INDEPENDENT BANK CORP /MI/ - FORM 8-K - EX-99.2 - EXHIBIT 99.2

Attached files

file	filename
EX-99.1 - EXHIBIT 99.1 - INDEPENDENT BANK CORP /MI/	ex99_1.htm
8-K - INDEPENDENT BANK CORPORATION 8-K 7-30-2012 - INDEPENDENT BANK CORP /MI/	form8k.htm

Exhibit 99.2

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES

Supplemental Data

Non-performing assets(1)

	June 30,			December 31,
	2012			2011
	(Dollars in thousands)
Non-accrual loans	$	44,314		$	59,309
Loans 90 days or more past due and still accruing interest		739			574
Total non-performing loans		45,053			59,883
Other real estate and repossessed assets		29,504			34,042
Total non-performing assets	$	74,557		$	93,925
As a percent of Portfolio Loans
Non-performing loans		3.09	%		3.80	%
Allowance for loan losses		3.52			3.73
Non-performing assets to total assets		3.10			4.07
Allowance for loan losses as a percent of non-performing loans		113.97			98.33

(1)

Excludes loans classified as “troubled debt restructured” that are not past due and vehicle service contract counterparty receivables, net.

Troubled debt restructurings (“TDR”)

	June 30, 2012
	Commercial		Retail			Total
	(In thousands)
Performing TDR’s	$	44,573	$	87,294		$	131,867
Non-performing TDR’s (1)		11,298		11,538	(2)		22,836
Total	$	55,871	$	98,832		$	154,703

	December 31, 2011
	Commercial		Retail			Total
	(In thousands)
Performing TDR’s	$	29,799	$	86,770		$	116,569
Non-performing TDR’s (1)		14,567		14,081	(2)		28,648
Total	$	44,366	$	100,851		$	145,217

(1)

Included in non-performing assets table above.

(2)

Also includes loans on non-accrual at the time of modification until six payments are received on a timely basis.

Allowance for loan losses	Six months ended
	June 30,
	2012						2011
				Unfunded						Unfunded
	Loans			Commitments			Loans			Commitments
	(Dollars in thousands)
Balance at beginning of period	$	58,884		$	1,286		$	67,915		$	1,322
Additions (deduction)
Provision for loan losses		6,187			-			14,858			-
Recoveries credited to allowance		3,231			-			2,182			-
Loans charged against the allowance		(16,175	)		-			(24,436	)		-
Reclassification to loans held for sale		(781	)		-			-			-
Additions (deductions) included in non-interest expense		-			(59	)		-			184
Balance at end of period	$	51,346		$	1,227		$	60,519		$	1,506

Net loans charged against the allowance to average Portfolio Loans (annualized)		1.69	%					2.58	%

Alternative Sources of Funds

	June 30,						December 31,
			2012						2011
			Average						Average
	Amount		Maturity	Rate			Amount		Maturity	Rate
	(Dollars in thousands)
Brokered CDs(1)	$	48,860	0.8 years		1.21	%	$	42,279	1.0 years		1.59	%
Fixed-rate FHLB advances		17,917	5.1 years		6.38			30,384	3.3 years		3.99
Variable-rate FHLB advances(1)		-						3,000	2.3 years		0.51
Total	$	66,777	2.0 years		2.60	%	$	75,663	2.0 years		2.51	%

(1)

Certain of these items have had their average maturity and rate altered through the use of derivative instruments, such as pay-fixed interest-rate swaps.

Capitalization

	June 30,			December 31,
	2012			2010
	(In thousands)
Subordinated debentures	$	50,175		$	50,175
Amount not qualifying as regulatory capital		(1,507	)		(1,507	)
Amount qualifying as regulatory capital		48,668			48,668
Shareholders’ equity
Preferred stock		82,004			79,857
Common stock		249,751			248,950
Accumulated deficit		(208,569	)		(214,259	)
Accumulated other comprehensive loss		(10,014	)		(11,921	)
Total shareholders’ equity		113,172			102,627
Total capitalization	$	161,840		$	151,295

Non-Interest Income

	Three months ended									Six months ended
	June 30,			March 31,			June 30,			June 30,
	2012			2012			2011			2012			2011
	(In thousands)
Service charges on deposit accounts	$	4,552		$	4,201		$	4,784		$	8,753		$	9,066
Interchange income		2,407			2,322			2,308			4,729			4,476
Net gains (losses) on assets
Mortgage loans		3,579			3,860			1,793			7,439			3,728
Securities		169			684			115			853			328
Other than temporary impairment loss on securities
Total impairment loss		(85	)		(177	)		327			(262	)		(142	)
Loss recognized in other comprehensive income		-			-			(327	)		-			-
Net impairment loss recognized in earnings		(85	)		(177	)		-			(262	)		(142	)
Mortgage loan servicing		(1,088	)		736			(126	)		(352	)		770
Investment and insurance commissions		648			447			524			1,095			1,079
Bank owned life insurance		399			424			464			823			889
Title insurance fees		489			508			318			997			791
(Increase) decrease in fair value of U.S.
Treasury warrant		(25	)		(154	)		642			(179	)		996
Other		1,997			1,733			1,634			3,730			3,186
Total non-interest income	$	13,042		$	14,584		$	12,456		$	27,626		$	25,167

Capitalized Mortgage Loan Servicing Rights

	Three months ended June 30,						Six months ended June 30,
	2012			2011			2012			2011
	(In thousands)
Balance at beginning of period	$	11,795		$	15,531		$	11,229		$	14,661
Originated servicing rights capitalized		1,028			431			1,952			1,495
Amortization		(1,237	)		(574	)		(2,299	)		(1,323	)
Change in valuation allowance		(935	)		(647	)		(231	)		(92	)
Balance at end of period	$	10,651		$	14,741		$	10,651		$	14,741

Valuation allowance at end of period	$	6,775		$	3,302		$	6,775		$	3,302

Mortgage Loan Activity

	Three months ended									Six months ended
	June 30,			March 31,			June 30,			June 30,
	2012			2012			2011			2012			2011
	(Dollars in thousands)
Mortgage loans originated	$	136,835		$	112,798		$	74,612		$	249,633		$	170,185
Mortgage loans sold		127,013			112,141			63,369			239,154			184,857
Mortgage loans sold with servicing rights released		22,555			15,340			18,428			37,895			35,000
Net gains on the sale of mortgage loans		3,579			3,860			1,793			7,439			3,728
Net gains as a percent of mortgage loans sold (“Loan Sales Margin”)		2.82	%		3.44	%		2.83	%		3.11	%		2.02	%
Fair value adjustments included in the Loan Sales Margin		0.19			0.92			0.63			0.53			(0.26	)

Non-Interest Expense

	Three months ended								Six months ended
	June 30,			March 31,			June 30,		June 30,
	2012			2012			2011		2012			2011
	(In thousands)
Compensation	$	9,551		$	9,945		$	10,020	$	19,496		$	19,832
Performance-based compensation		1,735			85			334		1,820			491
Payroll taxes and employee benefits		2,220			2,452			2,675		4,672			5,055
Compensation and employee benefits		13,506			12,482			13,029		25,988			25,378
Loan and collection		2,407			2,890			3,580		5,297			7,447
Occupancy, net		2,490			2,716			2,663		5,206			5,764
Data processing		2,450			2,339			2,415		4,789			4,725
Furniture, fixtures and equipment		1,307			1,294			1,502		2,601			2,920
Legal and professional fees		1,268			897			801		2,165			1,579
Communications		826			875			889		1,701			1,837
FDIC deposit insurance		816			857			652		1,673			1,887
Net losses on other real estate and repossessed assets		633			987			777		1,620			2,183
Credit card and bank service fees		624			651			1,013		1,275			2,060
Advertising		639			556			670		1,195			1,224
Vehicle service contract counterparty contingencies		326			471			1,311		797			3,657
Supplies		340			394			392		734			794
Provision for loss reimbursement on sold loans		126			432			363		558			769
Amortization of intangible assets		272			272			343		544			686
Costs (recoveries) related to unfunded lending commitments		(12	)		(47	)		89		(59	)		184
Other		1,465			(17	)		1,416		1,448			2,679
Total non-interest expense	$	29,483		$	28,049		$	31,905	$	57,532		$	65,773

Average Balances and Rates

	Three Months Ended
	June 30,
	2012							2011
	Average							Average
	Balance		Interest		Rate(3)			Balance		Interest		Rate(3)
Assets (1)	(Dollars in thousands)
Taxable loans	$	1,556,478	$	23,623		6.09	%	$	1,718,171	$	28,017		6.54	%
Tax-exempt loans (2)		7,085		73		4.14			8,080		85		4.22
Taxable securities		261,554		933		1.43			61,407		344		2.25
Tax-exempt securities (2)		26,431		244		3.71			30,064		298		3.98
Cash – interest bearing		306,329		196		0.26			306,864		194		0.25
Other investments		20,564		186		3.64			22,852		189		3.32
Interest Earning Assets		2,178,441		25,255		4.65			2,147,438		29,127		5.43
Cash and due from banks		51,470							50,250
Other assets, net		163,096							189,472
Total Assets	$	2,393,007						$	2,387,160

Liabilities
Savings and interest-bearing checking	$	1,080,130		486		0.18		$	1,013,095		608		0.24
Time deposits		571,088		1,819		1.28			680,267		3,903		2.30
Other borrowings		69,826		1,120		6.45			94,609		1,232		5.22
Interest Bearing Liabilities		1,721,044		3,425		0.80			1,787,971		5,743		1.29
Non-interest bearing deposits		523,647							443,163
Other liabilities		39,630							44,674
Shareholders’ equity		108,686							111,352
Total liabilities and shareholders’ equity	$	2,393,007						$	2,387,160

Net Interest Income			$	21,830						$	23,384

Net Interest Income as a Percent of Average Interest Earning Assets						4.02	%						4.36	%

(1)	All domestic, except for $0.01 million for the three months ended June 30, 2011, of average payment plan receivables included in taxable loans for customers domiciled in Canada.

(2)	Interest on tax-exempt loans and securities is not presented on a fully tax equivalent basis due to the current net operating loss carryforward position and the deferred tax asset valuation allowance.

(3)	Annualized.

Average Balances and Rates

	Six Months Ended
	June 30,
	2012							2011
	Average							Average
	Balance		Interest		Rate(3)			Balance		Interest		Rate(3)
Assets (1)	(Dollars in thousands)
Taxable loans	$	1,569,460	$	47,893		6.13	%	$	1,757,979	$	57,414		6.57	%
Tax-exempt loans (2)		7,162		149		4.18			8,235		172		4.21
Taxable securities		223,176		1,591		1.43			51,568		811		3.17
Tax-exempt securities (2)		26,788		540		4.05			30,508		630		4.16
Cash – interest bearing		312,452		395		0.25			338,154		426		0.25
Other investments		20,696		383		3.72			23,239		392		3.40
Interest Earning Assets		2,159,734		50,951		4.73			2,209,683		59,845		5.45
Cash and due from banks		53,776							50,568
Other assets, net		163,608							190,672
Total Assets	$	2,377,118						$	2,450,923

Liabilities
Savings and interest-bearing checking	$	1,067,013		958		0.18		$	1,003,864		1,197		0.24
Time deposits		574,028		3,771		1.32			742,609		8,259		2.24
Other borrowings		76,605		2,292		6.02			99,730		2,555		5.17
Interest Bearing Liabilities		1,717,646		7,021		0.82			1,846,203		12,011		1.31
Non-interest bearing deposits		513,833							446,056
Other liabilities		39,442							44,515
Shareholders’ equity		106,197							114,149
Total liabilities and shareholders’ equity	$	2,377,118						$	2,450,923

Net Interest Income			$	43,930						$	47,834

Net Interest Income as a Percent of Average Interest Earning Assets						4.08	%						4.35	%

(1)	All domestic, except for $0.02 million for the three months ended June 30, 2011, of average payment plan receivables included in taxable loans for customers domiciled in Canada.

(2)	Interest on tax-exempt loans and securities is not presented on a fully tax equivalent basis due to the current net operating loss carryforward position and the deferred tax asset valuation allowance.

(3)	Annualized.

Commercial Loan Portfolio Analysis as of June 30, 2012

			Total Commercial Loans
			Watch Credits						Percent of Loan
Loan Category	All Loans		Performing		Non- performing		Total		Category in Watch Credit
	(Dollars in thousands)
Land	$	15,247	$	1,261	$	3,826	$	5,087		33.4	%
Land Development		16,724		9,211		936		10,147		60.7
Construction		14,896		561		166		727		4.9
Income Producing		224,824		36,840		8,557		45,397		20.2
Owner Occupied		235,578		30,625		8,097		38,722		16.4
Total Commercial Real Estate Loans (1)	$	507,269	$	78,498		21,582	$	100,080		19.7

Other Commercial Loans(1)	$	137,098	$	16,323		1,170	$	17,493		12.8
Total non-performing commercial loans					$	22,752

(1)	The total of these two categories is different than the June 30, 2012, Consolidated Statement of Financial Condition due primarily to loans in process. Includes loans held for sale relating to branch sale.

INDEPENDENT BANK CORP /MI/ - FORM 8-K - EX-99.2 - EXHIBIT 99.2 - July 30, 2012

Attached files

INDEPENDENT BANK CORP /MI/ Reports