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8-K - 8-K - TALMER BANCORP, INC.a15-3377_18k.htm

Exhibit 99.1

 

Talmer Bancorp, Inc. reports fourth quarter 2014 net income of $12.5 million, representing $0.16 of earnings per diluted average common share

 

Experienced strong net loan growth of $214.5 million in the fourth quarter 2014

 

Talmer Bancorp, Inc. declares cash dividend on common stock of $0.01 per share

 

TROY/January 30, 2015 — Talmer Bancorp, Inc. (NASDAQ: TLMR) (“Talmer”) today reported fourth quarter 2014 net income of $12.5 million, compared to $19.5 million for the third quarter of 2014 and $12.6 million for the fourth quarter of 2013.  Earnings per diluted common share were $0.16 for the fourth quarter of 2014, compared to $0.26 for the third quarter of 2014 and $0.18 for the fourth quarter of 2013. In addition, the Board of Directors of Talmer declared a cash dividend on its Class A common stock of $0.01 per share on January 29, 2015.  The dividend will be paid on February 20, 2015, to our Class A common shareholders of record as of February 9, 2015.

 

Talmer Bancorp President and CEO David Provost commented, “We are pleased at our consistent progress in substantially improving our core operating efficiency and sustaining strong organic loan growth.  Looking forward, our lending pipelines are strong, and we plan to make further incremental improvements in our operating efficiency in early 2015 given the anticipated first quarter completion of the First of Huron Corporation acquisition and the operational integration of Talmer West Bank.  During the fourth quarter we generated an annualized reported return on average assets of 85 basis points despite the earnings headwinds from a pre-tax $3.7 million charge related to a reduction in the fair value of our loan servicing rights due to lower market interest rates.  Our team remains optimistic about the substantial organic growth opportunities in our existing markets and continues to be well-prepared to pursue additional acquisitions.”

 



 

Quarterly Results Summary

 

(Dollars in thousands, except per share data)

 

4th Qtr 2014

 

3rd Qtr 2014

 

4th Qtr 2013

 

Earnings Summary

 

 

 

 

 

 

 

Net interest income

 

$

51,463

 

$

52,217

 

$

39,284

 

Total provision for loan losses

 

2,994

 

1,509

 

3,250

 

Noninterest income

 

15,834

 

29,974

 

23,557

 

Noninterest expense

 

48,098

 

51,263

 

53,009

 

Income before income taxes

 

16,205

 

29,419

 

6,582

 

Income tax provision (benefit)

 

3,703

 

9,904

 

(5,971

)

Net income

 

12,502

 

19,515

 

12,553

 

 

 

 

 

 

 

 

 

Per Share Data

 

 

 

 

 

 

 

Diluted earnings per common share

 

$

0.16

 

$

0.26

 

$

0.18

 

Tangible book value per share (1) 

 

10.61

 

10.40

 

9.12

 

Average diluted common shares (in thousands)

 

75,759

 

75,752

 

70,555

 

 

 

 

 

 

 

 

 

Performance and Capital Ratios

 

 

 

 

 

 

 

Return on average assets

 

0.85

%

1.36

%

1.08

%

Return on average equity

 

6.63

 

10.56

 

8.24

 

Net interest margin (fully taxable equivalent) (2) 

 

3.89

 

4.05

 

3.72

 

Core efficiency ratio (1)

 

67.09

 

70.81

 

88.22

 

Tangible average equity to tangible average assets (1)

 

12.67

 

12.64

 

12.91

 

Tier 1 leverage ratio (3)

 

11.56

 

11.45

 

12.19

 

Tier 1 risk-based capital (3)

 

15.20

 

15.56

 

18.29

 

Total risk-based capital (3)

 

16.44

 

16.76

 

19.21

 

 

 

 

 

 

 

 

 

 


(1) See section entitled “Reconciliation of Non-GAAP Financial Measures.”

(2) Presented on a tax equivalent basis using a 35% tax rate for all periods presented.

(3) Fourth quarter 2014 is estimated.

 

Fourth Quarter 2014 Compared to Third Quarter 2014

 

·                  Net income was $12.5 million, or $0.16 per diluted average common share, in the fourth quarter of 2014, compared to $19.5 million, or $0.26 per diluted average common share, for the third quarter of 2014.  The decline in net income in the fourth quarter of 2014 was primarily due to the third quarter of 2014 benefit of $14.4 million in gain on sales of branches, partially offset by a $3.2 million decrease in total noninterest expense.

·                  Net total loans increased during the fourth quarter of 2014 by $214.5 million.  During the fourth quarter of 2014, Talmer Bank and Trust’s net total loans grew by $223.9 million, as a result of $276.8 million of net uncovered loan growth (loans not covered by loss share agreements with the FDIC) and $52.9 million of net covered loan run-off (loans covered by loss share agreements with the FDIC).  Talmer West Bank experienced net loan run-off of $9.4 million in the fourth quarter of 2014.

·                  Total deposits increased $63.3 million, to $4.5 billion as of December 31, 2014, compared to September 30, 2014.  Total deposit growth included other brokered funds of $169.0 million to fund continued loan growth, partially offset by declines in time deposits of $68.8 million, noninterest-bearing demand deposits of $20.8 million, interest-bearing demand deposits of $12.6 million and money market and savings deposits of $3.5 million.

·                  Net interest income decreased slightly to $51.5 million in the fourth quarter of 2014, compared to $52.2 million in the third quarter of 2014.  Our net interest margin declined 16 basis points to 3.89% in the fourth quarter of 2014, compared to 4.05% in the third quarter of 2014, due in large part to the increased negative accretion of the FDIC indemnification asset.

 

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·                  Noninterest income decreased $14.1 million to $15.8 million in the fourth quarter of 2014, compared to the third quarter of 2014.  The decrease is primarily the result of $14.4 million in gain on sales of branches recognized from the sales of our Wisconsin branches and our single branch located in New Mexico recognized in the third quarter of 2014.  Also impacting the decline was a fourth quarter decline of mortgage banking and other loan fees of $2.9 million, driven by a detriment to earnings of $3.7 million due to the change in the fair value of loan servicing rights, partially offset by a fourth quarter decrease of $2.2 million in the amounts due to the FDIC resulting from lower recoveries recognized included within “FDIC loss sharing income.”  In the third quarter of 2014, the change in the fair value of loan servicing rights was a detriment of $176 thousand. The changes in the fair value of loan servicing rights were due mainly to movements in market interest rate during those periods.

·                  Noninterest expense decreased $3.2 million, or 6.2%, to $48.1 million in the fourth quarter of 2014, compared to the third quarter of 2014.  The decline in noninterest expense is significantly due to a decrease in salary and employee benefits of $4.2 million driven by lower salary and benefit related costs as a result of the sales of our Wisconsin and New Mexico branches during the third quarter.

 

Income Statement

 

Net Interest Income and Net Interest Margin

 

Net interest income for the fourth quarter of 2014 was $51.5 million, compared to $52.2 million in the prior quarter.  Our net interest margin was 3.89% in the fourth quarter of 2014, a decrease of 16 basis points from 4.05% in the third quarter of 2014.  The decline in our net interest margin in the fourth quarter was due to a combination of several factors.  The largest factors affecting the change in our net interest margin were: (1) an increase in negative accretion of the FDIC indemnification asset as we continue to experience increases in cash flow expectations on covered loans as a result of our quarterly re-estimations, and (2) a decline in the yield on our uncovered purchased credit impaired loan portfolio due to the run-off of certain higher yielding uncovered purchased credit impaired loans.

 

Our net interest margin benefits from discount accretion on our purchased credit impaired loan portfolio, a component of the accretable yield.  The accretable yield for purchased credit impaired loans includes both the expected coupon of the loan and the discount accretion, and is recognized as interest income over the expected remaining life of the loans.  For the fourth and third quarters of 2014, the yield on uncovered loans was 4.71% and 4.97%, respectively, while the yield generated using only the expected coupon would have been 4.25% and 4.51%, respectively.  For the fourth and third quarters of 2014, the yield on covered loans was 13.03% and 12.36%, respectively, while the yield generated using only the expected coupon would have been 6.25% and 5.93%, respectively.  The difference between the actual yield earned on total loans and the yield generated based on the contractual coupon (not including any interest income for loans in nonaccrual status) represents excess accretable yield.  Our net interest margin is also adversely impacted by the negative yield on the FDIC indemnification asset.  Because our quarterly cash flow re-estimations have continuously resulted in improvements in the overall expected cash flows on covered loans, our expected payment from the FDIC under our loss share agreements has declined, resulting in a negative yield on the FDIC indemnification asset.  This negative yield on the FDIC indemnification asset partially offsets the benefits provided by the excess accretable yield.  This negative yield was $7.5 million, or 38.41%, for the fourth quarter of 2014 compared to $6.7 million, or 26.61%, for the third quarter of 2014.  The combination of the excess accretable yield on both covered and uncovered loans and negative yield on the FDIC indemnification asset benefitted net interest margin by 24 basis points and 35 basis points in the fourth and third quarters of 2014, respectively.  Therefore, excluding the benefit of excess accretable yield and negative yield on the FDIC indemnification asset, our net interest margin in the fourth quarter of 2014 was 3.65% compared to 3.69% in third quarter of 2014.

 

Noninterest Income

 

Noninterest income decreased $14.1 million to $15.8 million in the fourth quarter of 2014, compared to the third quarter of 2014.  The decrease is primarily the result of $14.4 million in gain on sales of branches recognized from the sales of our Wisconsin branches and our single branch located in New Mexico recognized in the third quarter of 2014.  Also impacting

 

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the decline was a fourth quarter decline of mortgage banking and other loan fees of $2.9 million, driven by a detriment to earnings of $3.7 million due to the change in the fair value of loan servicing rights, partially offset by a fourth quarter decrease of $2.2 million in the amounts due to the FDIC resulting from lower recoveries recognized included within “FDIC loss sharing income.”  In the third quarter of 2014, the change in the fair value of loan servicing rights was a detriment of $176 thousand. The changes in the fair value of loan servicing rights were due mainly to movements in market interest rate during those periods.  Loan servicing rights totaled $70.6 million as of December 31, 2014, compared to $74.4 million as of September 30, 2014.   In January of 2015, we completed a sale of approximately $13.2 million of mortgage loan servicing rights, at a price that approximates the current fair value, which were substantially all of the servicing rights we had owned for mortgages located outside of our primarily target markets.  At this time, we do not have any intention to sell any additional mortgage servicing rights.

 

Noninterest Expense

 

Noninterest expense in the fourth quarter of 2014 declined $3.2 million to $48.1 million, compared to $51.3 million in the third quarter of 2014.  The decline in noninterest expense primarily reflects decreases in salary and employee benefits of $4.2 million, occupancy and equipment expense of $1.1 million and data processing fees of $821 thousand, primarily due to the full-quarter impact of the branch sales completed in the third quarter of 2014 and our continued efforts to improve operating efficiencies as we move to fully integrate and rationalize the operations of our acquired banks.

 

Our core efficiency ratio for the fourth quarter of 2014 was 67.09%, exceeding our goal of achieving a 70% or better core efficiency ratio by the fourth quarter of 2014, compared to 70.81% for the third quarter.  The efficiency ratio is a measure of noninterest expense as a percent of net interest income and noninterest income.  The core efficiency ratio begins with the efficiency ratio and then excludes certain items deemed by management to not be related to regular operations.  The fourth quarter of 2014 core efficiency ratio excludes the fair value adjustment to our loan servicing rights of $3.7 million, transaction and integration related costs of $329 thousand and the FDIC loss sharing income which was a detriment of $244 thousand.  The third quarter of 2014 core efficiency ratio excludes the gain on sales of branches of $14.4 million, FDIC loss sharing income which was a detriment of $2.4 million, the fair value adjustment to our loan servicing rights of $176 thousand, and transaction and integration related costs of $1.4 million.

 

Credit Quality

 

The total net provision for loan losses in the fourth quarter of 2014 increased $1.5 million to $3.0 million, compared to $1.5 million in the third quarter of 2014.  The increase in the net provision for loan losses was primarily due to an increase in loan loss provisions resulting from our quarterly cash flow re-estimations on purchased credit impaired loans, and to a lesser extent, additional specific allowances based on individual evaluation of certain loans.

 

The provision for loan losses on uncovered loans in the fourth quarter of 2014 decreased $2.1 million to $5.7 million, compared to $7.8 million in the third quarter of 2014.  At December 31, 2014, the allowance for loan losses on uncovered loans was $33.8 million, or 0.87% of total uncovered loans, compared to $29.9 million, or 0.82% of total uncovered loans, at September 30, 2014.  The increase in allowance for loan losses on uncovered loans for the quarter was primarily due to the impact of organic loan growth and impairment resulting from our quarterly re-estimation of cash flows for our uncovered purchased credit impaired loans.  At December 31, 2014, uncovered nonperforming loans were $35.1 million, compared to $43.3 million at September 30, 2014.  During the fourth quarter of 2014, we repossessed the underlying assets of a set of interrelated loans previously included within uncovered nonperforming loans, which had a net carrying value of approximately $10.5 million at September 30, 2014.  At December 31, 2014, the related assets are included in “Other real estate owned and repossessed assets” at a net carrying value of approximately $9.7 million, net of charge offs and payments applied.  These assets resulted in approximately $900 thousand of credit-related charges during the fourth quarter.

 

The net benefit for loan losses on covered loans in the fourth quarter of 2014 decreased $3.6 million to a benefit of $2.7 million, compared to a benefit of $6.3 million in the third quarter of 2014.  At December 31, 2014, the allowance for loan

 

4



 

losses on covered loans was $21.4 million, or 6.16% of total covered loans, compared to $25.8 million, or 6.38% of total covered loans at September 30, 2014.  The decrease in allowance for loan losses on covered loans primarily reflects the relief of allowance resulting from unanticipated payments received on loans.

 

During the fourth quarter of 2014, we completed re-estimations of cash flow expectations for purchased credit impaired loans acquired in each of our acquisitions.  For the re-estimations, loans with changes in cash flow expectations resulted in net additional loan loss provisions of $3.0 million ($2.6 million uncovered and $456 thousand covered).  The re-estimations also resulted in a $24.5 million improvement in the gross cash flow expectations for purchased credit impaired loans, which will be recognized prospectively as an increase in the accretable yield.  The improvement in cash flows on covered loans will be partially offset by a continued reduction in the FDIC indemnification asset, which will impact future earnings through negative accretion.  For loans with cash flow expectation improvements, any previously recorded impairment is reversed with any additional increase in cash flows recognized prospectively as an increase in the accretable yield.

 

All of our acquired loan portfolios are continuing to perform significantly better than initially anticipated.  We believe improvements in performance are primarily due to improvements in the economy and the efforts made by our Special Assets team that manages our acquired loan portfolios.  Similar to the fourth quarter 2014 re-estimations, the prior re-estimations of cash flows have indicated better overall expected performance than originally anticipated at acquisition.

 

Balance Sheet and Capital Management

 

Total assets increased $126.6 million to $5.9 billion at December 31, 2014 compared to September 30, 2014.  The primary drivers of the increase in assets in the quarter ended December 31, 2014 were an increase in net total loans of $214.5 million, partially offset by decreases of $44.9 million in cash and cash equivalents, $29.1 million in loans held for sale and $15.4 million in the FDIC indemnification asset.  The decrease in the FDIC indemnification asset primarily reflects the impact of $7.5 million of indemnification asset negative accretion, $5.6 million of indemnification write-off due to settlements and the results of our quarterly re-estimations of cash flow expectations for covered purchased credit impaired loans and $1.7 million of claims filed for losses on covered loans.

 

Net total loans at December 31, 2014 increased $214.5 million to $4.2 billion, compared to $4.0 billion at September 30, 2014.  During the fourth quarter of 2014, Talmer Bank and Trust’s net total loans grew by $223.9 million resulting from $276.8 million of net uncovered loan growth, partially offset by $52.9 million of net covered loan run-off.  Talmer West Bank experienced net loan run-off of $9.4 million in the fourth quarter of 2014.  We continue to be focused on sourcing quality loan growth to overcome the run-off of higher-yielding acquired loans.  Our covered loan portfolio has now declined to $346.5 million, or 8.2%, of total loans, which are covered by loss sharing agreements entered into with the FDIC.  Acquired loans are reported on the balance sheet at the contractual balance, net of remaining discount resulting from acquisition accounting and charge-offs taken since acquisition.

 

Total liabilities were $5.1 billion at December 31, 2014 compared to $5.0 billion at September 30, 2014.  The $111.7 million increase in liabilities in the quarter ended December 31, 2014 was primarily due to increases in long-term debt of $69.0 million and in total deposits of $63.3 million, partially offset by a decrease in short-term borrowings of $14.8 million.  The increase in long-term debt primarily reflects additional Federal Home Loan Bank (“FHLB”) advances entered into during the period.  Total deposit growth included other brokered funds of $169.0 million, partially offset by declines in time deposits of $68.8 million, noninterest-bearing demand deposits of $20.8 million, interest-bearing demand deposits of $12.6 million and money market and savings deposits of $3.5 million.  The decrease in short-term borrowings primarily reflects decreases in outstanding securities sold under agreements to repurchase of $51.9 million, partially offset by additional short-term FHLB borrowings of $40.0 million.

 

Total shareholders’ equity increased $15.0 million, or 2.0%, to $761.6 million at December 31, 2014, compared to September 30, 2014.  The increase in shareholders’ equity primarily reflects our fourth quarter 2014 net income of $12.5 million.

 

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Our Tier 1 leverage ratio improved to 11.56% at December 31, 2014 compared to 11.45% at September 30, 2014.  We anticipate that the implementation of new Basel III capital rules during the first quarter of 2015 will have a modestly positive impact to our regulatory capital ratios.

 

Key Performance Goals

 

Our near-term focus continues to be on driving quality loan and core deposit growth and realizing significant operating synergies as we move toward fully integrating our acquired banks.  This includes the consolidation of back office processes, personnel and facilities and the wind-down of third party expenses associated with meeting regulatory compliance and system enhancements.  Recent increases in the level of merger activity in our market area offer the potential for additional opportunities to further leverage our capital position; however, we strive to remain disciplined in our evaluation of the risks and challenges in each and every deal.  The effective integration of operations and culture from previous acquisitions and the ongoing investment in core growth provide momentum in our pursuit of delivering a sustainable 1%+ core return on assets.

 

Conference Call and Webcast

 

Talmer Bancorp, Inc. will host a live conference webcast to review fourth quarter 2014 financial results at 10:00 a.m. ET on Monday, February 2, 2015. The webcast may be accessed through Talmer’s Investor Relations page at www.talmerbank.com where a link will be provided. Interested parties may also access the conference call by calling (888) 317-6003 (event ID No. 6379006) or internationally at (412) 317-6061.  A replay of the webcast will be available for approximately 90 days after the event on Talmer’s Investor Relations page at www.talmerbank.com.

 

About Talmer Bancorp, Inc.

 

Headquartered in Troy, Michigan, Talmer Bancorp, Inc. is the holding company for Talmer Bank and Trust and Talmer West Bank.  These banks, operating through branches and lending offices in Michigan, Ohio, Illinois, Indiana, and Nevada, offer a full suite of commercial and retail banking, mortgage banking, wealth management and trust services to small and medium-sized businesses and individuals.

 

This press release contains both financial measures based on accounting principles generally accepted in the United States (GAAP) and non-GAAP based financial measures, which are used where management believes it to be helpful in understanding Talmer Bancorp Inc.’s results of operations or financial position.  Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as reconciliation to the comparable GAAP financial measure, can be found in this press release. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

 

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Forward-looking Statements

 

Some of the statements in this press release are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements can be identified by words such as:  “intend,” “plan,” “seek,” “believe,” “expect,” “strategy,” “future,” “likely,” “may,” “should,” “will” and similar references to future periods.  Examples of forward-looking statements, include, among others, statements related to our future expectations, including all statements under the heading entitled “Key Performance Goals,” statements about our strong lending pipelines, further incremental improvements in our operating efficiencies in 2015, the anticipated completion of the First of Huron Corp. acquisition and operational integration of Talmer West Bank, expectations related to growth opportunities in our markets, including our ability to pursue additional acquisitions, our ability to drive strong earning asset and fee income growth, our anticipated implementation of the new Basel III capital rules, and our strategic plan.  Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions.  Because forward-looking statements relate to the future, they are subject to risks, uncertainties and other factors, such as a downturn in the economy, unanticipated losses related to the integration of, and accounting for, our acquisition transactions, access to funding sources, greater than expected noninterest expenses, volatile credit and financial markets both domestic and foreign, potential deterioration in real estate values, regulatory changes, excessive loan losses, and, with respect to the proposed acquisition of First of Huron Corp., the inability to meet certain closing terms and conditions, as well as additional risks and uncertainties contained in the “Risk Factors” and the forward-looking statement disclosure contained in our Annual Report on Form 10-K for the most recently ended fiscal year, any of which could cause actual results to differ materially from future results expressed or implied by those forward-looking statements.  All forward-looking statements speak only as of the date on which it is made.  We undertake no obligation to update or revise any forward-looking statements, whether written or oral, that may be made from time to time, whether as a result of new information, future events or otherwise.

 

Media Contact:

 

Investor Relations Contact:

 

 

 

Shellie Maitre

 

Bradley Adams

 

 

 

(248) 498-2858

 

(248) 498-2862

 

7



 

Talmer Bancorp, Inc.

Consolidated Balance Sheets

(Unaudited)

 

 

 

December 31,

 

September 30,

 

December 31,

 

(Dollars in thousands, except per share data)

 

2014

 

2014

 

2013

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

Cash and due from banks

 

$

86,185

 

$

91,214

 

$

97,167

 

Interest-bearing deposits with other banks

 

96,551

 

121,952

 

206,160

 

Federal funds sold and other short-term investments

 

71,000

 

85,500

 

72,029

 

Total cash and cash equivalents

 

253,736

 

298,666

 

375,356

 

Securities available-for-sale

 

740,819

 

734,489

 

620,083

 

Federal Home Loan Bank stock

 

20,212

 

17,426

 

16,303

 

Loans held for sale

 

93,453

 

122,599

 

85,252

 

Loans:

 

 

 

 

 

 

 

Residential real estate (includes $18.3 million, $17.9 million and $16.3 million respectively, measured at fair value)

 

1,426,012

 

1,430,939

 

1,085,453

 

Commercial real estate

 

1,310,938

 

1,213,361

 

755,839

 

Commercial and industrial

 

869,477

 

790,867

 

446,644

 

Real estate construction (includes $1.4 million measured at fair value at December 31, 2013)

 

131,686

 

102,920

 

176,226

 

Consumer

 

164,524

 

93,246

 

9,754

 

Total loans, excluding covered loans

 

3,902,637

 

3,631,333

 

2,473,916

 

Less: Allowance for loan losses - uncovered

 

(33,819

)

(29,892

)

(17,746

)

Net loans - excluding covered loans

 

3,868,818

 

3,601,441

 

2,456,170

 

Covered loans

 

346,490

 

403,792

 

530,068

 

Less: Allowance for loan losses - covered

 

(21,353

)

(25,768

)

(40,381

)

Net loans - covered

 

325,137

 

378,024

 

489,687

 

Net total loans

 

4,193,955

 

3,979,465

 

2,945,857

 

Premises and equipment

 

46,905

 

49,462

 

51,001

 

FDIC indemnification asset

 

67,026

 

82,441

 

131,861

 

Other real estate owned and repossessed assets

 

48,743

 

45,033

 

29,982

 

Loan servicing rights

 

70,598

 

74,380

 

78,603

 

Core deposit intangible

 

13,035

 

13,696

 

13,205

 

FDIC receivable

 

6,062

 

12,873

 

7,783

 

Company-owned life insurance

 

97,782

 

96,605

 

39,500

 

Income tax benefit

 

177,472

 

181,318

 

126,200

 

Other assets

 

40,982

 

35,717

 

26,375

 

Total assets

 

$

5,870,780

 

$

5,744,170

 

$

4,547,361

 

Liabilities

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

Noninterest-bearing demand deposits

 

$

887,567

 

$

908,343

 

$

779,407

 

Interest-bearing demand deposits

 

660,697

 

673,336

 

598,281

 

Money market and savings deposits

 

1,170,236

 

1,173,697

 

1,215,864

 

Time deposits

 

1,188,178

 

1,256,981

 

927,313

 

Other brokered funds

 

642,185

 

473,240

 

80,000

 

Total deposits

 

4,548,863

 

4,485,597

 

3,600,865

 

FDIC clawback liability

 

26,905

 

25,723

 

24,887

 

FDIC warrants payable

 

4,633

 

4,563

 

4,118

 

Short-term borrowings

 

135,743

 

150,573

 

71,876

 

Long-term debt

 

353,972

 

285,009

 

199,037

 

Other liabilities

 

39,057

 

46,053

 

29,563

 

Total liabilities

 

5,109,173

 

4,997,518

 

3,930,346

 

Shareholders’ equity

 

 

 

 

 

 

 

Preferred stock - $1.00 par value

 

 

 

 

 

 

 

Authorized - 20,000,000 shares at 12/31/2014, 9/30/2014 and 12/31/2013

Issued and outstanding - 0 shares at 12/31/2014, 9/30/2014 and 12/31/2013

 

 

 

 

Common stock:

 

 

 

 

 

 

 

Class A Voting Common Stock - $1.00 par value

Authorized -198,000,000 shares at 12/31/2014, 9/30/2014 and 12/31/2013

Issued and outstanding -70,532,122 shares at 12/31/2014, 70,503,920 shares at 9/30/2014 and 66,234,397 shares at 12/31/2013

 

70,532

 

70,504

 

66,234

 

Class B Non-Voting Common Stock - $1.00 par value

Authorized - 2,000,000 shares at 12/31/2014, 9/30/2014 and 12/31/2013

Issued and outstanding - 0 shares at 12/31/2014, 9/30/2014 and 12/31/2013

 

 

 

 

Additional paid-in-capital

 

405,436

 

404,068

 

366,428

 

Retained earnings

 

281,789

 

269,993

 

192,349

 

Accumulated other comprehensive income (loss), net of tax

 

3,850

 

2,087

 

(7,996

)

Total shareholders’ equity

 

761,607

 

746,652

 

617,015

 

Total liabilities and shareholders’ equity

 

$

5,870,780

 

$

5,744,170

 

$

4,547,361

 

 

 

8



 

Talmer Bancorp, Inc.

Consolidated Statements of Income

(Unaudited)

 

 

 

Three months ended December 31,

 

Year ended December 31,

 

(Dollars in thousands, except per share data)

 

2014

 

2013

 

2014

 

2013

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

 

 

 

 

 

 

 

Interest and fees on loans

 

$

58,271

 

$

45,354

 

$

226,674

 

$

194,857

 

Interest on investments

 

 

 

 

 

 

 

 

 

Taxable

 

2,263

 

1,880

 

8,509

 

6,097

 

Tax-exempt

 

1,610

 

1,098

 

6,232

 

4,230

 

Total interest on securities

 

3,873

 

2,978

 

14,741

 

10,327

 

Interest on interest-earning cash balances

 

94

 

188

 

640

 

776

 

Interest on federal funds and other short-term investments

 

126

 

204

 

527

 

930

 

Dividends on FHLB stock

 

177

 

160

 

867

 

872

 

FDIC indemnification asset

 

(7,539

)

(6,952

)

(26,426

)

(28,040

)

Total interest income

 

55,002

 

41,932

 

217,023

 

179,722

 

Interest Expense

 

 

 

 

 

 

 

 

 

Interest-bearing demand deposits

 

194

 

173

 

824

 

673

 

Money market and savings deposits

 

457

 

430

 

1,930

 

1,889

 

Time deposits

 

1,546

 

1,250

 

6,080

 

5,864

 

Other brokered funds

 

527

 

32

 

879

 

142

 

Interest on short-term borrowings

 

90

 

24

 

420

 

105

 

Interest on long-term debt

 

725

 

739

 

2,627

 

3,052

 

Total interest expense

 

3,539

 

2,648

 

12,760

 

11,725

 

Net interest income

 

51,463

 

39,284

 

204,263

 

167,997

 

Provision for loan losses - uncovered

 

5,655

 

6,569

 

23,082

 

15,520

 

Benefit for loan losses - covered

 

(2,661

)

(3,319

)

(18,755

)

(10,422

)

Net interest income after provision for loan losses

 

48,469

 

36,034

 

199,936

 

162,899

 

 

 

 

 

 

 

 

 

 

 

Noninterest income

 

 

 

 

 

 

 

 

 

Deposit fee income

 

2,692

 

3,179

 

12,225

 

15,886

 

Mortgage banking and other loan fees

 

(865

)

7,666

 

1,163

 

30,853

 

Net gain on sales of loans

 

4,939

 

3,423

 

17,747

 

41,212

 

Net gain on sales of branches

 

 

 

14,410

 

 

Bargain purchase gain

 

 

 

41,977

 

71,702

 

FDIC loss sharing income

 

(244

)

(3,167

)

(6,211

)

(10,226

)

Accelerated discount on acquired loans

 

3,742

 

6,596

 

18,197

 

17,154

 

Net gain (loss) on sales of securities

 

 

292

 

(2,066

)

392

 

Other income

 

5,570

 

5,568

 

20,057

 

14,165

 

Total noninterest income

 

15,834

 

23,557

 

117,499

 

181,138

 

 

 

 

 

 

 

 

 

 

 

Noninterest expense

 

 

 

 

 

 

 

 

 

Salary and employee benefits

 

25,632

 

29,837

 

121,744

 

146,609

 

Occupancy and equipment expense

 

6,911

 

6,346

 

31,806

 

26,755

 

Data processing fees

 

789

 

1,974

 

6,399

 

7,591

 

Professional service fees

 

3,323

 

3,974

 

12,952

 

16,640

 

FDIC loss sharing expense

 

406

 

483

 

2,158

 

2,007

 

Bank acquisition and due diligence fees

 

329

 

819

 

3,765

 

8,693

 

Marketing expense

 

1,226

 

659

 

4,923

 

3,484

 

Other employee expense

 

658

 

642

 

2,674

 

3,096

 

Insurance expense

 

1,615

 

1,851

 

5,697

 

9,974

 

Other expense

 

7,209

 

6,424

 

26,762

 

25,965

 

Total noninterest expense

 

48,098

 

53,009

 

218,880

 

250,814

 

Income before income taxes

 

16,205

 

6,582

 

98,555

 

93,223

 

Income tax provision (benefit)

 

3,703

 

(5,971

)

7,705

 

(5,335

)

Net income

 

$

12,502

 

$

12,553

 

$

90,850

 

$

98,558

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.18

 

$

0.19

 

$

1.30

 

$

1.49

 

Diluted

 

$

0.16

 

$

0.18

 

$

1.21

 

$

1.41

 

Average common shares outstanding - basic

 

70,136

 

66,231

 

69,605

 

66,230

 

Average common shares outstanding - diluted

 

75,759

 

70,555

 

75,150

 

69,664

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income

 

$

14,265

 

$

9,922

 

$

102,696

 

$

86,644

 

 

 

9



 

Talmer Bancorp, Inc.

Consolidated Statements of Income

(Unaudited)

 

(Dollars in thousands, except per share data)

 

4th
Quarter
2014

 

3rd

Quarter

2014

 

2nd
Quarter
2014

 

1st
Quarter
2014

 

4th

Quarter
2013

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans

 

$

58,271

 

$

58,128

 

$

56,774

 

$

53,501

 

$

45,354

 

Interest on investments

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

2,263

 

2,241

 

2,139

 

1,866

 

1,880

 

Tax-exempt

 

1,610

 

1,444

 

1,213

 

1,965

 

1,098

 

Total interest on securities

 

3,873

 

3,685

 

3,352

 

3,831

 

2,978

 

Interest on interest-earning cash balances

 

94

 

159

 

171

 

216

 

188

 

Interest on federal funds and other short-term investments

 

126

 

130

 

131

 

140

 

204

 

Dividends on FHLB stock

 

177

 

177

 

291

 

222

 

160

 

FDIC indemnification asset

 

(7,539

)

(6,663

)

(5,506

)

(6,718

)

(6,952

)

Total interest income

 

55,002

 

55,616

 

55,213

 

51,192

 

41,932

 

Interest Expense

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing demand deposits

 

194

 

190

 

216

 

224

 

173

 

Money market and savings deposits

 

457

 

487

 

492

 

494

 

430

 

Time deposits

 

1,546

 

1,611

 

1,432

 

1,491

 

1,250

 

Other brokered funds

 

527

 

288

 

35

 

29

 

32

 

Interest on short-term borrowings

 

90

 

122

 

33

 

175

 

24

 

Interest on long-term debt

 

725

 

701

 

627

 

574

 

739

 

Total interest expense

 

3,539

 

3,399

 

2,835

 

2,987

 

2,648

 

Net interest income

 

51,463

 

52,217

 

52,378

 

48,205

 

39,284

 

Provision for loan losses - uncovered

 

5,655

 

7,784

 

3,219

 

6,424

 

6,569

 

Benefit for loan losses - covered

 

(2,661

)

(6,275

)

(7,321

)

(2,498

)

(3,319

)

Net interest income after provision for loan losses

 

48,469

 

50,708

 

56,480

 

44,279

 

36,034

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest income

 

 

 

 

 

 

 

 

 

 

 

Deposit fee income

 

2,692

 

3,047

 

3,188

 

3,298

 

3,179

 

Mortgage banking and other loan fees

 

(865

)

2,065

 

(1,122

)

1,085

 

7,666

 

Net gain on sales of loans

 

4,939

 

4,083

 

5,681

 

3,044

 

3,423

 

Net gain on sales of branches

 

 

14,410

 

 

 

 

Bargain purchase gain

 

 

 

 

41,977

 

 

FDIC loss sharing income

 

(244

)

(2,420

)

(3,434

)

(113

)

(3,167

)

Accelerated discount on acquired loans

 

3,742

 

3,663

 

4,326

 

6,466

 

6,596

 

Net gain (loss) on sales of securities

 

 

244

 

 

(2,310

)

292

 

Other income

 

5,570

 

4,882

 

5,312

 

4,293

 

5,568

 

Total noninterest income

 

15,834

 

29,974

 

13,951

 

57,740

 

23,557

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest expense

 

 

 

 

 

 

 

 

 

 

 

Salary and employee benefits

 

25,632

 

29,795

 

30,466

 

35,851

 

29,837

 

Occupancy and equipment expense

 

6,911

 

7,981

 

7,871

 

9,043

 

6,346

 

Data processing fees

 

789

 

1,610

 

2,260

 

1,740

 

1,974

 

Professional service fees

 

3,323

 

2,964

 

2,628

 

4,037

 

3,974

 

FDIC loss sharing expense

 

406

 

245

 

983

 

524

 

483

 

Bank acquisition and due diligence fees

 

329

 

239

 

268

 

2,929

 

819

 

Marketing expense

 

1,226

 

1,001

 

1,605

 

1,091

 

659

 

Other employee expense

 

658

 

621

 

752

 

643

 

642

 

Insurance expense

 

1,615

 

1,383

 

868

 

1,831

 

1,851

 

Other expense

 

7,209

 

5,424

 

6,370

 

7,759

 

6,424

 

Total noninterest expense

 

48,098

 

51,263

 

54,071

 

65,448

 

53,009

 

Income before income taxes

 

16,205

 

29,419

 

16,360

 

36,571

 

6,582

 

Income tax provision (benefit)

 

3,703

 

9,904

 

(4,246

)

(1,656

)

(5,971

)

Net income

 

$

12,502

 

$

19,515

 

$

20,606

 

$

38,227

 

$

12,553

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.18

 

$

0.28

 

$

0.29

 

$

0.56

 

$

0.19

 

Diluted

 

$

0.16

 

$

0.26

 

$

0.27

 

$

0.52

 

$

0.18

 

Average common shares outstanding - basic

 

70,136

 

70,092

 

70,021

 

68,121

 

66,231

 

Average common shares outstanding - diluted

 

75,759

 

75,752

 

75,659

 

73,377

 

70,555

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income

 

$

14,265

 

$

19,369

 

$

25,254

 

$

43,808

 

$

9,922

 

 

10



 

Talmer Bancorp, Inc.

Selected Financial Information

(Unaudited)

 

 

 

2014

 

2013

 

(Dollars in thousands, except per share data)

 

4th Qtr

 

3rd Qtr

 

2nd Qtr

 

1st Qtr

 

4th Qtr

 

Earnings Summary

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

$

55,002

 

$

55,616

 

$

55,213

 

$

51,192

 

$

41,932

 

Interest expense

 

3,539

 

3,399

 

2,835

 

2,987

 

2,648

 

Net interest income

 

51,463

 

52,217

 

52,378

 

48,205

 

39,284

 

Provision for loan losses - uncovered

 

5,655

 

7,784

 

3,219

 

6,424

 

6,569

 

Provision (benefit) for loan losses - covered

 

(2,661

)

(6,275

)

(7,321

)

(2,498

)

(3,319

)

Bargain purchase gains

 

 

 

 

41,977

 

 

Noninterest income

 

15,834

 

29,974

 

13,951

 

57,740

 

23,557

 

Noninterest expense

 

48,098

 

51,263

 

54,071

 

65,448

 

53,009

 

Income before income taxes

 

16,205

 

29,419

 

16,360

 

36,571

 

6,582

 

Income tax provision (benefit)

 

3,703

 

9,904

 

(4,246

)

(1,656

)

(5,971

)

Net income

 

12,502

 

19,515

 

20,606

 

38,227

 

12,553

 

 

 

 

 

 

 

 

 

 

 

 

 

Per Share Data

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per common share

 

$

0.18

 

$

0.28

 

$

0.29

 

$

0.56

 

$

0.19

 

Diluted earnings per common share

 

0.16

 

0.26

 

0.27

 

0.52

 

0.18

 

Book value per common share

 

10.80

 

10.59

 

10.33

 

10.05

 

9.32

 

Tangible book value per share (1) 

 

10.61

 

10.40

 

10.11

 

9.82

 

9.12

 

Shares outstanding (in thousands)

 

70,532

 

70,504

 

70,451

 

69,962

 

66,234

 

Average common diluted shares (in thousands)

 

75,759

 

75,752

 

75,659

 

73,377

 

70,555

 

 

 

 

 

 

 

 

 

 

 

 

 

Selected Period End Balances

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

5,870,780

 

$

5,744,170

 

$

5,609,493

 

$

5,423,261

 

$

4,547,361

 

Securities available-for-sale

 

740,819

 

734,489

 

731,700

 

632,047

 

620,083

 

Total loans

 

4,249,127

 

4,035,125

 

3,755,487

 

3,643,196

 

3,003,984

 

Uncovered loans

 

3,902,637

 

3,631,333

 

3,296,207

 

3,145,276

 

2,473,916

 

Covered loans

 

346,490

 

403,792

 

459,280

 

497,920

 

530,068

 

FDIC indemnification asset

 

67,026

 

82,441

 

102,694

 

119,045

 

131,861

 

Total deposits

 

4,548,863

 

4,485,597

 

4,296,534

 

4,386,332

 

3,600,865

 

Total liabilities

 

5,109,173

 

4,997,518

 

4,881,548

 

4,720,233

 

3,930,346

 

Total shareholders’ equity

 

761,607

 

746,652

 

727,945

 

703,028

 

617,015

 

Tangible shareholders’ equity (1)

 

748,572

 

732,956

 

712,567

 

686,926

 

603,810

 

 

 

 

 

 

 

 

 

 

 

 

 

Performance and Capital Ratios

 

 

 

 

 

 

 

 

 

 

 

Return on average assets

 

0.85

%

1.36

%

1.51

%

2.75

%

1.08

%

Return on average equity

 

6.63

 

10.56

 

11.61

 

22.15

 

8.24

 

Net interest margin (fully taxable equivalent) (2) 

 

3.89

 

4.05

 

4.34

 

3.95

 

3.72

 

Core efficiency ratio (1)

 

67.09

 

70.81

 

71.97

 

82.12

 

88.22

 

Tangible average equity to tangible average assets (1)

 

12.67

 

12.64

 

12.79

 

12.17

 

12.91

 

Tier 1 leverage ratio (3)

 

11.56

 

11.45

 

11.71

 

11.13

 

12.19

 

Tier 1 risk-based capital (3)

 

15.20

 

15.56

 

16.16

 

16.54

 

18.29

 

Total risk-based capital (3)

 

16.44

 

16.76

 

17.31

 

17.60

 

19.21

 

 

 

 

 

 

 

 

 

 

 

 

Asset Quality Ratios:

 

 

 

 

 

 

 

 

 

 

 

Net charge-offs to average loans, excluding covered loans

 

0.18

%

0.25

%

0.20

%

0.17

%

0.71

%

Nonperforming assets as a percentage of total assets

 

1.78

 

1.73

 

1.60

 

1.79

 

1.55

 

Nonperforming loans as a percent of total loans

 

1.34

 

1.38

 

1.04

 

1.13

 

1.40

 

Nonperforming loans as a percent of total loans, excluding covered loans

 

0.90

 

1.19

 

0.79

 

0.81

 

0.98

 

Allowance for loan losses as a percentage of period-end loans

 

1.30

 

1.38

 

1.52

 

1.67

 

1.93

 

Allowance for loan losses-uncovered as a percentage of period-end uncovered loans

 

0.87

 

0.82

 

0.74

 

0.72

 

0.72

 

Allowance for loan losses as a percentage of nonperforming loans, excluding loans accounted for under ASC 310-30

 

39.39

 

33.68

 

42.07

 

50.61

 

43.52

 

 


(1)  See section entitled “Reconciliation of Non-GAAP Financial Measures.”

(2)  Presented on a tax equivalent basis using a 35% tax rate for all periods presented.

(3) Fourth quarter 2014 is estimated.

 

11



 

Talmer Bancorp, Inc.

Loan Data

(Unaudited)

 

 

 

December 31,

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

(Dollars in thousands)

 

2014

 

2014

 

2014

 

2014

 

2013

 

 

 

 

 

 

 

 

 

 

 

 

 

Uncovered loans

 

 

 

 

 

 

 

 

 

 

 

Residential real estate

 

$

1,426,012

 

$

1,430,939

 

$

1,362,869

 

$

1,267,714

 

$

1,085,453

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

Non-owner occupied

 

888,650

 

814,179

 

731,743

 

742,151

 

581,651

 

Owner-occupied

 

417,843

 

379,964

 

371,406

 

377,678

 

148,545

 

Farmland

 

4,445

 

19,218

 

28,199

 

27,964

 

25,643

 

Total commercial real estate

 

1,310,938

 

1,213,361

 

1,131,348

 

1,147,793

 

755,839

 

Commercial and industrial

 

869,477

 

790,867

 

647,090

 

573,268

 

446,644

 

Real estate construction

 

131,686

 

102,920

 

112,866

 

143,569

 

176,226

 

Consumer

 

164,524

 

93,246

 

42,034

 

12,932

 

9,754

 

Total uncovered loans

 

3,902,637

 

3,631,333

 

3,296,207

 

3,145,276

 

2,473,916

 

 

 

 

 

 

 

 

 

 

 

 

 

Covered loans

 

 

 

 

 

 

 

 

 

 

 

Residential real estate

 

108,226

 

113,228

 

117,507

 

119,408

 

123,334

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

Non-owner occupied

 

108,692

 

121,491

 

142,846

 

143,460

 

154,951

 

Owner-occupied

 

70,492

 

80,990

 

91,829

 

108,630

 

115,435

 

Farmland

 

7,478

 

17,015

 

21,541

 

27,059

 

29,015

 

Total commercial real estate

 

186,662

 

219,496

 

256,216

 

279,149

 

299,401

 

Commercial and industrial

 

32,648

 

47,252

 

60,497

 

71,155

 

78,437

 

Real estate construction

 

9,389

 

13,734

 

14,391

 

16,895

 

17,218

 

Consumer

 

9,565

 

10,082

 

10,669

 

11,313

 

11,678

 

Total covered loans

 

346,490

 

403,792

 

459,280

 

497,920

 

530,068

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans

 

$

4,249,127

 

$

4,035,125

 

$

3,755,487

 

$

3,643,196

 

$

3,003,984

 

 

12



 

Talmer Bancorp, Inc.

Impaired Loans

(Unaudited)

 

(Dollars in thousands)

 

4th Qtr 2014

 

3rd Qtr 2014

 

2nd Qtr 2014

 

1st Qtr 2014

 

4th Qtr 2013

 

Uncovered

 

 

 

 

 

 

 

 

 

 

 

Nonperforming troubled debt restructurings

 

 

 

 

 

 

 

 

 

 

 

Residential real estate

 

$

3,984

 

$

2,284

 

$

1,920

 

$

2,189

 

$

2,469

 

Commercial real estate

 

2,644

 

3,122

 

2,842

 

2,664

 

3,581

 

Commercial and industrial

 

180

 

135

 

541

 

526

 

415

 

Consumer

 

83

 

84

 

90

 

2

 

3

 

Total nonperforming troubled debt restructurings

 

6,891

 

5,625

 

5,393

 

5,381

 

6,468

 

Nonaccrual loans other than nonperforming troubled debt restructurings

 

 

 

 

 

 

 

 

 

 

 

Residential real estate

 

13,390

 

13,449

 

11,708

 

11,633

 

12,946

 

Commercial real estate

 

11,112

 

9,456

 

6,590

 

6,174

 

2,010

 

Commercial and industrial

 

3,370

 

14,339

 

2,074

 

1,723

 

2,266

 

Real estate construction

 

174

 

253

 

158

 

582

 

510

 

Consumer

 

174

 

161

 

76

 

100

 

97

 

Total nonaccrual loans other than nonperforming troubled debt restructurings

 

28,220

 

37,658

 

20,606

 

20,212

 

17,829

 

Total nonaccrual loans

 

35,111

 

43,283

 

25,999

 

25,593

 

24,297

 

Other real estate owned and repossessed assets (1)

 

36,872

 

32,046

 

39,848

 

45,716

 

17,046

 

Total nonperforming assets

 

71,983

 

75,329

 

65,847

 

71,309

 

41,343

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing troubled debt restructurings

 

 

 

 

 

 

 

 

 

 

 

Residential real estate

 

1,368

 

1,802

 

1,628

 

828

 

328

 

Commercial real estate

 

3,785

 

2,961

 

2,588

 

3,003

 

1,637

 

Commercial and industrial

 

840

 

652

 

995

 

1,365

 

1,367

 

Real estate construction

 

90

 

92

 

94

 

96

 

90

 

Consumer

 

234

 

56

 

29

 

30

 

30

 

Total performing troubled debt restructurings

 

6,317

 

5,563

 

5,334

 

5,322

 

3,452

 

Total uncovered impaired assets

 

$

78,300

 

$

80,892

 

$

71,181

 

$

76,631

 

$

44,795

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans 90 days or more past due and still accruing, excluding loans accounted for under ASC 310-30

 

$

53

 

$

595

 

$

305

 

$

3

 

$

539

 

 

 

 

 

 

 

 

 

 

 

 

 

Covered

 

 

 

 

 

 

 

 

 

 

 

Nonperforming troubled debt restructurings

 

 

 

 

 

 

 

 

 

 

 

Residential real estate

 

$

1,363

 

$

1,304

 

$

1,408

 

$

962

 

$

900

 

Commercial real estate

 

14,343

 

4,144

 

4,861

 

6,235

 

6,561

 

Commercial and industrial

 

2,043

 

2,438

 

2,089

 

2,780

 

3,052

 

Real estate construction

 

272

 

614

 

595

 

1,023

 

926

 

Consumer

 

13

 

42

 

15

 

25

 

25

 

Total nonperforming troubled debt restructurings

 

18,034

 

8,542

 

8,968

 

11,025

 

11,464

 

Nonaccrual loans other than nonperforming troubled debt restructurings

 

 

 

 

 

 

 

 

 

 

 

Residential real estate

 

485

 

433

 

426

 

368

 

88

 

Commercial real estate

 

1,380

 

1,313

 

1,489

 

1,563

 

1,563

 

Commercial and industrial

 

1,517

 

1,653

 

1,751

 

2,124

 

4,149

 

Real estate construction

 

441

 

441

 

439

 

442

 

446

 

Consumer

 

 

 

1

 

 

6

 

Total nonaccrual loans other than nonperforming troubled debt restructurings

 

3,823

 

3,840

 

4,106

 

4,497

 

6,252

 

Total nonaccrual loans

 

21,857

 

12,382

 

13,074

 

15,522

 

17,716

 

Other real estate owned

 

10,719

 

11,835

 

10,975

 

10,184

 

11,598

 

Total nonperforming assets

 

32,576

 

24,217

 

24,049

 

25,706

 

29,314

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing troubled debt restructurings

 

 

 

 

 

 

 

 

 

 

 

Residential real estate

 

3,046

 

2,860

 

2,821

 

2,582

 

2,691

 

Commercial real estate

 

9,017

 

14,915

 

16,102

 

15,056

 

14,391

 

Commercial and industrial

 

1,137

 

2,119

 

2,962

 

3,030

 

3,802

 

Real estate construction

 

264

 

108

 

109

 

111

 

163

 

Total performing troubled debt restructurings

 

13,464

 

20,002

 

21,994

 

20,779

 

21,047

 

Total covered impaired assets

 

$

46,040

 

$

44,219

 

$

46,043

 

$

46,485

 

$

50,361

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans 90 days or more past due and still accruing, excluding loans accounted for under ASC 310-30

 

$

 

$

 

$

49

 

$

7

 

$

 

 


(1) Excludes closed branches and operating facilities.

 

13



 

Talmer Bancorp, Inc.

Net Interest Income and Net Interest Margin

(Unaudited)

 

 

Three months ended

 

 

 

December 31, 2014

 

September 30, 2014

 

December 31, 2013

 

(Dollars in thousands)

 

Average
Balance

 

Interest (1)

 

Average
Rate (2)

 

Average
Balance

 

Interest (1)

 

Average
Rate (2)

 

Average
Balance

 

Interest (1)

 

Average
Rate (2)

 

Earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-earning balances

 

$

147,713

 

$

94

 

 

0.25

%

$

264,158

 

$

159

 

0.24

%

$

278,114

 

$

188

 

0.27

%

Federal funds sold and other short-term investments

 

69,897

 

126

 

0.71

 

76,724

 

130

 

0.67

 

103,011

 

204

 

0.79

 

Investment securities (3):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

519,774

 

2,263

 

1.73

 

515,388

 

2,241

 

1.73

 

451,467

 

1,880

 

1.65

 

Tax-exempt

 

223,580

 

1,610

 

3.82

 

205,329

 

1,444

 

3.77

 

187,911

 

1,098

 

3.13

 

FHLB Stock

 

18,671

 

177

 

3.77

 

17,333

 

177

 

4.04

 

16,303

 

160

 

3.90

 

Gross uncovered loans (4)

 

3,865,553

 

45,863

 

4.71

 

3,548,152

 

44,444

 

4.97

 

2,507,233

 

29,615

 

4.69

 

Gross covered loans (4)

 

377,776

 

12,408

 

13.03

 

439,366

 

13,684

 

12.36

 

539,570

 

15,739

 

11.57

 

FDIC indemnification asset

 

77,865

 

(7,539

)

(38.41

)

99,335

 

(6,663

)

(26.61

)

144,949

 

(6,952

)

(19.03

)

Total earning assets

 

5,300,829

 

55,002

 

4.16

%

5,165,785

 

55,616

 

4.31

%

4,228,558

 

41,932

 

3.97

%

Non-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

101,884

 

 

 

 

 

114,156

 

 

 

 

 

108,944

 

 

 

 

 

Allowance for loan losses

 

(52,808

)

 

 

 

 

(55,579

)

 

 

 

 

(57,114

)

 

 

 

 

Premises and equipment

 

48,587

 

 

 

 

 

51,636

 

 

 

 

 

52,870

 

 

 

 

 

Core deposit intangible

 

13,334

 

 

 

 

 

14,398

 

 

 

 

 

13,527

 

 

 

 

 

Other real estate owned and repossessed assets

 

48,983

 

 

 

 

 

49,464

 

 

 

 

 

31,425

 

 

 

 

 

Loan servicing rights

 

73,059

 

 

 

 

 

73,996

 

 

 

 

 

73,680

 

 

 

 

 

FDIC receivable

 

11,013

 

 

 

 

 

5,886

 

 

 

 

 

10,392

 

 

 

 

 

Company-owned life insurance

 

97,081

 

 

 

 

 

95,930

 

 

 

 

 

39,337

 

 

 

 

 

Other non-earning assets

 

223,662

 

 

 

 

 

230,931

 

 

 

 

 

126,548

 

 

 

 

 

Total assets

 

$

5,865,624

 

 

 

 

 

$

5,746,603

 

 

 

 

 

$

4,628,167

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing demand deposits

 

$

676,994

 

$

194

 

0.11

%

$

657,107

 

$

190

 

0.11

%

$

595,362

 

$

173

 

0.12

%

Money market and savings deposits

 

1,174,132

 

457

 

0.15

 

1,237,984

 

487

 

0.16

 

1,225,280

 

430

 

0.14

 

Time deposits

 

1,219,758

 

1,546

 

0.50

 

1,236,286

 

1,611

 

0.52

 

943,778

 

1,250

 

0.53

 

Other brokered funds

 

543,784

 

527

 

0.38

 

361,929

 

288

 

0.32

 

80,000

 

32

 

0.16

 

Short-term borrowings

 

165,515

 

90

 

0.22

 

219,859

 

122

 

0.22

 

40,219

 

24

 

0.24

 

Long-term debt

 

326,924

 

725

 

0.88

 

280,054

 

701

 

0.99

 

252,173

 

739

 

1.16

 

Total interest-bearing liabilities

 

4,107,107

 

3,539

 

0.34

%

3,993,219

 

3,399

 

0.34

%

3,136,812

 

2,648

 

0.33

%

Noninterest-bearing liabilities and shareholders’ equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing demand deposits

 

934,143

 

 

 

 

 

961,559

 

 

 

 

 

819,961

 

 

 

 

 

FDIC clawback liability

 

25,923

 

 

 

 

 

26,492

 

 

 

 

 

24,485

 

 

 

 

 

Other liabilities

 

43,729

 

 

 

 

 

26,463

 

 

 

 

 

37,564

 

 

 

 

 

Shareholders’ equity

 

754,722

 

 

 

 

 

738,870

 

 

 

 

 

609,345

 

 

 

 

 

Total liabilities and shareholders’ equity

 

$

5,865,624

 

 

 

 

 

$

5,746,603

 

 

 

 

 

$

4,628,167

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 

 

$

51,463

 

 

 

 

 

$

52,217

 

 

 

 

 

$

39,284

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest spread

 

 

 

 

 

3.82

%

 

 

 

 

3.97

%

 

 

 

 

3.64

%

Net interest margin as a percentage of interest-earning assets

 

 

 

 

 

3.85

%

 

 

 

 

4.01

%

 

 

 

 

3.68

%

Tax equivalent effect

 

 

 

 

 

0.04

%

 

 

 

 

0.04

%

 

 

 

 

0.04

%

Net interest margin as a percentage of interest-earning assets (FTE)

 

 

 

 

 

3.89

%

 

 

 

 

4.05

%

 

 

 

 

3.72

%

 


(1) Interest income is shown on actual basis and does not include taxable equivalent adjustments.

(2) Average rates are presented on an annual basis and include a taxable equivalent adjustment to interest income of $542 thousand, $505 thousand and $384 thousand on tax-exempt securities for the three months ended December 31, 2014, September 30, 2014, and December 31, 2013, respectively, using the statutory tax rate of 35%.

(3) For presentation in this table, average balances and the corresponding average rates for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.

(4) Includes nonaccrual loans.

 

14



 

Talmer Bancorp, Inc.

Net Interest Income and Net Interest Margin

(Unaudited)                                                                                                                                        

 

 

 

For the years ended December 31,

 

 

 

2014

 

2013

 

(Dollars in thousands)

 

Average
Balance

 

Interest (1)

 

Average
Rate (2)

 

Average
Balance

 

Interest (1)

 

Average
Rate (2)

 

Earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-earning balances

 

$

265,155

 

$

640

 

0.24

%

$

307,256

 

$

776

 

0.25

%

Federal funds sold and other short-term investments

 

73,453

 

527

 

0.72

 

111,239

 

930

 

0.84

 

Investment securities (3):

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

505,754

 

8,509

 

1.68

 

451,517

 

6,097

 

1.35

 

Tax-exempt

 

197,786

 

6,232

 

4.22

 

179,382

 

4,230

 

3.18

 

Federal Home Loan Bank stock

 

17,841

 

867

 

4.86

 

16,162

 

872

 

5.40

 

Gross uncovered loans (4)

 

3,473,608

 

171,196

 

4.93

 

2,431,647

 

117,117

 

4.82

 

Gross covered loans (4)

 

451,590

 

55,478

 

12.28

 

659,820

 

77,740

 

11.78

 

FDIC indemnification asset

 

105,034

 

(26,426

)

(25.16

)

181,768

 

(28,040

)

(15.43

)

Total earning assets

 

5,090,221

 

217,023

 

4.31

 

4,338,791

 

179,722

 

4.18

 

Non-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

97,935

 

 

 

 

 

107,249

 

 

 

 

 

Allowance for loan losses

 

(56,094

)

 

 

 

 

(59,123

)

 

 

 

 

Premises and equipment

 

53,142

 

 

 

 

 

56,885

 

 

 

 

 

Core deposit intangible

 

15,055

 

 

 

 

 

14,524

 

 

 

 

 

Other real estate owned and repossessed assets

 

53,513

 

 

 

 

 

37,700

 

 

 

 

 

Loan servicing rights

 

75,863

 

 

 

 

 

61,848

 

 

 

 

 

FDIC receivable

 

7,592

 

 

 

 

 

12,520

 

 

 

 

 

Company-owned life insurance

 

81,245

 

 

 

 

 

38,843

 

 

 

 

 

Other non-earning assets

 

224,232

 

 

 

 

 

116,548

 

 

 

 

 

Total assets

 

$

5,642,704

 

 

 

 

 

$

4,725,785

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing demand deposits

 

$

689,225

 

$

824

 

0.12

%

$

564,447

 

673

 

0.12

%

Money market and savings deposits

 

1,289,388

 

1,930

 

0.15

 

1,231,066

 

1,889

 

0.15

 

Time deposits

 

1,247,907

 

6,080

 

0.49

 

1,079,779

 

5,864

 

0.54

 

Other brokered funds

 

268,080

 

879

 

0.33

 

76,134

 

142

 

0.19

 

Short-term borrowings

 

153,951

 

420

 

0.27

 

49,493

 

105

 

0.21

 

Long-term debt

 

257,487

 

2,627

 

1.02

 

260,514

 

3,052

 

1.17

 

Total interest-bearing liabilities

 

3,906,038

 

12,760

 

0.33

 

3,261,433

 

11,725

 

0.36

 

Noninterest-bearing liabilities and shareholders’ equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing demand deposits

 

943,321

 

 

 

 

 

765,853

 

 

 

 

 

FDIC clawback liability

 

25,823

 

 

 

 

 

23,364

 

 

 

 

 

Other liabilities

 

38,829

 

 

 

 

 

71,478

 

 

 

 

 

Shareholders’ equity

 

728,693

 

 

 

 

 

603,657

 

 

 

 

 

Total liabilities and shareholders’ equity

 

$

5,642,704

 

 

 

 

 

$

4,725,785

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 

 

$

204,263

 

 

 

 

 

$

167,997

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest spread

 

 

 

 

 

3.98

%

 

 

 

 

3.82

%

Net interest margin as a percentage of interest-earning assets

 

 

 

 

 

4.01

%

 

 

 

 

3.87

%

Tax equivalent effect

 

 

 

 

 

0.03

%

 

 

 

 

0.03

%

Net interest margin as a percentage of interest-earning assets (FTE)

 

 

 

 

 

4.04

%

 

 

 

 

3.90

%

 


(1) Interest income is shown on actual basis and does not include taxable equivalent adjustments.

(2) Average rates are presented on an annual basis and include a taxable equivalent adjustment to interest income of $2.1 million and $1.5 million on tax-exempt securities for the years ended December 31, 2014 and 2013, respectively, using the statutory tax rate of 35%.

(3) For presentation in this table, average balances and the corresponding average rates for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.

(4) Includes nonaccrual loans.

 

15



 

Talmer Bancorp, Inc.

Reconciliation of Non-GAAP Financial Measures (1)

(Unaudited)

 

 

 

2014

 

2013

 

(Dollars in thousands, except per share data)

 

4th Quarter

 

3rd Quarter

 

2nd Quarter

 

1st Quarter

 

4th Quarter

 

 

 

 

 

 

 

 

 

 

 

 

 

Tangible shareholders’ equity:

 

 

 

 

 

 

 

 

 

 

 

Total shareholders’ equity

 

$

761,607

 

$

746,652

 

$

727,945

 

$

703,028

 

$

617,015

 

Less:

 

 

 

 

 

 

 

 

 

 

 

Core deposit intangibles

 

13,035

 

13,696

 

15,378

 

16,102

 

13,205

 

Tangible shareholders’ equity

 

$

748,572

 

$

732,956

 

$

712,567

 

$

686,926

 

$

603,810

 

 

 

 

 

 

 

 

 

 

 

 

 

Tangible book value per share:

 

 

 

 

 

 

 

 

 

 

 

Shares outstanding

 

70,532

 

70,504

 

70,451

 

69,962

 

66,234

 

Tangible book value per share

 

$

10.61

 

$

10.40

 

$

10.11

 

$

9.82

 

$

9.12

 

 

 

 

 

 

 

 

 

 

 

 

 

Tangible average equity to tangible average assets:

 

 

 

 

 

 

 

 

 

 

 

Average assets

 

$

5,865,624

 

$

5,746,603

 

$

5,445,770

 

$

5,550,329

 

$

4,628,167

 

Average equity

 

754,722

 

738,870

 

709,982

 

690,214

 

609,345

 

Average core deposit intangibles

 

13,334

 

14,398

 

15,740

 

16,794

 

13,527

 

Tangible average equity to tangible average assets

 

12.67

%

12.64

%

12.79

%

12.17

%

12.91

%

 

 

 

 

 

 

 

 

 

 

 

 

Core efficiency ratio:

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

$

51,463

 

$

52,217

 

$

52,378

 

$

48,205

 

$

39,284

 

Noninterest income

 

15,834

 

29,974

 

13,951

 

57,740

 

23,557

 

Total revenue

 

67,297

 

82,191

 

66,329

 

105,945

 

62,841

 

Less:

 

 

 

 

 

 

 

 

 

 

 

(Expense)/benefit due to change in the fair value of loan servicing rights

 

(3,657

)

(176

)

(4,200

)

(2,205

)

6,852

 

FDIC loss sharing income

 

(244

)

(2,420

)

(3,434

)

(113

)

(3,167

)

Net gains on sales of branches

 

 

14,410

 

 

 

 

Bargain purchase gain

 

 

 

 

41,977

 

 

Total core revenue

 

71,198

 

70,377

 

73,963

 

66,286

 

59,156

 

 

 

 

 

 

 

 

 

 

 

 

 

Total noninterest expense

 

48,098

 

51,263

 

54,071

 

65,448

 

53,009

 

Less:

 

 

 

 

 

 

 

 

 

 

 

Transaction and integration related costs

 

329

 

1,428

 

837

 

11,015

 

819

 

Total core noninterest expense

 

47,769

 

49,835

 

53,234

 

54,433

 

52,190

 

 

 

 

 

 

 

 

 

 

 

 

 

Core efficiency ratio

 

67.09

%

70.81

%

71.97

%

82.12

%

88.22

%

 


(1) Management believes these non-GAAP financial measures provide useful information to both management and investors that is supplementary to our financial condition and results of operations in accordance with GAAP; however, we do acknowledge that our non-GAAP financial measures have a number of limitations.  As such, you should not view these disclosures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable to non-GAAP financial measures that other companies use.

 

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