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8-K - 8-K - TALMER BANCORP, INC.a15-10144_18k.htm

Exhibit 99.1

 

 

Talmer Bancorp, Inc. reports first quarter 2015 net income of $9.4 million, representing $0.12 of earnings per diluted average common share

 

Successfully completed and integrated the acquisition of First of Huron Corporation (Signature Bank)

 

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

 

TROY/April 30, 2015 — Talmer Bancorp, Inc. (NASDAQ: TLMR) (“Talmer”) today reported first quarter 2015 net income of $9.4 million, compared to $12.5 million for the fourth quarter of 2014 and $38.2 million for the first quarter of 2014.  Earnings per diluted common share were $0.12 for the first quarter of 2015, compared to $0.16 for the fourth quarter of 2014 and $0.52 for the first quarter of 2014. The first quarter of 2014 included a $42.0 million bargain purchase gain related to the acquisition of Talmer West Bank.  In addition, the Board of Directors of Talmer declared a cash dividend on its Class A common stock of $0.01 per share on April 29, 2015.  The dividend will be paid on May 22, 2015, to our Class A common shareholders of record as of May 11, 2015.

 

Talmer Bancorp President and CEO David Provost commented, “We continue to execute on our strategic plans to build a leading Midwest community bank.  In February, we completed the acquisition of First of Huron Corp., and its wholly-owned bank subsidiary, Signature Bank, and additionally completed the operational integration of Talmer West Bank.  We are excited to welcome the employees and customers of Signature Bank and build upon our franchise in the thumb area of Michigan.  We are pleased with our core operating results for the quarter and note that our reported earnings were significantly impacted by two substantial non-core items:  $3.3 million of transaction and integration related expenses and a $4.1 million detriment to earnings due to the change in fair value of our loan servicing rights.  The negative impact to our earnings per diluted common share for the first quarter of 2015 from these non-core items was approximately $0.07 per diluted common share.  We expect to see an incremental improvement in our core operating efficiency in the second quarter reflecting the success of integrating our two most recent acquisitions.  Our team remains optimistic about the substantial 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)

 

1st Qtr 2015

 

4th Qtr 2014

 

1st Qtr 2014

 

Earnings Summary

 

 

 

 

 

 

 

Net interest income

 

$

51,036

 

$

51,463

 

$

48,205

 

Total provision for loan losses

 

1,993

 

2,994

 

3,926

 

Noninterest income

 

21,430

 

15,834

 

57,740

 

Noninterest expense

 

56,595

 

48,098

 

65,448

 

Income before income taxes

 

13,878

 

16,205

 

36,571

 

Income tax provision (benefit)

 

4,441

 

3,703

 

(1,656

)

Net income

 

9,437

 

12,502

 

38,227

 

 

 

 

 

 

 

 

 

Per Share Data

 

 

 

 

 

 

 

Diluted earnings per common share

 

$

0.12

 

$

0.16

 

$

0.52

 

Tangible book value per share (1) 

 

10.38

 

10.61

 

9.82

 

Average diluted common shares (in thousands)

 

75,103

 

75,759

 

73,377

 

 

 

 

 

 

 

 

 

Performance and Capital Ratios

 

 

 

 

 

 

 

Return on average assets

 

0.62

%

0.85

%

2.75

%

Return on average equity

 

4.97

 

6.63

 

22.15

 

Net interest margin (fully taxable equivalent) (2) 

 

3.80

 

3.89

 

3.95

 

Core efficiency ratio (1)

 

68.60

 

67.09

 

82.12

 

Tangible average equity to tangible average assets (1)

 

12.32

 

12.67

 

12.17

 

Tier 1 leverage ratio (3)

 

11.66

 

11.56

 

11.13

 

Tier 1 risk-based capital (3)

 

13.07

 

15.20

 

16.54

 

Total risk-based capital (3)

 

14.11

 

16.44

 

17.60

 

 


(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) First quarter 2015 is estimated.

 

First Quarter 2015 Compared to Fourth Quarter 2014

 

·                  Net income was $9.4 million, or $0.12 per diluted average common share, in the first quarter of 2015, compared to $12.5 million, or $0.16 per diluted average common share, for the fourth quarter of 2014.  The decline in net income in the first quarter of 2015 was primarily due to an increase of $3.0 million in transaction and integration related expenses related to the acquisition of First of Huron Corp. and the operational integration of Talmer West Bank.

 

·                  Net total loans increased during the first quarter of 2015 by $227.3 million.  During the first quarter of 2015, Talmer Bank and Trust’s net total loans grew by $245.1 million, as a result of $163.0 million of loans acquired at fair value in the Signature Bank transaction and $114.5 million of other net uncovered loan growth (loans not covered by loss share agreements with the FDIC), partially offset by $25.5 million of net covered loan run-off (loans covered by loss share agreements with the FDIC) and $6.9 million of run-off of loans acquired in the Signature Bank transaction.  Talmer West Bank experienced net loan run-off of $17.8 million in the first quarter of 2015.

 

·                  Total deposits increased $229.7 million, to $4.8 billion as of March 31, 2015, compared to December 31, 2014.  Total deposit growth included $201.5 million of deposits acquired at fair value in the Signature Bank transaction, in addition to growth in demand deposits of $108.8 million, time deposits of $76.8 million, and money market and savings deposits of $25.3 million.  These increases were partially offset by a substantial decline in other brokered funds of $182.7 million.  The strong growth in core deposit balances and the decreases in non-core deposit balances were reflective of management’s drive to increase core deposit growth achieved through programs promoted in the first quarter of 2015.

 

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·                  Net interest income decreased slightly to $51.0 million in the first quarter of 2015, compared to $51.5 million in the fourth quarter of 2014, as the benefit provided by the $187.4 million of average loan increase was more than offset by an increase in negative accretion of the FDIC indemnification asset of $1.7 million.  Our net interest margin declined nine basis points to 3.80% in the first quarter of 2015, compared to 3.89% in the fourth quarter of 2014, due in large part to the increased negative accretion of the FDIC indemnification asset.  Exclusive of the benefit of excess accretable yield and negative yield on the FDIC indemnification asset, discussed in detail below, our core net interest margin in the first quarter of 2015 was 3.76% compared to 3.64% in fourth quarter of 2014.

 

·                  Noninterest income increased $5.6 million to $21.4 million in the first quarter of 2015, compared to the fourth quarter of 2014.  The increase is primarily the result of an increase in accelerated discount on acquired loans of $4.5 million and a $3.7 million increase in net gain on sales of loans as our residential loan origination and sales volume increased in the quarter.  Non-interest income was negatively impacted by a detriment to earnings of $4.1 million due to the change in the fair value of loan servicing rights, which is the key driver of the $1.3 million of negative income for mortgage banking and other loan fees.

 

·                  Noninterest expense increased $8.5 million, to $56.6 million in the first quarter of 2015, compared to the fourth quarter of 2014.  The increase in noninterest expense includes an increase in transaction and integration related expenses of $3.0 million primarily related to the acquisition of First of Huron Corp., an increase of $2.2 million in other real estate owned and repossessed assets valuation expense, and, to a lesser extent, a seasonal increase in payroll tax expense and the addition of operating expenses from the acquisition of Signature Bank.

 

·                  Total shareholder’s equity of $753.9 million as of March 31, 2015, decreased $7.8 million compared to December 31, 2014.  The decrease is primarily the result of our repurchase of warrants to purchase 2.5 million shares of Class A common stock for $19.9 million, partially offset by first quarter of 2015 net income of $9.4 million.

 

Income Statement

 

Net Interest Income and Net Interest Margin

 

Net interest income for the first quarter of 2015 was $51.0 million, compared to $51.5 million in the prior quarter.  Our net interest margin was 3.80% in the first quarter of 2015, a decrease of nine basis points from 3.89% in the fourth quarter of 2014.  The decline in our net interest margin in the first quarter was due to a combination of several factors.  The largest factors affecting the change in our net interest margin were the negative impact of 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 a decline in the benefit provided by our higher yielding covered loan portfolio significantly comprised of purchased credit impaired loans as the balances continue to run-off. These negative impacts were partially offset by an increase in the yield on our uncovered loans due to a combination of a shift in the composition of loans to a higher percentage of commercial loans, which generally have higher yields than residential mortgage loans, and an increase in the benefit provided from discount accretion on our purchased credit impaired loan portfolio.

 

Our net interest margin benefitted 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 first quarter of 2015 and the fourth quarter of 2014, the yield on uncovered loans was 4.90% and 4.71%, respectively, while the yield generated using only the expected coupon would have been 4.36% and 4.25%, respectively.  For the first quarter of 2015 and the fourth quarter of 2014, the yield on covered loans was 12.83% and 13.03%, respectively, while the yield generated using only the expected coupon would have been 7.44% and 6.20%, 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 continued to result 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

 

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indemnification asset partially offsets the benefits provided by the excess accretable yield.  This negative yield was 60.0%, representing $9.3 million, for the first quarter of 2015 compared to 38.41%, representing $7.5 million, for the fourth quarter of 2014.  The combination of the excess accretable yield on both covered and uncovered loans, offset by the negative yield on the FDIC indemnification asset, benefitted net interest margin by four basis points in the first quarter of 2015 compared to 25 basis points the fourth quarter of 2014.  Therefore, excluding the benefit of excess accretable yield and negative yield on the FDIC indemnification asset, our net interest margin in the first quarter of 2015 was 3.76% compared to 3.64% in fourth quarter of 2014.  The increase in the core net interest margin in the first quarter of 2015 is primarily due to an increase in the yield on our uncovered loans due to a shift in the composition of loans to a higher percentage of commercial loans, which generally have higher yields than residential mortgage loans.

 

Noninterest Income

 

Noninterest income increased $5.6 million to $21.4 million in the first quarter of 2015, compared to the fourth quarter of 2014.  The increase is primarily the result of an increase in accelerated discount on acquired loans of $4.5 million and a $3.7 million increase in net gain on sales of loans as our residential loan origination and sales volume increased in the quarter.  Accelerated discount on acquired loans results from the accelerated recognition of a portion of the loan discount that would have been recognized over the expected life of the loan and occurs when a loan is paid in full or otherwise settled.  Partially offsetting these items was a decrease in other noninterest income of $840 thousand, an $824 thousand increase in the amounts due to the FDIC resulting from higher recoveries recognized included within “FDIC loss sharing income” and a decrease in mortgage banking and other loan fees of $396 thousand.  The decrease in mortgage banking and other loan fees was significantly impacted by a detriment to earnings of $4.1 million due to the change in the fair value of loan servicing rights.  In the fourth quarter of 2014, the change in the fair value of loan servicing rights was a detriment of $3.7 million. The changes in the fair value of loan servicing rights were due mainly to downward movements in market interest rate during those periods.

 

As we have noted in prior quarters, we have chosen not the hedge our investment in loan servicing rights.  Since our loan servicing rights are accounted for under the fair market value measurement method, decreases in interest rates generally result in a detriment to earnings due to an anticipated increase in prepayments speeds, whereas increases in interest rates generally result in a benefit to earnings due to the opposite effect.  The large majority of our servicing rights were acquired on January 1, 2013 at the time we acquired First Place Bank.  While there has been meaningful reported earnings volatility due to our decision not to hedge our loan servicing rights, the cumulative acquisition-to-date detriment to pre-tax earnings due to the decline in fair value has only been approximately $100 thousand given that the valuation expenses taken over the past few quarters were substantially offset by the valuation gains recognized during the year ended December 31, 2013.  If interest rates were to rise significantly, we expect we would implement a loan servicing rights hedge strategy to reduce potential earnings volatility going forward.

 

Noninterest Expense

 

Noninterest expense in the first quarter of 2015 increased $8.5 million, to $56.6 million in the first quarter of 2015, compared to the fourth quarter of 2014.  The increase in noninterest expense includes an increase in transaction and integration related expenses of $3.0 million, an increase of $2.2 million in other real estate and repossessed assets valuation expense, and, to a lesser extent, a seasonal increase in payroll tax expense and the addition of operating expenses from the acquisition of Signature Bank.

 

Our core efficiency ratio for the first quarter of 2015 was 68.60%, compared to 67.09% for the fourth quarter of 2014.  The slight increase in the ratio in the first quarter of 2015 primarily reflects the drag on the efficiency ratio as a result of the increase in negative accretion of the indemnification asset, an increase in other real estate and repossessed assets valuation expense, seasonally high payroll tax expense, and an increase in salary and employee benefits related to Signature Bank employees that were retained during the operational integration process.  These items were partially offset by an increase in accelerated discount on acquired loans.  The efficiency ratio is a measure of noninterest expense as a percent of net interest

 

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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 first quarter of 2015 core efficiency ratio excludes the fair value adjustment to our loan servicing rights of $4.1 million, transaction and integration related costs of $3.3 million and the FDIC loss sharing income, which was a detriment of $1.1 million.  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.

 

Credit Quality

 

The total net provision for loan losses in the first quarter of 2015 decreased $1.0 million to $2.0 million, compared to $3.0 million in the fourth quarter of 2014.  The decrease in the net provision for loan losses was primarily due to additional relief of allowance resulting from unanticipated payments received on loans, a lesser amount of new loan originations compared to the fourth quarter of 2014 and a lower level of loan loss provisions resulting from our quarterly cash flow re-estimations on purchased credit impaired loans, partially offset by additional specific allowances based on the individual evaluation of certain loans.

 

The provision for loan losses on uncovered loans in the first quarter of 2015 decreased $2.2 million to $3.4 million, compared to the fourth quarter of 2014.  At March 31, 2015, the allowance for loan losses on uncovered loans was $34.5 million, or 0.83% of total uncovered loans, compared to $33.8 million, or 0.87% of total uncovered loans, at December 31, 2014.  The increase in allowance for loan losses on uncovered loans for the quarter was primarily due to impairment resulting from our quarterly re-estimation of cash flows for our uncovered purchased credit impaired loans, additional specific allowance based on the individual evaluation of certain loans and the impact of organic loan growth.  Because we record all acquired loans at fair value, we did not record an allowance for loan losses related to the acquired loans from Signature Bank on the acquisition date.

 

The net benefit for loan losses on covered loans in the first quarter of 2015 decreased $1.2 million to a benefit of $1.4 million, compared to the fourth quarter of 2014.  At March 31, 2015, the allowance for loan losses on covered loans was $18.0 million, or 5.66% of total covered loans, compared to $21.4 million, or 6.16% of total covered loans at December 31, 2014.  The decrease in allowance for loan losses on covered loans primarily reflects the relief of allowance resulting from payments received on covered loans previously carrying an allowance for loan loss, partially offset by impairment resulting from our quarterly re-estimations of cash flows for our covered purchased credit impaired loans.

 

During the first quarter of 2015, we completed re-estimations of cash flow expectations for purchased credit impaired loans acquired in each of our acquisitions, with the exception of Signature Bank since it was acquired during the quarter.  For the re-estimations, loans with changes in cash flow expectations resulted in net additional loan loss provisions of $2.7 million ($1.7 million covered and $1.0 million uncovered).  The re-estimations also resulted in a $29.4 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 the strengthening economy and the efforts made by our Special Assets team that manages our acquired loan portfolios.  Similar to the first quarter 2015 re-estimations, the prior re-estimations of cash flows have indicated better overall expected performance than originally anticipated at acquisition.

 

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Balance Sheet and Capital Management

 

Total assets increased $407.7 million to $6.3 billion at March 31, 2015 compared to $5.9 billion at December 31, 2014.  The acquisition date fair value of assets acquired in our acquisition of First of Huron Corp. increased assets by $218.2 million after the $13.4 million of cash consideration paid.  The acquisition resulted in goodwill of $2.9 million that was recognized at acquisition date. The primary drivers of the increase in assets in the quarter ended March 31, 2015 were increases in cash and cash equivalents of $232.1 million and in net total loans of $227.3 million, partially offset by decreases of $26.9 million in loans held for sale, $16.3 million in the FDIC indemnification asset and $16.2 million in loan servicing rights.  The decrease in the FDIC indemnification asset primarily reflects the impact of $9.3 million of indemnification asset negative accretion, $5.0 million of claims filed for losses on covered loans and $1.7 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.   The decrease in loan servicing rights primarily reflects the sale of $12.7 million of loan servicing rights in the first quarter of 2015 and the $4.1 million decline due to the change in the fair value of loan servicing rights discussed previously.

 

Net total loans at March 31, 2015 increased $227.3 million to $4.4 billion, compared to $4.2 billion at December 31, 2014.  During the first quarter of 2015, Talmer Bank and Trust’s net total loans grew by $245.1 million resulting from $163.0 million acquired February 6, 2015 in our acquisition of First of Huron Corp. and $114.5 million of net uncovered loan growth, partially offset by $25.5 million of net covered loan run-off and $6.9 million of run-off of loans acquired in the Signature Bank transaction.  The net uncovered loan growth of $114.5 million was driven primarily by growth in our commercial and industrial and commercial real estate loan portfolios.  Talmer West Bank experienced net loan run-off of $17.8 million in the first quarter of 2015.  We continue to be focused on sourcing quality loan growth to overcome the run-off of higher-yielding acquired loans.  Acquired loans, which total $1.8 billion, or 40.9% of total loans, at March 31, 2015 are reported on the balance sheet at the contractual balance, net of remaining discount resulting from acquisition accounting and charge-offs taken since acquisition.

 

The FDIC indemnification asset balance was $50.7 million at March 31, 2015. Of this amount, we expect approximately $25.5 million to be collected from the FDIC and the remaining $25.2 million to be amortized prior to the end of the associated loss share agreements, as a result of expected improvements in cash flow expectations on covered loans. At March 31, 2015, the FDIC indemnification asset included approximately $3.9 million related to covered loans and approximately $93 thousand related to covered other real estate under loss share agreements that will expire at the end of the second quarter of 2015. Any losses on covered assets after the applicable loss share agreement expires will not be eligible for reimbursement from the FDIC. As such, to the extent that loss share coverage ends prior to the loss triggering event on a covered asset, impairment on any remaining FDIC indemnification asset associated with the covered asset would be required. Management is closely monitoring the outcome of anticipated losses on covered assets and has proactively reviewed the portfolios of covered loans and other real estate that are under loss share agreements that are expiring to evaluate the appropriateness of the associated remaining FDIC indemnification asset.

 

Total liabilities were $5.5 billion at December 31, 2014 compared to $5.1 billion at December 31, 2014.  The acquisition date fair value of liabilities assumed in our acquisition of First of Huron Corp. increased liabilities by $218.2 million.  The $415.4 million increase in liabilities in the quarter ended March 31, 2015 was primarily due to increases in total deposits of $229.7 million, long-term debt of $108.3 million and short-term borrowings of $81.0 million.  Total deposit growth included time deposits of $124.8 million, interest-bearing demand deposits of $123.3 million, money market and savings deposits of $87.7 million and noninterest-bearing demand deposits of $76.6 million, partially offset by a decrease in other brokered funds of $182.7 million.  The increase in long-term debt primarily reflects additional Federal Home Loan Bank (“FHLB”) advances entered into during the period.  The increase in short-term borrowings primarily reflects an increase in federal funds purchased of $126.0 million and a $20.0 million draw on our existing line of credit in order to facilitate the repurchase of warrants, partially offset by a decrease in short-term FHLB borrowings of $60.0 million.

 

Total shareholders’ equity of $753.9 million as of March 31, 2015, decreased $7.8 million compared to December 31, 2014.  The decrease is primarily the result of our repurchase of warrants to purchase 2.5 million shares of $19.9 million, partially

 

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offset by first quarter of 2015 net income of $9.4 million.  Our Tier 1 leverage ratio was 11.66% at March 31, 2015 compared to 11.56% at December 31, 2014.

 

Key Performance Goals

 

Our near-term focus continues to be on driving quality loan and core deposit growth and realizing additional 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 will 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 first quarter 2015 financial results at 10:00 a.m. ET on Thursday, April 30, 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. 5221748) 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, Maryland 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 and our conference call 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, including, among others, statements related to our future expectations, including all statements under the heading entitled “Key Performance Goals,” statements about further incremental improvements in our operating efficiencies in 2015, deposit growth, and loan growth. 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, 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

 

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Talmer Bancorp, Inc.

Consolidated Balance Sheets

(Unaudited)

 

 

 

March 31,

 

December 31,

 

March 31,

 

(Dollars in thousands, except per share data)

 

2015

 

2014

 

2014

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

Cash and due from banks

 

$

77,957

 

$

86,185

 

$

107,170

 

Interest-bearing deposits with other banks

 

303,926

 

96,551

 

318,368

 

Federal funds sold and other short-term investments

 

104,000

 

71,000

 

105,000

 

Total cash and cash equivalents

 

485,883

 

253,736

 

530,538

 

Securities available-for-sale

 

730,393

 

740,819

 

632,047

 

Federal Home Loan Bank stock

 

20,744

 

20,212

 

12,335

 

Loans held for sale, at fair value

 

66,556

 

93,453

 

75,931

 

Loans:

 

 

 

 

 

 

 

Residential real estate (includes $21.8 million, $18.3 million and $17.6 million respectively, measured at fair value)

 

1,474,042

 

1,426,012

 

1,267,714

 

Commercial real estate

 

1,404,906

 

1,310,938

 

1,147,793

 

Commercial and industrial

 

947,735

 

869,477

 

573,268

 

Real estate construction (includes $431 thousand, $1.2 million and $278 thousand respectively, measured at fair value)

 

140,893

 

131,686

 

143,569

 

Consumer

 

188,508

 

164,524

 

12,932

 

Total loans, excluding covered loans

 

4,156,084

 

3,902,637

 

3,145,276

 

Less: Allowance for loan losses - uncovered

 

(34,477

)

(33,819

)

(22,771

)

Net loans - excluding covered loans

 

4,121,607

 

3,868,818

 

3,122,505

 

Covered loans

 

317,593

 

346,490

 

497,920

 

Less: Allowance for loan losses - covered

 

(17,988

)

(21,353

)

(38,000

)

Net loans - covered

 

299,605

 

325,137

 

459,920

 

Net total loans

 

4,421,212

 

4,193,955

 

3,582,425

 

Premises and equipment

 

48,150

 

48,389

 

58,666

 

FDIC indemnification asset

 

50,702

 

67,026

 

119,045

 

Other real estate owned and repossessed assets

 

42,921

 

48,743

 

57,512

 

Loan servicing rights

 

54,409

 

70,598

 

77,892

 

Core deposit intangible

 

14,796

 

13,035

 

16,102

 

Goodwill

 

2,926

 

 

 

FDIC receivable

 

7,839

 

6,062

 

8,130

 

Company-owned life insurance

 

103,924

 

97,782

 

39,814

 

Income tax benefit

 

182,223

 

177,472

 

185,455

 

Other assets

 

47,273

 

40,982

 

29,684

 

Total assets

 

$

6,279,951

 

$

5,872,264

 

$

5,425,576

 

Liabilities

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

Noninterest-bearing demand deposits

 

$

964,163

 

$

887,567

 

$

950,671

 

Interest-bearing demand deposits

 

784,001

 

660,697

 

714,043

 

Money market and savings deposits

 

1,257,919

 

1,170,236

 

1,370,691

 

Time deposits

 

1,312,992

 

1,188,178

 

1,270,927

 

Other brokered funds

 

459,499

 

642,185

 

80,000

 

Total deposits

 

4,778,574

 

4,548,863

 

4,386,332

 

FDIC clawback liability

 

27,881

 

26,905

 

25,593

 

FDIC warrants payable

 

4,472

 

4,633

 

4,423

 

Short-term borrowings

 

216,747

 

135,743

 

89,562

 

Long-term debt

 

462,252

 

353,972

 

177,483

 

Other liabilities

 

36,172

 

40,541

 

39,155

 

Total liabilities

 

5,526,098

 

5,110,657

 

4,722,548

 

Shareholders’ equity

 

 

 

 

 

 

 

Preferred stock - $1.00 par value Authorized - 20,000,000 shares at 3/31/2015, 12/31/2014 and 3/31/2014 Issued and outstanding - 0 shares at 3/31/2015, 12/31/2014, and 3/31/2014

 

 

 

 

Common stock:

 

 

 

 

 

 

 

Class A Voting Common Stock - $1.00 par value Authorized -198,000,000 shares at 3/31/2015, 12/31/2014, and 3/31/2014 Issued and outstanding -70,938,113 shares at 03/31/2015, 70,532,122 shares at 12/31/2014, and 69,962,461 shares at 3/31/2014

 

70,938

 

70,532

 

69,962

 

Class B Non-Voting Common Stock - $1.00 par value Authorized - 2,000,000 shares at 3/31/2015, 12/31/2014, and 3/31/2014 Issued and outstanding - 0 shares at 3/31/2015, 12/31/2014, and 3/31/2014

 

 

 

 

Additional paid-in-capital

 

385,755

 

405,436

 

404,905

 

Retained earnings

 

290,520

 

281,789

 

230,576

 

Accumulated other comprehensive income (loss), net of tax

 

6,640

 

3,850

 

(2,415

)

Total shareholders’ equity

 

753,853

 

761,607

 

703,028

 

Total liabilities and shareholders’ equity

 

$

6,279,951

 

$

5,872,264

 

$

5,425,576

 

 

9



 

Talmer Bancorp, Inc.

Consolidated Statements of Income

(Unaudited)

 

 

 

Three months ended March 31,

 

(Dollars in thousands, except per share data)

 

2015

 

2014

 

 

 

 

 

 

 

Interest income

 

 

 

 

 

Interest and fees on loans

 

$

59,944

 

$

53,501

 

Interest on investments

 

 

 

 

 

Taxable

 

2,323

 

1,866

 

Tax-exempt

 

1,615

 

1,965

 

Total interest on securities

 

3,938

 

3,831

 

Interest on interest-earning cash balances

 

86

 

216

 

Interest on federal funds and other short-term investments

 

165

 

140

 

Dividends on FHLB stock

 

245

 

222

 

FDIC indemnification asset

 

(9,250

)

(6,718

)

Total interest income

 

55,128

 

51,192

 

Interest Expense

 

 

 

 

 

Interest-bearing demand deposits

 

290

 

224

 

Money market and savings deposits

 

471

 

494

 

Time deposits

 

1,827

 

1,491

 

Other brokered funds

 

623

 

29

 

Interest on short-term borrowings

 

79

 

175

 

Interest on long-term debt

 

802

 

574

 

Total interest expense

 

4,092

 

2,987

 

Net interest income

 

51,036

 

48,205

 

Provision for loan losses - uncovered

 

3,412

 

6,424

 

Benefit for loan losses - covered

 

(1,419

)

(2,498

)

Net interest income after provision for loan losses

 

49,043

 

44,279

 

 

 

 

 

 

 

Noninterest income

 

 

 

 

 

Deposit fee income

 

2,320

 

3,298

 

Mortgage banking and other loan fees

 

(1,261

)

1,085

 

Net gain on sales of loans

 

8,618

 

3,044

 

Bargain purchase gain

 

 

41,977

 

FDIC loss sharing income

 

(1,068

)

(113

)

Accelerated discount on acquired loans

 

8,198

 

6,466

 

Net loss on sales of securities

 

(107

)

(2,310

)

Other income

 

4,730

 

4,293

 

Total noninterest income

 

21,430

 

57,740

 

 

 

 

 

 

 

Noninterest expense

 

 

 

 

 

Salary and employee benefits

 

29,212

 

35,851

 

Occupancy and equipment expense

 

7,666

 

9,043

 

Data processing fees

 

1,854

 

1,740

 

Professional service fees

 

3,543

 

4,037

 

FDIC loss sharing expense

 

949

 

524

 

Bank acquisition and due diligence fees

 

1,412

 

2,929

 

Marketing expense

 

1,095

 

1,091

 

Other employee expense

 

934

 

643

 

Insurance expense

 

1,530

 

1,831

 

Other expense

 

8,400

 

7,759

 

Total noninterest expense

 

56,595

 

65,448

 

Income before income taxes

 

13,878

 

36,571

 

Income tax provision (benefit)

 

4,441

 

(1,656

)

Net income

 

$

9,437

 

$

38,227

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

Basic

 

$

0.13

 

$

0.56

 

Diluted

 

$

0.12

 

$

0.52

 

Average common shares outstanding - basic

 

70,216

 

68,121

 

Average common shares outstanding - diluted

 

75,103

 

73,377

 

 

 

 

 

 

 

Total comprehensive income

 

$

12,227

 

$

43,808

 

 

10



 

Talmer Bancorp, Inc.

Consolidated Statements of Income

(Unaudited)

 

 

 

2015

 

2014

 

(Dollars in thousands, except per share data)

 

1st Qtr

 

4th Qtr

 

3rd Qtr

 

2nd Qtr

 

1st Qtr

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans

 

$

59,944

 

$

58,271

 

$

58,128

 

$

56,774

 

$

53,501

 

Interest on investments

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

2,323

 

2,263

 

2,241

 

2,139

 

1,866

 

Tax-exempt

 

1,615

 

1,610

 

1,444

 

1,213

 

1,965

 

Total interest on securities

 

3,938

 

3,873

 

3,685

 

3,352

 

3,831

 

Interest on interest-earning cash balances

 

86

 

94

 

159

 

171

 

216

 

Interest on federal funds and other short-term investments

 

165

 

126

 

130

 

131

 

140

 

Dividends on FHLB stock

 

245

 

177

 

177

 

291

 

222

 

FDIC indemnification asset

 

(9,250

)

(7,539

)

(6,663

)

(5,506

)

(6,718

)

Total interest income

 

55,128

 

55,002

 

55,616

 

55,213

 

51,192

 

Interest Expense

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing demand deposits

 

290

 

194

 

190

 

216

 

224

 

Money market and savings deposits

 

471

 

457

 

487

 

492

 

494

 

Time deposits

 

1,827

 

1,546

 

1,611

 

1,432

 

1,491

 

Other brokered funds

 

623

 

527

 

288

 

35

 

29

 

Interest on short-term borrowings

 

79

 

90

 

122

 

33

 

175

 

Interest on long-term debt

 

802

 

725

 

701

 

627

 

574

 

Total interest expense

 

4,092

 

3,539

 

3,399

 

2,835

 

2,987

 

Net interest income

 

51,036

 

51,463

 

52,217

 

52,378

 

48,205

 

Provision for loan losses - uncovered

 

3,412

 

5,655

 

7,784

 

3,219

 

6,424

 

Benefit for loan losses - covered

 

(1,419

)

(2,661

)

(6,275

)

(7,321

)

(2,498

)

Net interest income after provision for loan losses

 

49,043

 

48,469

 

50,708

 

56,480

 

44,279

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest income

 

 

 

 

 

 

 

 

 

 

 

Deposit fee income

 

2,320

 

2,692

 

3,047

 

3,188

 

3,298

 

Mortgage banking and other loan fees

 

(1,261

)

(865

)

2,065

 

(1,122

)

1,085

 

Net gain on sales of loans

 

8,618

 

4,939

 

4,083

 

5,681

 

3,044

 

Net gain on sales of branches

 

 

 

14,410

 

 

 

Bargain purchase gain

 

 

 

 

 

41,977

 

FDIC loss sharing income

 

(1,068

)

(244

)

(2,420

)

(3,434

)

(113

)

Accelerated discount on acquired loans

 

8,198

 

3,742

 

3,663

 

4,326

 

6,466

 

Net gain (loss) on sales of securities

 

(107

)

 

244

 

 

(2,310

)

Other income

 

4,730

 

5,570

 

4,882

 

5,312

 

4,293

 

Total noninterest income

 

21,430

 

15,834

 

29,974

 

13,951

 

57,740

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest expense

 

 

 

 

 

 

 

 

 

 

 

Salary and employee benefits

 

29,212

 

25,632

 

29,795

 

30,466

 

35,851

 

Occupancy and equipment expense

 

7,666

 

6,911

 

7,981

 

7,871

 

9,043

 

Data processing fees

 

1,854

 

789

 

1,610

 

2,260

 

1,740

 

Professional service fees

 

3,543

 

3,323

 

2,964

 

2,628

 

4,037

 

FDIC loss sharing expense

 

949

 

406

 

245

 

983

 

524

 

Bank acquisition and due diligence fees

 

1,412

 

329

 

239

 

268

 

2,929

 

Marketing expense

 

1,095

 

1,226

 

1,001

 

1,605

 

1,091

 

Other employee expense

 

934

 

658

 

621

 

752

 

643

 

Insurance expense

 

1,530

 

1,615

 

1,383

 

868

 

1,831

 

Other expense

 

8,400

 

7,209

 

5,424

 

6,370

 

7,759

 

Total noninterest expense

 

56,595

 

48,098

 

51,263

 

54,071

 

65,448

 

Income before income taxes

 

13,878

 

16,205

 

29,419

 

16,360

 

36,571

 

Income tax provision (benefit)

 

4,441

 

3,703

 

9,904

 

(4,246

)

(1,656

)

Net income

 

$

9,437

 

$

12,502

 

$

19,515

 

$

20,606

 

$

38,227

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.13

 

$

0.18

 

$

0.28

 

$

0.29

 

$

0.56

 

Diluted

 

$

0.12

 

$

0.16

 

$

0.26

 

$

0.27

 

$

0.52

 

Average common shares outstanding - basic

 

70,216

 

70,136

 

70,092

 

70,021

 

68,121

 

Average common shares outstanding - diluted

 

75,103

 

75,759

 

75,752

 

75,659

 

73,377

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income

 

$

12,227

 

$

14,265

 

$

19,369

 

$

25,254

 

$

43,808

 

 

11



 

Talmer Bancorp, Inc.

Selected Financial Information

(Unaudited)

 

 

 

2015

 

2014

 

(Dollars in thousands, except per share data)

 

1st Qtr

 

4th Qtr

 

3rd Qtr

 

2nd Qtr

 

1st Qtr

 

Earnings Summary

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

$

55,128

 

$

55,002

 

$

55,616

 

$

55,213

 

$

51,192

 

Interest expense

 

4,092

 

3,539

 

3,399

 

2,835

 

2,987

 

Net interest income

 

51,036

 

51,463

 

52,217

 

52,378

 

48,205

 

Provision for loan losses - uncovered

 

3,412

 

5,655

 

7,784

 

3,219

 

6,424

 

Benefit for loan losses - covered

 

(1,419

)

(2,661

)

(6,275

)

(7,321

)

(2,498

)

Bargain purchase gains

 

 

 

 

 

41,977

 

Noninterest income

 

21,430

 

15,834

 

29,974

 

13,951

 

57,740

 

Noninterest expense

 

56,595

 

48,098

 

51,263

 

54,071

 

65,448

 

Income before income taxes

 

13,878

 

16,205

 

29,419

 

16,360

 

36,571

 

Income tax provision (benefit)

 

4,441

 

3,703

 

9,904

 

(4,246

)

(1,656

)

Net income

 

9,437

 

12,502

 

19,515

 

20,606

 

38,227

 

 

 

 

 

 

 

 

 

 

 

 

 

Per Share Data

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per common share

 

$

0.13

 

$

0.18

 

$

0.28

 

$

0.29

 

$

0.56

 

Diluted earnings per common share

 

0.12

 

0.16

 

0.26

 

0.27

 

0.52

 

Book value per common share

 

10.63

 

10.80

 

10.59

 

10.33

 

10.05

 

Tangible book value per share (1) 

 

10.38

 

10.61

 

10.40

 

10.11

 

9.82

 

Shares outstanding (in thousands)

 

70,938

 

70,532

 

70,504

 

70,451

 

69,962

 

Average common diluted shares (in thousands)

 

75,103

 

75,759

 

75,752

 

75,659

 

73,377

 

 

 

 

 

 

 

 

 

 

 

 

 

Selected Period End Balances

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

6,279,951

 

$

5,872,264

 

$

5,745,767

 

$

5,611,649

 

$

5,425,576

 

Securities available-for-sale

 

730,393

 

740,819

 

734,489

 

731,700

 

632,047

 

Total loans

 

4,473,677

 

4,249,127

 

4,035,125

 

3,755,487

 

3,643,196

 

Uncovered loans

 

4,156,084

 

3,902,637

 

3,631,333

 

3,296,207

 

3,145,276

 

Covered loans

 

317,593

 

346,490

 

403,792

 

459,280

 

497,920

 

FDIC indemnification asset

 

50,702

 

67,026

 

82,441

 

102,694

 

119,045

 

Total deposits

 

4,778,574

 

4,548,863

 

4,485,597

 

4,296,534

 

4,386,332

 

Total liabilities

 

5,526,098

 

5,110,657

 

4,999,115

 

4,883,704

 

4,722,548

 

Total shareholders’ equity

 

753,853

 

761,607

 

746,652

 

727,945

 

703,028

 

Tangible shareholders’ equity (1)

 

736,131

 

748,572

 

732,956

 

712,567

 

686,926

 

 

 

 

 

 

 

 

 

 

 

 

 

Performance and Capital Ratios

 

 

 

 

 

 

 

 

 

 

 

Return on average assets

 

0.62

%

0.85

%

1.36

%

1.51

%

2.75

%

Return on average equity

 

4.97

 

6.63

 

10.56

 

11.61

 

22.15

 

Net interest margin (fully taxable equivalent) (2) 

 

3.80

 

3.89

 

4.05

 

4.34

 

3.95

 

Core efficiency ratio (1)

 

68.60

 

67.09

 

70.81

 

71.97

 

82.12

 

Tangible average equity to tangible average assets (1)

 

12.32

 

12.67

 

12.64

 

12.78

 

12.17

 

Tier 1 leverage ratio (3)

 

11.66

 

11.56

 

11.45

 

11.71

 

11.13

 

Tier 1 risk-based capital (3)

 

13.07

 

15.20

 

15.56

 

16.16

 

16.54

 

Total risk-based capital (3)

 

14.11

 

16.44

 

16.76

 

17.31

 

17.60

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset Quality Ratios:

 

 

 

 

 

 

 

 

 

 

 

Net charge-offs to average loans, excluding covered loans

 

0.27

%

0.18

%

0.25

%

0.20

%

0.17

%

Nonperforming assets as a percentage of total assets

 

1.55

 

1.78

 

1.73

 

1.60

 

1.79

 

Nonperforming loans as a percent of total loans

 

1.25

 

1.34

 

1.38

 

1.04

 

1.13

 

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

 

0.86

 

0.90

 

1.19

 

0.79

 

0.81

 

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

 

1.17

 

1.30

 

1.38

 

1.52

 

1.67

 

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

 

0.83

 

0.87

 

0.82

 

0.74

 

0.72

 

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

 

41.84

 

39.39

 

33.68

 

42.07

 

50.61

 

 


(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) First quarter 2015 is estimated.

 

12



 

Talmer Bancorp, Inc.

Loan Data

(Unaudited)

 

 

 

March 31,

 

December 31,

 

September 30,

 

June 30,

 

March 31,

 

(Dollars in thousands)

 

2015

 

2014

 

2014

 

2014

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

Uncovered loans

 

 

 

 

 

 

 

 

 

 

 

Residential real estate

 

$

1,474,042

 

$

1,426,012

 

$

1,430,939

 

$

1,362,869

 

$

1,267,714

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

Non-owner occupied

 

919,287

 

888,650

 

814,179

 

731,743

 

742,151

 

Owner-occupied

 

459,002

 

417,843

 

379,964

 

371,406

 

377,678

 

Farmland

 

26,617

 

4,445

 

19,218

 

28,199

 

27,964

 

Total commercial real estate

 

1,404,906

 

1,310,938

 

1,213,361

 

1,131,348

 

1,147,793

 

Commercial and industrial

 

947,735

 

869,477

 

790,867

 

647,090

 

573,268

 

Real estate construction

 

140,893

 

131,686

 

102,920

 

112,866

 

143,569

 

Consumer

 

188,508

 

164,524

 

93,246

 

42,034

 

12,932

 

Total uncovered loans

 

4,156,084

 

3,902,637

 

3,631,333

 

3,296,207

 

3,145,276

 

 

 

 

 

 

 

 

 

 

 

 

 

Covered loans

 

 

 

 

 

 

 

 

 

 

 

Residential real estate

 

103,429

 

108,226

 

113,228

 

117,507

 

119,408

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

Non-owner occupied

 

97,661

 

108,692

 

121,491

 

142,846

 

143,460

 

Owner-occupied

 

63,031

 

70,492

 

80,990

 

91,829

 

108,630

 

Farmland

 

6,684

 

7,478

 

17,015

 

21,541

 

27,059

 

Total commercial real estate

 

167,376

 

186,662

 

219,496

 

256,216

 

279,149

 

Commercial and industrial

 

29,384

 

32,648

 

47,252

 

60,497

 

71,155

 

Real estate construction

 

8,443

 

9,389

 

13,734

 

14,391

 

16,895

 

Consumer

 

8,961

 

9,565

 

10,082

 

10,669

 

11,313

 

Total covered loans

 

317,593

 

346,490

 

403,792

 

459,280

 

497,920

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans

 

$

4,473,677

 

$

4,249,127

 

$

4,035,125

 

$

3,755,487

 

$

3,643,196

 

 

13



 

Talmer Bancorp, Inc.

Impaired Loans

(Unaudited)

 

 

 

2015

 

2014

 

(Dollars in thousands)

 

1st Qtr

 

4th Qtr

 

3rd Qtr

 

2nd Qtr

 

1st Qtr

 

Uncovered

 

 

 

 

 

 

 

 

 

 

 

Nonperforming troubled debt restructurings

 

 

 

 

 

 

 

 

 

 

 

Residential real estate

 

$

4,418

 

$

3,984

 

$

2,284

 

$

1,920

 

$

2,189

 

Commercial real estate

 

4,031

 

2,644

 

3,122

 

2,842

 

2,664

 

Commercial and industrial

 

43

 

180

 

135

 

541

 

526

 

Real estate construction

 

147

 

 

 

 

 

Consumer

 

89

 

83

 

84

 

90

 

2

 

Total nonperforming troubled debt restructurings

 

8,728

 

6,891

 

5,625

 

5,393

 

5,381

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonaccrual loans other than nonperforming troubled debt restructurings

 

 

 

 

 

 

 

 

 

 

 

Residential real estate

 

13,683

 

13,390

 

13,449

 

11,708

 

11,633

 

Commercial real estate

 

11,120

 

11,112

 

9,456

 

6,590

 

6,174

 

Commercial and industrial

 

1,892

 

3,370

 

14,339

 

2,074

 

1,723

 

Real estate construction

 

 

174

 

253

 

158

 

582

 

Consumer

 

254

 

174

 

161

 

76

 

100

 

Total nonaccrual loans other than nonperforming troubled debt restructurings

 

26,949

 

28,220

 

37,658

 

20,606

 

20,212

 

Total nonaccrual loans

 

35,677

 

35,111

 

43,283

 

25,999

 

25,593

 

Other real estate owned and repossessed assets (1)

 

30,761

 

36,872

 

32,046

 

39,848

 

45,716

 

Total nonperforming assets

 

66,438

 

71,983

 

75,329

 

65,847

 

71,309

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing troubled debt restructurings

 

 

 

 

 

 

 

 

 

 

 

Residential real estate

 

1,875

 

1,368

 

1,802

 

1,628

 

828

 

Commercial real estate

 

2,625

 

3,785

 

2,961

 

2,588

 

3,003

 

Commercial and industrial

 

2,171

 

840

 

652

 

995

 

1,365

 

Real estate construction

 

89

 

90

 

92

 

94

 

96

 

Consumer

 

220

 

234

 

56

 

29

 

30

 

Total performing troubled debt restructurings

 

6,980

 

6,317

 

5,563

 

5,334

 

5,322

 

Total uncovered impaired assets

 

$

73,418

 

$

78,300

 

$

80,892

 

$

71,181

 

$

76,631

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

72

 

$

53

 

$

595

 

$

305

 

$

3

 

 

 

 

 

 

 

 

 

 

 

 

 

Covered

 

 

 

 

 

 

 

 

 

 

 

Nonperforming troubled debt restructurings

 

 

 

 

 

 

 

 

 

 

 

Residential real estate

 

$

1,623

 

$

1,363

 

$

1,304

 

$

1,408

 

$

962

 

Commercial real estate

 

13,617

 

14,343

 

4,144

 

4,861

 

6,235

 

Commercial and industrial

 

1,476

 

2,043

 

2,438

 

2,089

 

2,780

 

Real estate construction

 

267

 

272

 

614

 

595

 

1,023

 

Consumer

 

28

 

13

 

42

 

15

 

25

 

Total nonperforming troubled debt restructurings

 

17,011

 

18,034

 

8,542

 

8,968

 

11,025

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonaccrual loans other than nonperforming troubled debt restructurings

 

 

 

 

 

 

 

 

 

 

 

Residential real estate

 

441

 

485

 

433

 

426

 

368

 

Commercial real estate

 

1,180

 

1,380

 

1,313

 

1,489

 

1,563

 

Commercial and industrial

 

1,233

 

1,517

 

1,653

 

1,751

 

2,124

 

Real estate construction

 

451

 

441

 

441

 

439

 

442

 

Consumer

 

 

 

 

1

 

 

Total nonaccrual loans other than nonperforming troubled debt restructurings

 

3,305

 

3,823

 

3,840

 

4,106

 

4,497

 

Total nonaccrual loans

 

20,316

 

21,857

 

12,382

 

13,074

 

15,522

 

Other real estate owned and repossessed assets (1)

 

10,709

 

10,719

 

11,835

 

10,975

 

10,184

 

Total nonperforming assets

 

31,025

 

32,576

 

24,217

 

24,049

 

25,706

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing troubled debt restructurings

 

 

 

 

 

 

 

 

 

 

 

Residential real estate

 

3,069

 

3,046

 

2,860

 

2,821

 

2,582

 

Commercial real estate

 

8,923

 

9,017

 

14,915

 

16,102

 

15,056

 

Commercial and industrial

 

993

 

1,137

 

2,119

 

2,962

 

3,030

 

Real estate construction

 

256

 

264

 

108

 

109

 

111

 

Total performing troubled debt restructurings

 

13,241

 

13,464

 

20,002

 

21,994

 

20,779

 

Total covered impaired assets

 

$

44,266

 

$

46,040

 

$

44,219

 

$

46,043

 

$

46,485

 

 

 

 

 

 

 

 

 

 

 

 

 

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.

 

14



 

Talmer Bancorp, Inc.

Net Interest Income and Net Interest Margin

(Unaudited)

 

 

 

Three months ended

 

 

 

March 31, 2015

 

December 31, 2014

 

March 31, 2014

 

(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

 

$

156,828

 

$

86

 

0.22

%

$

147,713

 

$

94

 

0.25

%

$

401,306

 

$

216

 

0.22

%

Federal funds sold and other short-term investments

 

97,419

 

165

 

0.69

 

69,897

 

126

 

0.71

 

70,688

 

140

 

0.80

 

Investment securities (3):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

494,079

 

2,323

 

1.91

 

519,774

 

2,263

 

1.73

 

475,885

 

1,866

 

1.59

 

Tax-exempt

 

236,469

 

1,615

 

3.69

 

223,580

 

1,610

 

3.82

 

185,903

 

1,965

 

5.79

 

FHLB Stock

 

20,681

 

245

 

4.81

 

18,671

 

177

 

3.77

 

22,426

 

222

 

4.02

 

Gross uncovered loans (4)

 

4,100,979

 

49,511

 

4.90

 

3,865,553

 

45,863

 

4.71

 

3,218,673

 

39,691

 

5.00

 

Gross covered loans (4)

 

329,767

 

10,433

 

12.83

 

377,776

 

12,408

 

13.03

 

513,608

 

13,810

 

10.90

 

FDIC indemnification asset

 

62,485

 

(9,250

)

(60.03

)

77,865

 

(7,539

)

(38.41

)

127,983

 

(6,718

)

(21.29

)

Total earning assets

 

5,498,707

 

55,128

 

4.11

%

5,300,829

 

55,002

 

4.16

%

5,016,472

 

51,192

 

4.19

%

Non-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

91,194

 

 

 

 

 

101,884

 

 

 

 

 

118,886

 

 

 

 

 

Allowance for loan losses

 

(53,268

)

 

 

 

 

(52,808

)

 

 

 

 

(61,913

)

 

 

 

 

Premises and equipment

 

48,376

 

 

 

 

 

50,130

 

 

 

 

 

55,716

 

 

 

 

 

Core deposit intangible

 

14,201

 

 

 

 

 

13,334

 

 

 

 

 

16,794

 

 

 

 

 

Goodwill

 

1,723

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other real estate owned and repossessed assets

 

48,562

 

 

 

 

 

48,983

 

 

 

 

 

59,558

 

 

 

 

 

Loan servicing rights

 

60,185

 

 

 

 

 

73,059

 

 

 

 

 

80,065

 

 

 

 

 

FDIC receivable

 

5,473

 

 

 

 

 

11,013

 

 

 

 

 

7,067

 

 

 

 

 

Company-owned life insurance

 

100,923

 

 

 

 

 

97,081

 

 

 

 

 

40,963

 

 

 

 

 

Other non-earning assets

 

234,502

 

 

 

 

 

223,685

 

 

 

 

 

217,081

 

 

 

 

 

Total assets

 

$

6,050,578

 

 

 

 

 

$

5,867,190

 

 

 

 

 

$

5,550,689

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing demand deposits

 

$

772,181

 

$

290

 

0.15

%

$

676,994

 

$

194

 

0.11

%

$

709,274

 

$

224

 

0.13

%

Money market and savings deposits

 

1,211,958

 

471

 

0.16

 

1,174,132

 

457

 

0.15

 

1,396,282

 

494

 

0.14

 

Time deposits

 

1,264,103

 

1,827

 

0.59

 

1,219,758

 

1,546

 

0.50

 

1,327,397

 

1,491

 

0.46

 

Other brokered funds

 

589,239

 

623

 

0.43

 

543,784

 

527

 

0.38

 

80,000

 

29

 

0.15

 

Short-term borrowings

 

49,839

 

79

 

0.65

 

165,515

 

90

 

0.22

 

102,633

 

175

 

0.69

 

Long-term debt

 

401,880

 

802

 

0.81

 

326,924

 

725

 

0.88

 

211,735

 

574

 

1.10

 

Total interest-bearing liabilities

 

4,289,200

 

4,092

 

0.39

%

4,107,107

 

3,539

 

0.34

%

3,827,321

 

2,987

 

0.32

%

Noninterest-bearing liabilities and shareholders’ equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing demand deposits

 

921,359

 

 

 

 

 

934,143

 

 

 

 

 

968,023

 

 

 

 

 

FDIC clawback liability

 

27,107

 

 

 

 

 

25,923

 

 

 

 

 

25,075

 

 

 

 

 

Other liabilities

 

53,547

 

 

 

 

 

45,272

 

 

 

 

 

40,063

 

 

 

 

 

Shareholders’ equity

 

759,365

 

 

 

 

 

754,745

 

 

 

 

 

690,207

 

 

 

 

 

Total liabilities and shareholders’ equity

 

$

6,050,578

 

 

 

 

 

$

5,867,190

 

 

 

 

 

$

5,550,689

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 

 

$

51,036

 

 

 

 

 

$

51,463

 

 

 

 

 

$

48,205

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest spread

 

 

 

 

 

3.72

%

 

 

 

 

3.82

%

 

 

 

 

3.87

%

Net interest margin as a percentage of interest-earning assets

 

 

 

 

 

3.76

%

 

 

 

 

3.85

%

 

 

 

 

3.90

%

Tax equivalent effect

 

 

 

 

 

0.04

%

 

 

 

 

0.04

%

 

 

 

 

0.05

%

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

 

 

 

 

 

3.80

%

 

 

 

 

3.89

%

 

 

 

 

3.95

%

 


(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 $534 thousand, $542 thousand and $688 thousand on tax-exempt securities for the three months ended March 31, 2015, December 31, 2014, and March 31, 2014, 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)

 

 

 

2015

 

2014

 

(Dollars in thousands, except per share data)

 

1st Quarter

 

4th Quarter

 

3rd Quarter

 

2nd Quarter

 

1st Quarter

 

 

 

 

 

 

 

 

 

 

 

 

 

Tangible shareholders’ equity:

 

 

 

 

 

 

 

 

 

 

 

Total shareholders’ equity

 

$

753,853

 

$

761,607

 

$

746,652

 

$

727,945

 

$

703,028

 

Less:

 

 

 

 

 

 

 

 

 

 

 

Core deposit intangibles

 

14,796

 

13,035

 

13,696

 

15,378

 

16,102

 

Goodwill

 

2,926

 

 

 

 

 

Tangible shareholders’ equity

 

$

736,131

 

$

748,572

 

$

732,956

 

$

712,567

 

$

686,926

 

 

 

 

 

 

 

 

 

 

 

 

 

Tangible book value per share:

 

 

 

 

 

 

 

 

 

 

 

Shares outstanding

 

70,938

 

70,532

 

70,504

 

70,451

 

69,962

 

Tangible book value per share

 

$

10.38

 

$

10.61

 

$

10.40

 

$

10.11

 

$

9.82

 

 

 

 

 

 

 

 

 

 

 

 

 

Tangible average equity to tangible average assets:

 

 

 

 

 

 

 

 

 

 

 

Average assets

 

$

6,050,578

 

$

5,867,190

 

$

5,747,108

 

$

5,446,347

 

$

5,550,689

 

Average equity

 

759,365

 

754,745

 

738,870

 

709,982

 

690,207

 

Average core deposit intangibles

 

14,201

 

13,334

 

14,398

 

15,740

 

16,794

 

Average goodwill

 

1,723

 

 

 

 

 

Tangible average equity to tangible average assets

 

12.32

%

12.67

%

12.64

%

12.78

%

12.17

%

 

 

 

 

 

 

 

 

 

 

 

 

Core efficiency ratio:

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

$

51,036

 

$

51,463

 

$

52,217

 

$

52,378

 

$

48,205

 

Noninterest income

 

21,430

 

15,834

 

29,974

 

13,951

 

57,740

 

Total revenue

 

72,466

 

67,297

 

82,191

 

66,329

 

105,945

 

Less:

 

 

 

 

 

 

 

 

 

 

 

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

 

(4,084

)

(3,656

)

(176

)

(4,200

)

(2,205

)

FDIC loss sharing income

 

(1,068

)

(244

)

(2,420

)

(3,434

)

(113

)

Net gains on sales of branches

 

 

 

14,410

 

 

 

Bargain purchase gain

 

 

 

 

 

41,977

 

Total core revenue

 

77,618

 

71,197

 

70,377

 

73,963

 

66,286

 

 

 

 

 

 

 

 

 

 

 

 

 

Total noninterest expense

 

56,595

 

48,098

 

51,263

 

54,071

 

65,448

 

Less:

 

 

 

 

 

 

 

 

 

 

 

Transaction and integration related costs

 

3,347

 

329

 

1,428

 

837

 

11,015

 

Total core noninterest expense

 

53,248

 

47,769

 

49,835

 

53,234

 

54,433

 

 

 

 

 

 

 

 

 

 

 

 

 

Core efficiency ratio

 

68.60

%

67.09

%

70.81

%

71.97

%

82.12

%

 


(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.

 

16