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

Attached files

file	filename
8-K - INDEPENDENT BANK CORPORATION 8-K 10-30-2012 - INDEPENDENT BANK CORP /MI/	form8k.htm
EX-99.1 - EXHIBIT 99.1 - INDEPENDENT BANK CORP /MI/	ex99_1.htm

Exhibit 99.2

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES

Supplemental Data

Non-performing assets(1)
	September 30,			December 31,
	2012			2011
	(Dollars in thousands)
Non-accrual loans	$	38,785		$	59,309
Loans 90 days or more past due and still accruing interest		62			574
Total non-performing loans		38,847			59,883
Other real estate and repossessed assets		30,347			34,042
Total non-performing assets	$	69,194		$	93,925
As a percent of Portfolio Loans
Non-performing loans		2.71	%		3.80	%
Allowance for loan losses		3.35			3.73
Non-performing assets to total assets		2.88			4.07
Allowance for loan losses as a percent of non-performing loans		123.62			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”)
		September 30, 2012
		Commercial		Retail			Total
		(In thousands)
Performing TDR’s	$	44,061	$	88,441		$	132,502
Non-performing TDR’s (1)		10,738		9,237	(2)		19,975
Total	$	54,799	$	97,678		$	152,477

		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	Nine months ended
	September 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		6,438			-			21,029			-
Recoveries credited to allowance		4,603			-			3,080			-
Loans charged against the allowance		(21,294	)		-			(33,204	)		-
Reclassification to loans held for sale		(610	)		-			-			-
Additions (deductions) included in non-interest expense		-			(597	)		-			12
Balance at end of period	$	48,021		$	689		$	58,820		$	1,334

Net loans charged against the allowance to average Portfolio Loans (annualized)		1.46	%					2.35	%

Alternative Sources of Funds
	September 30,						December 31,
	2012						2011
			Average						Average
	Amount		Maturity	Rate			Amount		Maturity	Rate
	(Dollars in thousands)
Brokered CDs(1)	$	48,859	0.8 years		1.10	%	$	42,279	1.0 years		1.59	%
Fixed-rate FHLB advances		17,714	4.8 years		6.38			30,384	3.3 years		3.99
Variable-rate FHLB advances(1)		-						3,000	2.3 years		0.51
Total	$	66,573	1.9 years		2.51	%	$	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
	September 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		83,097			79,857
Common stock		250,080			248,950
Accumulated deficit		(203,217	)		(214,259	)
Accumulated other comprehensive loss		(8,432	)		(11,921	)
Total shareholders’ equity		121,528			102,627
Total capitalization	$	170,196		$	151,295

Non-Interest Income
	Three months ended									Nine months ended
	September 30,			June 31,			September 30,			September 30,
	2012			2012			2011			2012			2011
	(In thousands)
Service charges on deposit accounts	$	4,739		$	4,552		$	4,623		$	13,492		$	13,689
Interchange income		2,324			2,407			2,356			7,053			6,832
Net gains (losses) on assets
Mortgage loans		4,602			3,579			2,025			12,041			5,753
Securities		301			169			(57	)		1,154			271
Other than temporary impairment loss on securities
Total impairment loss		(70	)		(85	)		(4	)		(332	)		(146	)
Loss recognized in other comprehensive income		-			-			-			-			-
Net impairment loss recognized in earnings		(70	)		(85	)		(4	)		(332	)		(146	)
Mortgage loan servicing		(364	)		(1,088	)		(2,655	)		(716	)		(1,885	)
Investment and insurance commissions		491			648			534			1,586			1,613
Bank owned life insurance		398			399			496			1,221			1,385
Title insurance fees		482			489			299			1,479			1,090
(Increase) decrease in fair value of U.S. Treasury warrant		(32	)		(25	)		29			(211	)		1,025
Other		1,671			1,997			1,609			5,401			4,795
Total non-interest income	$	14,542		$	13,042		$	9,255		$	42,168		$	34,422

Capitalized Mortgage Loan Servicing Rights
	Three months ended September 30,						Nine months ended September 30,
	2012			2011			2012			2011
	(In thousands)
Balance at beginning of period	$	10,651		$	14,741		$	11,229		$	14,661
Originated servicing rights capitalized		996			573			2,948			2,068
Amortization		(1,052	)		(688	)		(3,351	)		(2,011	)
Change in valuation allowance		(390	)		(3,077	)		(621	)		(3,169	)
Balance at end of period	$	10,205		$	11,549		$	10,205		$	11,549

Valuation allowance at end of period	$	7,165		$	6,379		$	7,165		$	6,379

Mortgage Loan Activity
	Three months ended									Nine months ended
	September 30,			June 30,			September 30,			September 30,
	2012			2012			2011			2012			2011
	(Dollars in thousands)
Mortgage loans originated	$	135,263		$	136,835		$	89,526		$	384,896		$	259,711
Mortgage loans sold		128,196			127,013			80,993			367,350			265,850
Mortgage loans sold with servicing rights released		21,942			22,555			25,179			59,837			60,179
Net gains on the sale of mortgage loans		4,602			3,579			2,025			12,041			5,753
Net gains as a percent of mortgage loans sold (“Loan Sales Margin”)		3.59	%		2.82	%		2.50	%		3.28	%		2.16	%
Fair value adjustments included in the Loan Sales Margin		0.29			0.19			0.15			0.45			(0.14	)

Non-Interest Expense
	Three months ended									Nine months ended
	September 30,			June 30,			September 30,			September 30,
	2012			2012			2011			2012			2011
	(In thousands)
Compensation	$	9,702		$	9,551		$	10,158		$	29,198		$	29,990
Performance-based compensation		1,712			1,735			281			3,532			772
Payroll taxes and employee benefits		2,196			2,220			2,215			6,868			7,270
Compensation and employee benefits		13,610			13,506			12,654			39,598			38,032
Loan and collection		2,832			2,407			2,658			8,129			10,105
Occupancy, net		2,482			2,490			2,651			7,688			8,415
Data processing		2,492			2,450			2,502			7,281			7,227
Furniture, fixtures and equipment		1,194			1,307			1,308			3,795			4,228
Legal and professional fees		952			1,268			751			3,117			2,330
FDIC deposit insurance		816			816			885			2,489			2,772
Communications		785			826			863			2,486			2,700
Net losses on other real estate and repossessed assets		291			633			1,931			1,911			4,114
Advertising		647			639			740			1,842			1,964
Credit card and bank service fees		433			624			869			1,708			2,929
Vehicle service contract counterparty contingencies		281			326			1,345			1,078			5,002
Supplies		299			340			376			1,033			1,170
Write-down of property and equipment held for sale		860			-			-			860			-
Amortization of intangible assets		272			272			343			816			1,029
Provision for loss reimbursement on sold loans		193			126			251			751			1,020
Costs (recoveries) related to unfunded lending commitments		(538	)		(12	)		(172	)		(597	)		12
Other		1,395			1,465			1,507			2,843			4,186
Total non-interest expense	$	29,296		$	29,483		$	31,462		$	86,828		$	97,235

Average Balances and Rates
		Three Months Ended
		September 30,
		2012						2011
		Average						Average
		Balance		Interest	Rate(3)			Balance		Interest	Rate(3)
Assets (1)		(Dollars in thousands)
Taxable loans	$	1,532,773	$	23,312	6.05	%	$	1,668,940	$	27,140	6.47	%
Tax-exempt loans (2)		6,709		73	4.33			7,728		82	4.21
Taxable securities		217,427		655	1.20			49,911		297	2.36
Tax-exempt securities (2)		26,116		261	3.98			29,259		301	4.08
Cash – interest bearing		377,899		243	0.26			282,170		179	0.25
Other investments		20,494		189	3.67			21,005		188	3.55
Interest Earning Assets		2,181,418		24,733	4.52			2,059,013		28,187	5.44
Cash and due from banks		56,289						56,233
Other assets, net		161,971						192,282
Total Assets	$	2,399,678					$	2,307,528

Liabilities
Savings and interest-bearing checking	$	1,079,389		494	0.18		$	1,008,525		608	0.24
Time deposits		549,319		1,729	1.25			577,723		2,622	1.80
Other borrowings		67,994		1,059	6.20			86,696		1,183	5.41
Interest Bearing Liabilities		1,696,702		3,282	0.77			1,672,944		4,413	1.05
Non-interest bearing deposits		545,945						477,093
Other liabilities		40,477						42,614
Shareholders’ equity		116,554						114,877
Total liabilities and shareholders’ equity	$	2,399,678					$	2,307,528

Net Interest Income			$	21,451					$	23,774

Net Interest Income as a Percent of Average Interest Earning Assets					3.92	%					4.59	%

(1)	All domestic, except for $0.01 million for the three months ended September 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
		Nine Months Ended
		September 30,
		2012						2011
		Average						Average
		Balance		Interest	Rate(3)			Balance		Interest	Rate(3)
Assets (1)		(Dollars in thousands)
Taxable loans	$	1,557,164	$	71,209	6.11	%	$	1,728,076	$	84,554	6.54	%
Tax-exempt loans (2)		7,010		218	4.15			8,064		254	4.21
Taxable securities		221,245		2,246	1.36			51,010		1,108	2.90
Tax-exempt securities (2)		26,563		801	4.03			30,087		931	4.14
Cash – interest bearing		334,426		638	0.25			319,288		605	0.25
Other investments		20,628		572	3.70			22,486		580	3.45
Interest Earning Assets		2,167,036		75,684	4.67			2,159,011		88,032	5.45
Cash and due from banks		54,619						52,475
Other assets, net		163,058						191,215
Total Assets	$	2,384,713					$	2,402,701

Liabilities
Savings and interest-bearing checking	$	1,071,169		1,452	0.18		$	1,005,436		1,805	0.24
Time deposits		565,731		5,500	1.30			687,043		10,881	2.12
Other borrowings		73,714		3,351	6.07			95,337		3,738	5.24
Interest Bearing Liabilities		1,710,614		10,303	0.80			1,787,816		16,424	1.23
Non-interest bearing deposits		524,615						456,514
Other liabilities		39,810						43,977
Shareholders’ equity		109,674						114,394
Total liabilities and shareholders’ equity	$	2,384,713					$	2,402,701

Net Interest Income			$	65,381					$	71,608

Net Interest Income as a Percent of Average Interest Earning Assets					4.03	%					4.43	%

(1)	All domestic, except for $0.02 million for the three months ended September 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 September 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		$	14,547	$	1,319	$	3,570	$	4,889		33.6	%
Land Development			15,195		5,857		864		6,721		44.2
Construction			15,892		639		165		804		5.1
Income Producing			220,217		39,653		7,741		47,394		21.5
Owner Occupied			232,157		29,197		6,218		35,415		15.3
Total Commercial Real Estate Loans (1)		$	498,008	$	76,665		18,558	$	95,223		19.1

Other Commercial Loans(1)		$	136,398	$	16,715		959	$	17,674		13.0
Total non-performing commercial loans						$	19,517

(1)	The total of these two categories is different than the September 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 - October 30, 2012

Attached files

INDEPENDENT BANK CORP /MI/ Reports