect but if you do get the $72 million of target money, my thought would be, would you accelerate maybe the even faster on the write down on somebody’s property in order to clear them off the balance sheet or Rob is it your thoughts that you would hold on to that capital and play and wait and see game at this moment?

I think what we do is what’s economically in the best interest of the bank. In other words, if we feel we could get reasonable value, we would pursue that and Stefanie mentioned we have a lot of instances where we are working with the borrower and they are slowly able to peck away at it and I do not think we changed that strategy because trying to just sell a wholesale amounts of those assets I do not think is in the economic best interest of the bank. Now, we may look at doing something creative like forming a sister company to the bank that is a direct subsidiary to holding companies. It is not going to change the holding company numbers but we could potentially move, sell assets from the bank to that sister company. We could then – that would accelerate the improvement in the bank’s balance sheet which could have some benefits on things like FDIC insurance costs while we still manage those assets in the best economic interest of the organization. So I think that is going to be our approach. The $72 million I think gives us some ability to look at sales if we can get what we think is reasonable economic value, but I do not think it will push us to just accepting distress crisis to just make the numbers look better. I don’t think that is in the long-term interest of our shareholders. And the other thing I think it does give us the ability to do is looked at opportunities to grow the organization. We are now focused more on the deleveraging but I think we would revisit that strategy. We’d still vigorously manage the balance sheet but I think it would allow us to may be look at opportunities for growth in certain loan segments. And I think that is one of the designs of the TARP CPP program is to get banks lending and growing, and help get this economy turned around.

Brad I would also just add that we do a regularly check the debt market to see if there are not select opportunities to move loans out of the organization. To date we have found those prices to be very distressed but we do continue to look to see there are not select opportunities. So I could – if I would add to Rob’s comments that although we’re not looking at any wholesale transaction to move a bunch of loans or sell them and take large write downs, there are select opportunities that we continue to look at. Brad Millsaps – Sandler O’Neill: And Stefanie on the – if I have my numbers correct, one of the large charge offs this quarter, you said it was $5 million related to one borrower. You’re not carrying out it less than one-third of the original appraise value in 50% of an appraisal obtained about a year ago. I mean that seems reasonable but would you say that is a typical in terms of the date of that appraisal or would you have more up to date appraisals on the majority of your loan and things like that is a large relationship there to have. I guess, an appraisal of that would be 12 months old and this type of market, it seems to be changing by the hour.

Well, just to de-clarify my comments. I am glad you asked the question, Brad. We do have an updated appraisal on the property that we just got. And what my comment was, we had also had one a year ago and we also had one in 2004. And so, I was comparing those three points in time for several properties that are all related to this one borrower.

I think Brad’s question is the space of time of the 12 months between the one in late ‘07 versus the current one. Was that typical or would we have more recent appraisal?

Typically, we would get appraisals at least once a year for a stress asset like this and we would also want to time those appraisals, so we would wait and get an appraisal right as we were moving something into ORE like we just did.

That one was a little unique, Brad, because we had done a forbearance agreement and had gotten additional collateral. I would say, typically, the processes differ and so the appraisals are more current relative, to say that last point you revalue the property. This one was unique because we did a workout for the end of last year, took on additional collateral and I do not think it is a situation that is indicative of the typical process or that you would see that type write down, that is an anomaly in my view.

The collateral was concentrated in one of the markets than the most stressed. So, we really have dropped significantly in value. That would not be typical for the state in general. Brad Millsaps – Sandler O'Neill: Okay and final question on the heels of Terry’s question regarding advertising who knows you are opening a branch this week, just curious, what are your plans? Are they going forward? Is that the best use of resources in this environment? And thank you very much.

Thanks Brad. Regarding the branch that will be opening on Thursday or after this grand opening on Thursday, that actually has been a loan production office in Houghton Lake for several years and a very effective loan production office in originated real estate mortgages. We licensed that, it was just an office in a strip mall and we basically obtain the approval for it to be a branch to accept deposits several years ago. And along with originated mortgages, it has received in those storefront deposits. It made more financial and economic stance when we took a look at the projections to move out of the leased space that we were in and to build our own brick and mortar facility, full service branch, again, based on already the reputation and business that we are generating out of that market. So what we really do is moving out of a storefront into full service branch. It is not opening a brand new branch in an unknown market to Independent Bank. At this point, to the overall corporation, we do not have any additional branch or new branch plans on the drawing board for any of our locations. We are looking at remodeling some of our current locations and renovating but we do not have plans for any additional new branch expansion.

Thank you. Our next question will come from Jason Werner from Howe Barnes. Please go ahead. Jason Werner – Howe Barnes: Good morning.

Good morning Jason. Jason Werner – Howe Barnes: Most of my questions have been answered. Just a follow up, with the loan we just talked about, there was a large one that was the bulk of the charge offs. Is that the same loan as the bulk of the REO too?

Yes. That was also the example of the customer that emotionally just couldn’t continue to try to market their own properties. And so, it moved right in to ORE and we took that significant charge.

Well that’s an example where we did do a deed in lieu because there weren’t at the secondary lane so it moved quickly and it had been performing prior to that capitulation. Jason Werner – Howe Barnes: I assume this is some development project but what is the collateral?

The collateral is vacant land and also a retail strip center. Jason Werner – Howe Barnes: Okay.

And the vacant land is what I would call on the fringes of the urban development and that is the real estate that we have really seen drop quickly in value, so somebody who bought land and plans to develop it and it was going to be the next new subdivision, well, that development is very sold and that significantly has impacted the prices and costs for that significant write down. Jason Werner – Howe Barnes: And the retail strip center, I am guessing, is this suffering from low vacancies then?

Yes. It just was recently constructed and needs to get tenants. Jason Werner – Howe Barnes: Okay. You guys said that this project was in areas that have some more distress prices? I guess you should be a little more clear on where this property is?

It is in the Macomb County area which is one of the areas that had very rapid growth prior to the slowdown, and that is probably one of the counties that we have seen the greatest drop in value. Jason Werner – Howe Barnes: Okay. I also have a question about the slight tent, I’m just curious is it available for sale, obviously the unrealized loss through this quarter. You said that the – on the private label, a CMO that was the sub-investment rate you would hardly take a hit on that and it is not –

It was not a CMO. It is a mobile home asset-backed security. Jason Werner – Howe Barnes: Okay.

And we took impairment charges of about $400,000 collectively or so back in ‘04 and ‘05, and it is performing just fine. And now, the market value comfortably exceeds the adjusted cost basis but when you take other than temporary impairment, you cannot write it back up unless you sell it. Jason Werner – Howe Barnes: Right.

So that’s the only security in that grouping that we’ve had any downgrade on whatsoever. Jason Werner – Howe Barnes: Okay, but obviously that’s not part of that $6.9 million –?

No. Most of that – it is just the CMO market, in general is off, so some of these are driven by rates being higher than when we originally bought the CMO’s. Others, just in general out of favor. But we’ve gone through and analyzed every one of them and looked at. We didn’t buy in support franchise on any of these. Ours is at the top of the food chain and in almost every instance our – the subordination support below is actually better than when the CMO was originally constructed. Jason Werner – Howe Barnes: Okay. So looking at that, you don’t see much of a chance of an OCTI [ph] on that.

No. They all have maturity dates and there all – the credit support is good on all of those. Jason Werner – Howe Barnes: Okay. What can you tell us about this money market preferred that’s off almost $5 million?

The money market, and I have a footnote, the money market preferred is backed by Bank of America’s Series E preferred stock and Lehman Brothers have put together, basically, two tranche asset that had a floating rate piece, an A piece [ph] that represented 75% of the – that has tied the LIBOR. Actually, it was an auction, they held a quarterly auction to establish the rate and then there was 25% of it was an inverse floater which was the higher risk of the structure. We own the low risk. What was supposed to be low risk piece of it, and earlier this year the auction began to fail and so the rate for our piece was actually set by a formula and so we were getting a much higher rate, it was an above market rate at the time. What happened in the third quarter was – with Lehman Brothers’ bankruptcy that created under the Trust [ph] a distribution event. And so in November, we were actually getting distributed the Bank of America’s Series E preferred stock and all preferred stocks as you can imagine were down dramatically in the third quarter because of the Fannie Mae and Freddie Mac conservatorship. So that fair value was the value of the underlying Bank of America preferred series E. And at least at this juncture – and you may be aware of the SEC send a letter to the feds beyond perpetual preferred and they said what to the credit worthiness of the issuer and certainty of the cash flows. And so when we evaluate this, and look at the credit worthiness of the issuer which is Bank of America, we are comfortable with that and the certainty of the cash flows were comfortable with. The pricing on it is LIBOR plus 35 with a 4% floor and recognized that 70% of it is not taxable. It is a dividend received deduction. And their coverage ratio on their preferred dividend was like 7 or 8 times. So we felt comfortable that we did not have other than temporary impairment on that but that is the reason for the steep declined in the cost basis versus the fair value. And finally, we have the ability and intent to hold that until such time as the price recovers. Jason Werner – Howe Barnes: Once you get the possession of the series E preferred would you have dividend available for sale or would you move that into with the other preferred stocks?

Our intent is to keep it in available for sale. Jason Werner – Howe Barnes: Okay. And then, also you said and I think I heard you right. You had a head year margin in the 475 range. You said that given the shrinkage in earning assets that the dollar level of things that is likely to come down. Is that would you said?

I said that if we continue to deleverage, I don’t know that we can make up that with growth in the margin although if the fed moves in other half point tomorrow, I would have to revisit that. That would give us I think a bit of a boost but nonetheless, I think I had it in the slide just to give you an example. We were able to borrow a$100 million in the fed term auction at 1.11%. So the fed liquidity has been extremely helpful to us. We have taken as much advantage of it as we can and like I said if the fed moves again, it is likely going to help us. One other odd thing Jason is LIBOR spreads are elevated and that has helped us a bit. We have more assets that are tied the LIBOR loans and some securities that have re-priced at higher rates and we have very little debt or borrowings tied to LIBOR. And we have paid fixed interest rates swaps. We are paying a fixed rate and receiving LIBOR. So all of that has helped a little bit to – but again my basic premise was absent of fed move, there is probably not a lot more upside potential on the margins. So if our earning and assets are shrinking a bit that is going to have a little move down in our dollar amount of net interest income. Jason Werner – Howe Barnes: Okay, thank you guys.

Thank you our next question will come from Steve Geyen from Stifel Nicolaus. Please go ahead.

Yes just one small question. Stefanie I think I heard you chatting a lot of things down at time. It’s like you made some changes to the standard reserve, just wondering, what assumption are they using?

Yes just one small question. Stefanie I think I heard you chatting a lot of things down at time. It’s like you made some changes to the standard reserve, just wondering, what assumption are they using?

The standard reserves that I was outlining are the methodology that we have had in place all year. We would go through a once a year review and update of that. So it is not something new.

Okay, got you. Thank you.

Okay, got you. Thank you.

You’re welcome.

We show no further questions at this time. I would like to turn the conference back over to Mr. McGee for any closing remarks.

Stef, Rob, thank you. With that, this concludes our conference call today. Thank you for your interest in Independent Bank Corporation and we look forward to speaking with you again next quarter. A reminder, for an archived webcast of today’s call, please go to the Investors Section of our website www.ibcp.com. The webcast will be archived on our website for approximately 90 days from today’s date. If you have any questions in the interim, please feel free to contact Stefanie, Rob or myself. Again, thank you and have a great day.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.