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| 8-K - 8-K TLMR REPORTS Q2 2015 EARNINGS - TALMER BANCORP, INC. | q22015earningsrelease.htm |
Exhibit 99.1
Talmer Bancorp, Inc. reports second quarter 2015 net income of $17.5 million, representing $0.23 of earnings per diluted average common share
Second quarter deposit growth of $129.5 million, or 10.84% on an annualized basis
Talmer Bancorp, Inc. declares cash dividend on common stock of $0.01 per share
TROY, Mich., July 30, 2015 - Talmer Bancorp, Inc. (NASDAQ: TLMR) (“Talmer”) today reported second quarter 2015 net income of $17.5 million, compared to $9.4 million for the first quarter of 2015 and $20.6 million for the second quarter of 2014. Earnings per diluted common share were $0.23 for the second quarter of 2015, compared to $0.12 for the first quarter of 2015 and $0.27 for the second quarter of 2014. In addition, the Board of Directors of Talmer declared a cash dividend on its Class A common stock of $0.01 per share on July 29, 2015. The dividend will be paid on August 21, 2015, to our Class A common shareholders of record as of August 10, 2015.
Talmer Bancorp President and CEO David Provost commented, “We are pleased with underlying trends this quarter including strong core deposit growth, improved operating expense trends, quality loan growth and solid revenue trends from our fee businesses. Core deposit trends benefited from the continued focus of our retail sales force to drive growth in key markets in order to fund our strong lending pipelines. Second quarter loan growth trends were somewhat mitigated by the strategic sale of $49.9 million of long-term residential mortgages out of our held for investment portfolio. Also, overall balances of commercial real estate loans declined as we focus on increasing our proportionate exposure to commercial and industrial lending. Net interest income trends were negatively impacted by higher levels of prepayments, excess liquidity and the negative yield of the FDIC indemnification asset. Looking forward, margin and revenue trends should benefit from the July 1, 2015 expiration of the first and largest of our four non-single family FDIC loss sharing agreements. Our reported earnings were impacted by several non-core items: a $3.1 million benefit to earnings due to the change in fair value of our loan servicing rights, $419 thousand in bank acquisition and due diligence fees and $1.8 million of net expense related to the rationalization of corporate real estate including sales, impairments and lease terminations. The cumulative impact to our earnings per diluted common share for the second quarter of 2015 from these non-core items was a benefit of approximately $0.01 per diluted common share. We expect to see an incremental improvement in our core operating efficiency in the third quarter reflecting the impact of continuing expense management, improving net interest income trends and additional savings related to the charter consolidation of Talmer West Bank, which will be completed in August. 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) | 2nd Qtr 2015 | 1st Qtr 2015 | 2nd Qtr 2014 | |||||||||
Earnings Summary | ||||||||||||
Net interest income | $ | 49,609 | $ | 51,032 | $ | 52,378 | ||||||
Total provision (benefit) for loan losses | (7,313 | ) | 1,993 | (4,102 | ) | |||||||
Noninterest income | 22,098 | 21,430 | 13,951 | |||||||||
Noninterest expense | 53,293 | 56,595 | 54,071 | |||||||||
Income before income taxes | 25,727 | 13,874 | 16,360 | |||||||||
Income tax provision (benefit) | 8,179 | 4,441 | (4,246 | ) | ||||||||
Net income | 17,548 | 9,433 | 20,606 | |||||||||
Per Share Data | ||||||||||||
Diluted earnings per common share | $ | 0.23 | $ | 0.12 | $ | 0.27 | ||||||
Tangible book value per share (1) | 10.53 | 10.37 | 10.11 | |||||||||
Average diluted common shares (in thousands) | 74,900 | 75,103 | 75,659 | |||||||||
Performance and Capital Ratios | ||||||||||||
Return on average assets (annualized) | 1.11 | % | 0.62 | % | 1.51 | % | ||||||
Return on average equity (annualized) | 9.26 | 4.97 | 11.61 | |||||||||
Net interest margin (fully taxable equivalent) (2) | 3.50 | 3.80 | 4.34 | |||||||||
Core efficiency ratio (1) | 68.54 | 68.61 | 71.97 | |||||||||
Tangible average equity to tangible average assets (1) | 11.79 | 12.31 | 12.78 | |||||||||
Common equity tier 1 capital (3) | 13.90 | 13.87 | N/A | |||||||||
Tier 1 leverage ratio (3) | 11.50 | 11.65 | 11.71 | |||||||||
Tier 1 risk-based capital (3) | 13.90 | 13.87 | 16.16 | |||||||||
Total risk-based capital (3) | 14.98 | 14.97 | 17.31 | |||||||||
(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 and second quarter 2015 are estimated. First and second quarter 2015 are under Basel III transitional and second quarter 2014 is under Basel I. |
Second Quarter 2015 Compared to First Quarter 2015
• | Net income was $17.5 million, or $0.23 per diluted average common share, in the second quarter of 2015, compared to $9.4 million, or $0.12 per diluted average common share, for the first quarter of 2015. The increase in net income in the second quarter of 2015 was primarily due to strong credit performance from both the covered and uncovered loan portfolios, an increase in mortgage banking and other loan fees, and reductions in non-interest operating expenses. |
• | Net total loans increased during the second quarter of 2015 by $51.5 million. During the second quarter of 2015, Talmer Bank and Trust’s net total loans grew by $86.6 million, as a result of $121.7 million of net uncovered loan growth, inclusive of $49.9 million of residential real estate loan sales during the quarter, partially offset by $35.1 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 $35.1 million in the second quarter of 2015. |
• | Total deposits increased $129.5 million, to $4.9 billion as of June 30, 2015, compared to March 31, 2015. Total deposit growth included increases in time deposits of $114.1 million, demand deposits of $75.5 million, and money market and savings deposits of $18.8 million. These increases were partially offset by a substantial decline in other brokered funds of $78.9 million. The strong growth in core deposit balances and the decrease in non-core deposit balances were reflective of management’s efforts to increase core deposit growth achieved through programs initiated in early 2015. |
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• | Net interest income decreased to $49.6 million in the second quarter of 2015, compared to $51.0 million in the first quarter of 2015, as the benefits provided by the $122.1 million of average loan increase and the $702 thousand reduction in negative accretion on the FDIC indemnification asset were more than offset by both a decline in the yield earned on our loan portfolios and an increase of $715 thousand in total interest expense associated with an increase in on balance sheet liquidity. Our net interest margin declined 30 basis points to 3.50% in the second quarter of 2015, compared to 3.80% in the first quarter of 2015, due in large part to the decline in yield earned on our loan portfolios driven by the run-off of loans with higher yields (which were primarily acquired loans) being replaced with new loans with lower, current market-competitive rates. 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 second quarter of 2015 was 3.41% compared to 3.76% in first quarter of 2015. |
• | Noninterest income increased $668 thousand to $22.1 million in the second quarter of 2015, compared to the first quarter of 2015. Noninterest income was impacted by a benefit to earnings of $3.1 million due to the change in the fair value of loan servicing rights, which is a key component of the $4.7 million of income from mortgage banking and other loan fees. The benefit provided by the increase in mortgage banking and other loan fees was partially offset by a $4.9 million decrease in FDIC loss sharing income, driven primarily by the increase in amounts due to the FDIC in accordance with our loss sharing agreements related to the significant credit recoveries on covered loans in the second quarter of 2015. |
• | Noninterest expense decreased $3.3 million, to $53.3 million in the second quarter of 2015, compared to the first quarter of 2015. The decrease in noninterest expense includes decreases in transaction and integration related expenses of $2.9 million primarily related to costs associated with the acquisition of First of Huron Corp. in the first quarter of 2015, other expenses of $1.7 million and FDIC loss sharing expense of $816 thousand. These decreases were partially offset by $1.8 million of net expense recognized in the second quarter of 2015 related to our targeted analysis of property efficiency which included a review of certain lease contracts resulting in lease buyouts, final sales of unused properties and impairments recognized due to current appraisals on owned properties under review for potential upcoming sales. |
• | Total shareholder’s equity of $766.4 million as of June 30, 2015, increased $12.6 million compared to March 31, 2015. The increase is primarily the result of second quarter of 2015 net income of $17.5 million, partially offset by a decrease in accumulated other comprehensive income due to a decline in the fair value of our investment securities portfolio. |
Income Statement
Net Interest Income and Net Interest Margin
Net interest income for the second quarter of 2015 was $49.6 million, compared to $51.0 million in the prior quarter. Our net interest margin was 3.50% in the second quarter of 2015, a decrease of 30 basis points from 3.80% in the first quarter of 2015. The decline in our net interest margin in the second quarter was due to a combination of several factors. The largest factor affecting the change in our net interest margin was a decline in the yield earned on our loan portfolios due to a combination of causes including the run-off of higher yielding loans (which were primarily acquired loans) being replaced with newly originated loans at current market rates, a decrease in the benefit provided from discount accretion on our purchased credit impaired loan portfolio and a market driven decline in interest rates on our adjustable-rate loans.
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 second and first quarters of 2015, the yield on uncovered loans was 4.62% and 4.90%, respectively, while the yield generated using only the expected coupon would have been 4.14% and 4.36%, respectively. For the second and first quarters of 2015, the yield on covered loans was 12.48% and 12.83%, respectively, while the yield generated using only the expected coupon would have been 6.17% and 7.44%, 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 indemnification asset partially offsets the benefits provided by the excess accretable yield. This negative yield was 73.00%, representing $8.5 million, for the second quarter of 2015 compared to a negative yield of 60.03%, representing $9.3 million, for the first quarter of 2015. 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 seven basis points in the second quarter of 2015 compared to four basis points in the first quarter of 2015.
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Therefore, excluding the benefit of excess accretable yield and negative yield on the FDIC indemnification asset, our net interest margin in the second quarter of 2015 was 3.41% compared to 3.76% in the first quarter of 2015. The decrease in the core net interest margin in the second quarter of 2015 is primarily due to a decrease in the yield earned on our loan portfolio discussed previously.
Noninterest Income
Noninterest income increased $668 thousand to $22.1 million in the second quarter of 2015, compared to the first quarter of 2015. The increase is primarily the result of an increase in mortgage banking and other loan fees of $6.0 million, partially offset by a $4.9 million increase in the net amounts due to the FDIC resulting from higher recoveries on covered loans, recognized within “FDIC loss sharing income,” and a decline in accelerated discount on acquired loans of $754 thousand. 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. The increase in mortgage banking and other loan fees was impacted by a benefit to earnings of $3.1 million due to the change in the fair value of loan servicing rights. In the first quarter of 2015, the change in the fair value of loan servicing rights was a detriment of $4.1 million. The change in the fair value of loan servicing rights in the second quarter was due mainly to upward movements in market interest rates during the period.
As we have noted in prior quarters, we have chosen not to hedge our investment in loan servicing rights. Since our loan servicing rights are accounted for under the fair 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 in our acquisition of 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 benefit to pre-tax earnings due to the changes in fair value has been approximately $3.0 million since the acquisition of First Place Bank on January 1, 2013.
Noninterest Expense
Noninterest expense in the second quarter of 2015 decreased $3.3 million, to $53.3 million, compared to the first quarter of 2015. The decrease in noninterest expense includes a decrease in transaction and integration related expenses of $2.9 million and other spending cuts made within other noninterest expenses. Partially offsetting these declines was $1.8 million of net expense recognized in the second quarter of 2015 related to our targeted analysis of property efficiency which included a review of certain lease contracts resulting in lease buyouts, final sales of unused properties and impairments taken on owned properties under review for potential upcoming sales. We anticipate the cost savings related to the early exit of leases and sales of unoccupied properties to reduce occupancy and equipment expense by approximately $650 thousand in the second half of 2015 and approximately $950 thousand for the full year 2016.
Our core efficiency ratio was 68.54% and 68.61%, for the second and first quarters of 2015, respectively. While we were able to reduce our core operating expenses $2.2 million in the second quarter of 2015, compared to the first quarter of 2015, this decrease was mostly offset by a decrease in core revenue, driven by the decline in net interest income discussed previously. 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 second quarter of 2015 core efficiency ratio excludes the benefit provided by the fair value adjustment to our loan servicing rights of $3.1 million, transaction and integration related costs of $419 thousand, property efficiency review expenses of $1.8 million and the FDIC loss sharing income, which was a detriment of $5.9 million. The first quarter of 2015 core efficiency ratio excludes the fair value adjustment to our loan servicing rights of a negative $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.
Credit Quality
The second quarter of 2015 resulted in a total net benefit for loan losses of $7.3 million, compared to a net provision of $2.0 million in the first quarter of 2015. The decrease in the net provision for loan losses was primarily due to unanticipated payments received on loans previously charged-off.
The provision for loan losses on uncovered loans in the second quarter of 2015 decreased $2.3 million to $1.1 million, compared to the first quarter of 2015. At June 30, 2015, the allowance for loan losses on uncovered loans was $36.6 million, or 0.86% of total uncovered loans, compared to $34.5 million, or 0.83% of total uncovered loans, at March 31, 2015. 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 and the impact of organic loan growth.
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The net benefit for loan losses on covered loans in the second quarter of 2015 increased $7.0 million to a benefit of $8.4 million, compared to the first quarter of 2015. The net benefit for loan losses on covered loans in the second quarter of 2015 was largely driven by the benefit received from significant recoveries on loans previously charged-off. The majority of these recoveries are offset by amounts owed to the FDIC related to the associated charge-offs previously claimed with the FDIC recognized as a reduction to FDIC loss sharing income. At June 30, 2015, the allowance for loan losses on covered loans was $16.3 million, or 5.83% of total covered loans, compared to $18.0 million, or 5.66% of total covered loans at March 31, 2015. 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 second quarter of 2015, 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 $2.6 million ($1.2 million covered and $1.4 million uncovered). The re-estimations also resulted in a $21.6 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 second quarter 2015 re-estimations, the prior re-estimations of cash flows have indicated better overall expected performance in our acquired loan portfolio than originally anticipated at acquisition.
Balance Sheet and Capital Management
Total assets increased $137.4 million to $6.4 billion at June 30, 2015 compared to $6.3 billion at December 31, 2014. The primary drivers of the increase in assets in the quarter ended June 30, 2015 were increases in securities available-for-sale of $114.9 million, net total loans of $51.5 million and loans held for sale of $50.5 million, partially offset by a decrease in cash and cash equivalents of $75.3 million. The increase in securities available-for-sale reflects management’s decision to invest liquid assets while retaining accessibility to the funds for potential liquidity needs. The increase in loans held for sale primarily reflects strong mortgage banking loan production during the second quarter of 2015 and the strategic decision to increase the percentage of loans sold to the secondary market.
Net total loans at June 30, 2015 increased $51.5 million to $4.5 billion, compared to March 31, 2015. During the second quarter of 2015, Talmer Bank and Trust’s net total loans grew by $86.6 million, as a result of $121.7 million of net uncovered loan growth, inclusive of $49.9 million of residential real estate loan sales during the quarter, partially offset by $35.1 million of net covered loan run-off. The net uncovered loan growth of $86.6 million was driven primarily by growth in our commercial and industrial and real estate construction loan portfolios, partially offset by a decrease in our residential real estate loan portfolio primarily due to the loan pool sale discussed previously and a modest decrease in commercial real estate loans. Talmer West Bank experienced net loan run-off of $35.1 million in the second 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 $1.6 billion, or 36.4% of total loans, at June 30, 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 $37.0 million at June 30, 2015. Of this amount, we expect approximately $19.7 million to be collected from the FDIC and the remaining $17.3 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. 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 $5.7 billion at June 30, 2015 compared to $5.5 billion at March 31, 2015. The $124.9 million increase in liabilities in the quarter ended June 30, 2015 was primarily due to an increase in total deposits of $129.5 million. Total deposit growth included time deposits of $114.1 million, noninterest-bearing demand deposits of $37.9 million, interest-bearing demand deposits of $37.6 million and money market and savings deposits of $18.8 million, partially offset by a decrease in other brokered funds of $78.9 million. The strong growth in core deposit balances and the decrease in non-core deposit balances were reflective of management’s efforts to increase core deposit growth achieved through programs initiated in early 2015.
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Total shareholders’ equity of $766.4 million as of June 30, 2015, increased $12.6 million compared to March 31, 2015. The increase is primarily the result of second quarter of 2015 net income of $17.5 million, partially offset by a decrease in accumulated other comprehensive income due to a decline in the fair value of our investment securities portfolio. Our Tier 1 leverage ratio was 11.50% at June 30, 2015, compared to 11.65% at March 31, 2015.
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 and consolidating charters. We are also continuing to make progress on reducing the complexity of our business and believe opportunities exist to improve balance sheet efficiency and better leverage our capital position in the near term. Continuing merger activity in our market area offers the potential for additional growth opportunities; however, we will remain disciplined in our evaluation of the risks and challenges in each and every deal. Recent trends in operating expenses and 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 second quarter 2015 financial results at 10:00 a.m. ET on Thursday, July 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. 6109317) 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 our anticipation of favorable loan growth through the remainder of the year, the expected benefits to margin and revenue as our FDIC loss share agreements expire, expected incremental improvement in our core operating efficiency in the third quarter reflecting the continued impact of expense management and improving net interest income trends, anticipated cost savings related to the early exit of leases and sales of unoccupied properties and statements regarding growth opportunities in our markets. 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)
(Dollars in thousands, except per share data) | June 30, 2015 | March 31, 2015 (1) | December 31, 2014 | June 30, 2014 | |||||||||||
Assets | |||||||||||||||
Cash and due from banks | $ | 79,357 | $ | 77,957 | $ | 86,185 | $ | 107,292 | |||||||
Interest-bearing deposits with other banks | 161,201 | 303,926 | 96,551 | 218,309 | |||||||||||
Federal funds sold and other short-term investments | 170,000 | 104,000 | 71,000 | 77,000 | |||||||||||
Total cash and cash equivalents | 410,558 | 485,883 | 253,736 | 402,601 | |||||||||||
Securities available-for-sale | 845,319 | 730,393 | 740,819 | 731,700 | |||||||||||
Federal Home Loan Bank stock | 25,418 | 20,744 | 20,212 | 16,541 | |||||||||||
Loans held for sale, at fair value | 117,042 | 66,556 | 93,453 | 136,089 | |||||||||||
Loans: | |||||||||||||||
Residential real estate (includes $20.9 million, $21.7 million, $18.3 million and $18.5 million, respectively, measured at fair value) (1) | 1,434,678 | 1,474,025 | 1,426,012 | 1,362,869 | |||||||||||
Commercial real estate | 1,395,783 | 1,404,662 | 1,310,938 | 1,131,348 | |||||||||||
Commercial and industrial | 1,066,353 | 948,303 | 869,477 | 647,090 | |||||||||||
Real estate construction (includes $0, $431 thousand, $1.2 million, and $0, respectively, respectively, measured at fair value) (1) | 175,192 | 140,705 | 131,686 | 112,866 | |||||||||||
Consumer | 172,120 | 187,698 | 164,524 | 42,034 | |||||||||||
Total loans, excluding covered loans | 4,244,126 | 4,155,393 | 3,902,637 | 3,296,207 | |||||||||||
Less: Allowance for loan losses - uncovered | (36,566 | ) | (34,477 | ) | (33,819 | ) | (24,360 | ) | |||||||
Net loans - excluding covered loans | 4,207,560 | 4,120,916 | 3,868,818 | 3,271,847 | |||||||||||
Covered loans | 280,847 | 317,593 | 346,490 | 459,280 | |||||||||||
Less: Allowance for loan losses - covered | (16,340 | ) | (17,988 | ) | (21,353 | ) | (32,743 | ) | |||||||
Net loans - covered | 264,507 | 299,605 | 325,137 | 426,537 | |||||||||||
Net total loans | 4,472,067 | 4,420,521 | 4,193,955 | 3,698,384 | |||||||||||
Premises and equipment | 44,857 | 48,150 | 48,389 | 58,798 | |||||||||||
FDIC indemnification asset | 36,997 | 50,702 | 67,026 | 102,694 | |||||||||||
Other real estate owned and repossessed assets | 46,373 | 42,921 | 48,743 | 52,365 | |||||||||||
Loan servicing rights | 58,894 | 54,409 | 70,598 | 74,104 | |||||||||||
Core deposit intangible | 14,131 | 14,796 | 13,035 | 15,378 | |||||||||||
Goodwill | 3,524 | 3,524 | — | — | |||||||||||
FDIC receivable | 5,543 | 7,839 | 6,062 | 7,198 | |||||||||||
Company-owned life insurance | 104,972 | 103,924 | 97,782 | 95,580 | |||||||||||
Income tax benefit | 188,755 | 182,554 | 177,472 | 189,667 | |||||||||||
Other assets | 43,173 | 47,273 | 40,982 | 30,550 | |||||||||||
Total assets | $ | 6,417,623 | $ | 6,280,189 | $ | 5,872,264 | $ | 5,611,649 | |||||||
Liabilities | |||||||||||||||
Deposits: | |||||||||||||||
Noninterest-bearing demand deposits | $ | 1,002,053 | $ | 964,163 | $ | 887,567 | $ | 958,278 | |||||||
Interest-bearing demand deposits | 821,557 | 784,001 | 660,697 | 697,031 | |||||||||||
Money market and savings deposits | 1,276,726 | 1,257,919 | 1,170,236 | 1,330,036 | |||||||||||
Time deposits | 1,427,126 | 1,312,992 | 1,188,178 | 1,187,661 | |||||||||||
Other brokered funds | 380,611 | 459,499 | 642,185 | 123,528 | |||||||||||
Total deposits | 4,908,073 | 4,778,574 | 4,548,863 | 4,296,534 | |||||||||||
FDIC clawback liability | 28,588 | 27,881 | 26,905 | 26,309 | |||||||||||
FDIC warrants payable | 4,441 | 4,472 | 4,633 | 4,493 | |||||||||||
Short-term borrowings | 253,945 | 216,747 | 135,743 | 238,826 | |||||||||||
Long-term debt | 414,947 | 462,493 | 353,972 | 266,407 | |||||||||||
Other liabilities | 41,223 | 36,173 | 40,541 | 51,135 | |||||||||||
Total liabilities | 5,651,217 | 5,526,340 | 5,110,657 | 4,883,704 | |||||||||||
Shareholders’ equity | |||||||||||||||
Preferred stock - $1.00 par value | |||||||||||||||
Authorized - 20,000,000 shares at 6/30/2015, 3/31/2015, 12/31/2014 and 6/30/2014 | |||||||||||||||
Issued and outstanding - 0 shares at 6/30/2015, 3/31/2015, 12/31/2014 and 6/30/2014 | — | — | — | — | |||||||||||
Common stock: | |||||||||||||||
Class A Voting Common Stock - $1.00 par value | |||||||||||||||
Authorized - 198,000,000 shares at 6/30/2015, 3/31/2015, 12/31/2014 and 6/30/2014 | |||||||||||||||
Issued and outstanding -71,128,894 shares at 6/30/2015, 70,938,113 shares at 3/31/2015, 70,532,122 shares at 12/31/2014 and 70,451,057 shares at 6/30/2014 | 71,129 | 70,938 | 70,532 | 70,451 | |||||||||||
Class B Non-Voting Common Stock - $1.00 par value | |||||||||||||||
Authorized - 2,000,000 shares at 6/30/2015, 3/31/2015, 12/31/2014 and 6/30/2014 | |||||||||||||||
Issued and outstanding - 0 shares at 6/30/2015, 3/31/2015, 12/31/2014 and 6/30/2014 | — | — | — | — | |||||||||||
Additional paid-in-capital | 385,686 | 385,755 | 405,436 | 404,079 | |||||||||||
Retained earnings | 307,355 | 290,516 | 281,789 | 251,182 | |||||||||||
Accumulated other comprehensive income, net of tax | 2,236 | 6,640 | 3,850 | 2,233 | |||||||||||
Total shareholders’ equity | 766,406 | 753,849 | 761,607 | 727,945 | |||||||||||
Total liabilities and shareholders’ equity | $ | 6,417,623 | $ | 6,280,189 | $ | 5,872,264 | $ | 5,611,649 | |||||||
(1) First quarter 2015 information has been revised to reflect the impact to the financial statements from adjustments to the acquisition date fair value of certain assets and liabilities in the First of Huron Corporation (Signature Bank) acquisition within the measurement period. These adjustments decreased first quarter 2015 net income and period end equity by $4 thousand compared to previously reported levels.
8
Talmer Bancorp, Inc.
Consolidated Statements of Income
(Unaudited)
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
(Dollars in thousands, except per share data) | 2015 | 2014 | 2015 | 2014 | ||||||||||||
Interest income | ||||||||||||||||
Interest and fees on loans | $ | 58,319 | $ | 56,774 | $ | 118,257 | $ | 110,275 | ||||||||
Interest on investments | ||||||||||||||||
Taxable | 2,375 | 2,139 | 4,698 | 4,005 | ||||||||||||
Tax-exempt | 1,658 | 1,213 | 3,273 | 3,178 | ||||||||||||
Total interest on securities | 4,033 | 3,352 | 7,971 | 7,183 | ||||||||||||
Interest on interest-earning cash balances | 117 | 171 | 203 | 387 | ||||||||||||
Interest on federal funds and other short-term investments | 269 | 131 | 434 | 271 | ||||||||||||
Dividends on FHLB stock | 224 | 291 | 469 | 513 | ||||||||||||
FDIC indemnification asset | (8,548 | ) | (5,506 | ) | (17,798 | ) | (12,224 | ) | ||||||||
Total interest income | 54,414 | 55,213 | 109,536 | 106,405 | ||||||||||||
Interest Expense | ||||||||||||||||
Interest-bearing demand deposits | 382 | 216 | 672 | 440 | ||||||||||||
Money market and savings deposits | 562 | 492 | 1,033 | 986 | ||||||||||||
Time deposits | 2,131 | 1,432 | 3,958 | 2,923 | ||||||||||||
Other brokered funds | 607 | 35 | 1,230 | 64 | ||||||||||||
Interest on short-term borrowings | 209 | 33 | 288 | 208 | ||||||||||||
Interest on long-term debt | 914 | 627 | 1,714 | 1,201 | ||||||||||||
Total interest expense | 4,805 | 2,835 | 8,895 | 5,822 | ||||||||||||
Net interest income | 49,609 | 52,378 | 100,641 | 100,583 | ||||||||||||
Provision for loan losses - uncovered | 1,069 | 3,219 | 4,481 | 9,643 | ||||||||||||
Benefit for loan losses - covered | (8,382 | ) | (7,321 | ) | (9,801 | ) | (9,819 | ) | ||||||||
Net interest income after provision for loan losses | 56,922 | 56,480 | 105,961 | 100,759 | ||||||||||||
Noninterest income | ||||||||||||||||
Deposit fee income | 2,561 | 3,188 | 4,881 | 6,486 | ||||||||||||
Mortgage banking and other loan fees | 4,698 | (1,122 | ) | 3,437 | (37 | ) | ||||||||||
Net gain on sales of loans | 8,748 | 5,681 | 17,366 | 8,725 | ||||||||||||
Bargain purchase gain | — | — | — | 41,977 | ||||||||||||
FDIC loss sharing income | (5,928 | ) | (3,434 | ) | (6,996 | ) | (3,547 | ) | ||||||||
Accelerated discount on acquired loans | 7,444 | 4,326 | 15,642 | 10,792 | ||||||||||||
Net gain (loss) on sales of securities | 6 | — | (101 | ) | (2,310 | ) | ||||||||||
Other income | 4,569 | 5,312 | 9,299 | 9,605 | ||||||||||||
Total noninterest income | 22,098 | 13,951 | 43,528 | 71,691 | ||||||||||||
Noninterest expense | ||||||||||||||||
Salary and employee benefits | 28,685 | 30,466 | 57,897 | 66,317 | ||||||||||||
Occupancy and equipment expense | 8,415 | 7,871 | 16,081 | 16,914 | ||||||||||||
Data processing fees | 1,805 | 2,260 | 3,659 | 4,000 | ||||||||||||
Professional service fees | 3,275 | 2,628 | 6,818 | 6,665 | ||||||||||||
FDIC loss sharing expense | 133 | 983 | 1,082 | 1,507 | ||||||||||||
Bank acquisition and due diligence fees | 419 | 268 | 1,831 | 3,197 | ||||||||||||
Marketing expense | 1,483 | 1,605 | 2,578 | 2,696 | ||||||||||||
Other employee expense | 826 | 752 | 1,760 | 1,395 | ||||||||||||
Insurance expense | 1,527 | 868 | 3,057 | 2,699 | ||||||||||||
Other expense | 6,725 | 6,370 | 15,125 | 14,129 | ||||||||||||
Total noninterest expense | 53,293 | 54,071 | 109,888 | 119,519 | ||||||||||||
Income before income taxes | 25,727 | 16,360 | 39,601 | 52,931 | ||||||||||||
Income tax provision (benefit) | 8,179 | (4,246 | ) | 12,620 | (5,902 | ) | ||||||||||
Net income | $ | 17,548 | $ | 20,606 | $ | 26,981 | $ | 58,833 | ||||||||
Earnings per common share: | ||||||||||||||||
Basic | $ | 0.25 | $ | 0.29 | $ | 0.38 | $ | 0.85 | ||||||||
Diluted | $ | 0.23 | $ | 0.27 | $ | 0.36 | $ | 0.79 | ||||||||
Average common shares outstanding - basic | 70,301 | 70,021 | 70,259 | 69,071 | ||||||||||||
Average common shares outstanding - diluted | 74,900 | 75,659 | 75,046 | 74,531 | ||||||||||||
Total comprehensive income | $ | 13,144 | $ | 25,254 | $ | 25,367 | $ | 69,062 | ||||||||
9
Talmer Bancorp, Inc.
Consolidated Statements of Income
(Unaudited)
2015 | 2014 | |||||||||||||||||||
(Dollars in thousands, except per share data) | 2nd Qtr | 1st Qtr (1) | 4th Qtr | 3rd Qtr | 2nd Qtr | |||||||||||||||
Interest income | ||||||||||||||||||||
Interest and fees on loans | $ | 58,319 | $ | 59,938 | $ | 58,271 | $ | 58,128 | $ | 56,774 | ||||||||||
Interest on investments | ||||||||||||||||||||
Taxable | 2,375 | 2,323 | 2,263 | 2,241 | 2,139 | |||||||||||||||
Tax-exempt | 1,658 | 1,615 | 1,610 | 1,444 | 1,213 | |||||||||||||||
Total interest on securities | 4,033 | 3,938 | 3,873 | 3,685 | 3,352 | |||||||||||||||
Interest on interest-earning cash balances | 117 | 86 | 94 | 159 | 171 | |||||||||||||||
Interest on federal funds and other short-term investments | 269 | 165 | 126 | 130 | 131 | |||||||||||||||
Dividends on FHLB stock | 224 | 245 | 177 | 177 | 291 | |||||||||||||||
FDIC indemnification asset | (8,548 | ) | (9,250 | ) | (7,539 | ) | (6,663 | ) | (5,506 | ) | ||||||||||
Total interest income | 54,414 | 55,122 | 55,002 | 55,616 | 55,213 | |||||||||||||||
Interest Expense | ||||||||||||||||||||
Interest-bearing demand deposits | 382 | 290 | 194 | 190 | 216 | |||||||||||||||
Money market and savings deposits | 562 | 471 | 457 | 487 | 492 | |||||||||||||||
Time deposits | 2,131 | 1,827 | 1,546 | 1,611 | 1,432 | |||||||||||||||
Other brokered funds | 607 | 623 | 527 | 288 | 35 | |||||||||||||||
Interest on short-term borrowings | 209 | 79 | 90 | 122 | 33 | |||||||||||||||
Interest on long-term debt | 914 | 800 | 725 | 701 | 627 | |||||||||||||||
Total interest expense | 4,805 | 4,090 | 3,539 | 3,399 | 2,835 | |||||||||||||||
Net interest income | 49,609 | 51,032 | 51,463 | 52,217 | 52,378 | |||||||||||||||
Provision for loan losses - uncovered | 1,069 | 3,412 | 5,655 | 7,784 | 3,219 | |||||||||||||||
Benefit for loan losses - covered | (8,382 | ) | (1,419 | ) | (2,661 | ) | (6,275 | ) | (7,321 | ) | ||||||||||
Net interest income after provision for loan losses | 56,922 | 49,039 | 48,469 | 50,708 | 56,480 | |||||||||||||||
Noninterest income | ||||||||||||||||||||
Deposit fee income | 2,561 | 2,320 | 2,692 | 3,047 | 3,188 | |||||||||||||||
Mortgage banking and other loan fees | 4,698 | (1,261 | ) | (865 | ) | 2,065 | (1,122 | ) | ||||||||||||
Net gain on sales of loans | 8,748 | 8,618 | 4,939 | 4,083 | 5,681 | |||||||||||||||
Net gain on sale of branches | — | — | — | 14,410 | — | |||||||||||||||
FDIC loss sharing income | (5,928 | ) | (1,068 | ) | (244 | ) | (2,420 | ) | (3,434 | ) | ||||||||||
Accelerated discount on acquired loans | 7,444 | 8,198 | 3,742 | 3,663 | 4,326 | |||||||||||||||
Net gain (loss) on sales of securities | 6 | (107 | ) | — | 244 | — | ||||||||||||||
Other income | 4,569 | 4,730 | 5,570 | 4,882 | 5,312 | |||||||||||||||
Total noninterest income | 22,098 | 21,430 | 15,834 | 29,974 | 13,951 | |||||||||||||||
Noninterest expense | ||||||||||||||||||||
Salary and employee benefits | 28,685 | 29,212 | 25,632 | 29,795 | 30,466 | |||||||||||||||
Occupancy and equipment expense | 8,415 | 7,666 | 6,911 | 7,981 | 7,871 | |||||||||||||||
Data processing fees | 1,805 | 1,854 | 789 | 1,610 | 2,260 | |||||||||||||||
Professional service fees | 3,275 | 3,543 | 3,323 | 2,964 | 2,628 | |||||||||||||||
FDIC loss sharing expense | 133 | 949 | 406 | 245 | 983 | |||||||||||||||
Bank acquisition and due diligence fees | 419 | 1,412 | 329 | 239 | 268 | |||||||||||||||
Marketing expense | 1,483 | 1,095 | 1,226 | 1,001 | 1,605 | |||||||||||||||
Other employee expense | 826 | 934 | 658 | 621 | 752 | |||||||||||||||
Insurance expense | 1,527 | 1,530 | 1,615 | 1,383 | 868 | |||||||||||||||
Other expense | 6,725 | 8,400 | 7,209 | 5,424 | 6,370 | |||||||||||||||
Total noninterest expense | 53,293 | 56,595 | 48,098 | 51,263 | 54,071 | |||||||||||||||
Income before income taxes | 25,727 | 13,874 | 16,205 | 29,419 | 16,360 | |||||||||||||||
Income tax provision (benefit) | 8,179 | 4,441 | 3,703 | 9,904 | (4,246 | ) | ||||||||||||||
Net income | $ | 17,548 | $ | 9,433 | $ | 12,502 | $ | 19,515 | $ | 20,606 | ||||||||||
Earnings per common share: | ||||||||||||||||||||
Basic | $ | 0.25 | $ | 0.13 | $ | 0.18 | $ | 0.28 | $ | 0.29 | ||||||||||
Diluted | $ | 0.23 | $ | 0.12 | $ | 0.16 | $ | 0.26 | $ | 0.27 | ||||||||||
Average common shares outstanding - basic | 70,301 | 70,216 | 70,136 | 70,092 | 70,021 | |||||||||||||||
Average common shares outstanding - diluted | 74,900 | 75,103 | 75,759 | 75,752 | 75,659 | |||||||||||||||
Total comprehensive income | $ | 13,144 | $ | 12,227 | $ | 14,265 | $ | 19,369 | $ | 25,254 | ||||||||||
(1) First quarter 2015 information is revised to reflect the impact to the financial statements from adjustments to the acquisition date fair value of certain assets and liabilities in the First of Huron Corporation (Signature Bank) acquisition within the measurement period. These adjustments decreased first quarter 2015 net income and period end equity by $4 thousand compared to previously reported levels.
10
Talmer Bancorp, Inc.
Loan Data
(Unaudited)
(Dollars in thousands) | June 30, 2015 | March 31, 2015 (1) | December 31, 2014 | September 30, 2014 | June 30, 2014 | ||||||||||||||
Uncovered loans | |||||||||||||||||||
Residential real estate | $ | 1,434,678 | $ | 1,474,025 | $ | 1,426,012 | $ | 1,430,939 | $ | 1,362,869 | |||||||||
Commercial real estate | |||||||||||||||||||
Non-owner occupied | 924,174 | 919,043 | 888,650 | 814,179 | 731,743 | ||||||||||||||
Owner-occupied | 445,927 | 459,002 | 417,843 | 379,964 | 371,406 | ||||||||||||||
Farmland | 25,682 | 26,617 | 4,445 | 19,218 | 28,199 | ||||||||||||||
Total commercial real estate | 1,395,783 | 1,404,662 | 1,310,938 | 1,213,361 | 1,131,348 | ||||||||||||||
Commercial and industrial | 1,066,353 | 948,303 | 869,477 | 790,867 | 647,090 | ||||||||||||||
Real estate construction | 175,192 | 140,705 | 131,686 | 102,920 | 112,866 | ||||||||||||||
Consumer | 172,120 | 187,698 | 164,524 | 93,246 | 42,034 | ||||||||||||||
Total uncovered loans | 4,244,126 | 4,155,393 | 3,902,637 | 3,631,333 | 3,296,207 | ||||||||||||||
Covered loans | |||||||||||||||||||
Residential real estate | 96,371 | 103,429 | 108,226 | 113,228 | 117,507 | ||||||||||||||
Commercial real estate | |||||||||||||||||||
Non-owner occupied | 85,889 | 97,661 | 108,692 | 121,491 | 142,846 | ||||||||||||||
Owner-occupied | 53,614 | 63,031 | 70,492 | 80,990 | 91,829 | ||||||||||||||
Farmland | 4,395 | 6,684 | 7,478 | 17,015 | 21,541 | ||||||||||||||
Total commercial real estate | 143,898 | 167,376 | 186,662 | 219,496 | 256,216 | ||||||||||||||
Commercial and industrial | 24,794 | 29,384 | 32,648 | 47,252 | 60,497 | ||||||||||||||
Real estate construction | 7,426 | 8,443 | 9,389 | 13,734 | 14,391 | ||||||||||||||
Consumer | 8,358 | 8,961 | 9,565 | 10,082 | 10,669 | ||||||||||||||
Total covered loans | 280,847 | 317,593 | 346,490 | 403,792 | 459,280 | ||||||||||||||
Total loans | $ | 4,524,973 | $ | 4,472,986 | $ | 4,249,127 | $ | 4,035,125 | $ | 3,755,487 | |||||||||
(1) First quarter 2015 information is revised to reflect the impact from adjustments to the acquisition date fair value of certain loans in the First of Huron Corporation (Signature Bank) acquisition within the measurement period. These adjustments decreased first quarter 2015 total loans by $691 thousand, compared to previously reported levels.
11
Talmer Bancorp, Inc.
Impaired Loans
(Unaudited)
2015 | 2014 | ||||||||||||||||||
(Dollars in thousands) | 2nd Qtr | 1st Qtr | 4th Qtr | 3rd Qtr | 2nd Qtr | ||||||||||||||
Uncovered | |||||||||||||||||||
Nonperforming troubled debt restructurings | |||||||||||||||||||
Residential real estate | $ | 4,364 | $ | 4,418 | $ | 3,984 | $ | 2,284 | $ | 1,920 | |||||||||
Commercial real estate | 4,652 | 4,031 | 2,644 | 3,122 | 2,842 | ||||||||||||||
Commercial and industrial | 414 | 43 | 180 | 135 | 541 | ||||||||||||||
Real estate construction | 202 | 147 | — | — | — | ||||||||||||||
Consumer | 91 | 89 | 83 | 84 | 90 | ||||||||||||||
Total nonperforming troubled debt restructurings | 9,723 | 8,728 | 6,891 | 5,625 | 5,393 | ||||||||||||||
Nonaccrual loans other than nonperforming troubled debt restructurings | |||||||||||||||||||
Residential real estate | 15,769 | 13,683 | 13,390 | 13,449 | 11,708 | ||||||||||||||
Commercial real estate | 11,075 | 11,120 | 11,112 | 9,456 | 6,590 | ||||||||||||||
Commercial and industrial | 2,705 | 1,892 | 3,370 | 14,339 | 2,074 | ||||||||||||||
Real estate construction | 236 | — | 174 | 253 | 158 | ||||||||||||||
Consumer | 217 | 254 | 174 | 161 | 76 | ||||||||||||||
Total nonaccrual loans other than nonperforming troubled debt restructurings | 30,002 | 26,949 | 28,220 | 37,658 | 20,606 | ||||||||||||||
Total nonaccrual loans | 39,725 | 35,677 | 35,111 | 43,283 | 25,999 | ||||||||||||||
Other real estate owned and repossessed assets (1) | 37,612 | 30,761 | 36,872 | 32,046 | 39,848 | ||||||||||||||
Total nonperforming assets | 77,337 | 66,438 | 71,983 | 75,329 | 65,847 | ||||||||||||||
Performing troubled debt restructurings | |||||||||||||||||||
Residential real estate | 2,392 | 1,875 | 1,368 | 1,802 | 1,628 | ||||||||||||||
Commercial real estate | 3,741 | 2,625 | 3,785 | 2,961 | 2,588 | ||||||||||||||
Commercial and industrial | 2,597 | 2,171 | 840 | 652 | 995 | ||||||||||||||
Real estate construction | 131 | 89 | 90 | 92 | 94 | ||||||||||||||
Consumer | 233 | 220 | 234 | 56 | 29 | ||||||||||||||
Total performing troubled debt restructurings | 9,094 | 6,980 | 6,317 | 5,563 | 5,334 | ||||||||||||||
Total uncovered impaired assets | $ | 86,431 | $ | 73,418 | $ | 78,300 | $ | 80,892 | $ | 71,181 | |||||||||
Loans 90 days or more past due and still accruing, excluding loans accounted for under ASC 310-30 | $ | 340 | $ | 72 | $ | 53 | $ | 595 | $ | 305 | |||||||||
Covered | |||||||||||||||||||
Nonperforming troubled debt restructurings | |||||||||||||||||||
Residential real estate | $ | 1,606 | $ | 1,623 | $ | 1,363 | $ | 1,304 | $ | 1,408 | |||||||||
Commercial real estate | 14,717 | 13,617 | 14,343 | 4,144 | 4,861 | ||||||||||||||
Commercial and industrial | 1,652 | 1,476 | 2,043 | 2,438 | 2,089 | ||||||||||||||
Real estate construction | 336 | 267 | 272 | 614 | 595 | ||||||||||||||
Consumer | 20 | 28 | 13 | 42 | 15 | ||||||||||||||
Total nonperforming troubled debt restructurings | 18,331 | 17,011 | 18,034 | 8,542 | 8,968 | ||||||||||||||
Nonaccrual loans other than nonperforming troubled debt restructurings | |||||||||||||||||||
Residential real estate | 465 | 441 | 485 | 433 | 426 | ||||||||||||||
Commercial real estate | 251 | 1,180 | 1,380 | 1,313 | 1,489 | ||||||||||||||
Commercial and industrial | 717 | 1,233 | 1,517 | 1,653 | 1,751 | ||||||||||||||
Real estate construction | 29 | 451 | 441 | 441 | 439 | ||||||||||||||
Consumer | — | — | — | — | 1 | ||||||||||||||
Total nonaccrual loans other than nonperforming troubled debt restructurings | 1,462 | 3,305 | 3,823 | 3,840 | 4,106 | ||||||||||||||
Total nonaccrual loans | 19,793 | 20,316 | 21,857 | 12,382 | 13,074 | ||||||||||||||
Other real estate owned and repossessed assets | 8,261 | 10,709 | 10,719 | 11,835 | 10,975 | ||||||||||||||
Total nonperforming assets | 28,054 | 31,025 | 32,576 | 24,217 | 24,049 | ||||||||||||||
Performing troubled debt restructurings | |||||||||||||||||||
Residential real estate | 3,584 | 3,069 | 3,046 | 2,860 | 2,821 | ||||||||||||||
Commercial real estate | 3,055 | 8,923 | 9,017 | 14,915 | 16,102 | ||||||||||||||
Commercial and industrial | 569 | 993 | 1,137 | 2,119 | 2,962 | ||||||||||||||
Real estate construction | 300 | 256 | 264 | 108 | 109 | ||||||||||||||
Consumer | 7 | — | — | — | — | ||||||||||||||
Total performing troubled debt restructurings | 7,515 | 13,241 | 13,464 | 20,002 | 21,994 | ||||||||||||||
Total covered impaired assets | $ | 35,569 | $ | 44,266 | $ | 46,040 | $ | 44,219 | $ | 46,043 | |||||||||
Loans 90 days or more past due and still accruing, excluding loans accounted for under ASC 310-30 | $ | — | $ | — | $ | — | $ | — | $ | 49 | |||||||||
(1) Excludes closed branches and operating facilities.
12
Talmer Bancorp, Inc.
Net Interest Income and Net Interest Margin
(Unaudited)
For the three months ended | ||||||||||||||||||||||||||
June 30, 2015 | March 31, 2015 (1) | June 30, 2014 | ||||||||||||||||||||||||
(Dollars in thousands) | Average Balance | Interest (2) | Average Rate (3) | Average Balance | Interest (2) | Average Rate (3) | Average Balance | Interest (2) | Average Rate (3) | |||||||||||||||||
Earning assets: | ||||||||||||||||||||||||||
Interest-earning balances | $ | 195,874 | $ | 117 | 0.24 | % | $ | 156,828 | $ | 86 | 0.22 | % | $ | 250,239 | $ | 171 | 0.28 | % | ||||||||
Federal funds sold and other short-term investments | 152,593 | 269 | 0.71 | 97,419 | 165 | 0.69 | 76,474 | 131 | 0.69 | |||||||||||||||||
Investment securities (4): | ||||||||||||||||||||||||||
Taxable | 527,632 | 2,375 | 1.81 | 494,079 | 2,323 | 1.91 | 512,692 | 2,139 | 1.67 | |||||||||||||||||
Tax-exempt | 250,765 | 1,658 | 3.52 | 236,469 | 1,615 | 3.69 | 176,075 | 1,213 | 3.73 | |||||||||||||||||
Federal Home Loan Bank stock | 20,380 | 224 | 4.40 | 20,681 | 245 | 4.81 | 12,980 | 291 | 9.01 | |||||||||||||||||
Gross uncovered loans (5) | 4,250,403 | 48,919 | 4.62 | 4,100,575 | 49,505 | 4.90 | 3,254,119 | 41,198 | 5.08 | |||||||||||||||||
Gross covered loans (5) | 302,078 | 9,400 | 12.48 | 329,767 | 10,433 | 12.83 | 477,238 | 15,576 | 13.09 | |||||||||||||||||
FDIC indemnification asset | 46,971 | (8,548 | ) | (73.00 | ) | 62,485 | (9,250 | ) | (60.03 | ) | 115,565 | (5,506 | ) | (19.11 | ) | |||||||||||
Total earning assets | 5,746,696 | 54,414 | 3.84 | % | 5,498,303 | 55,122 | 4.11 | % | 4,875,382 | 55,213 | 4.58 | % | ||||||||||||||
Non-earning assets: | ||||||||||||||||||||||||||
Cash and due from banks | 86,290 | 91,194 | 111,501 | |||||||||||||||||||||||
Allowance for loan losses | (51,033 | ) | (53,268 | ) | (58,562 | ) | ||||||||||||||||||||
Premises and equipment | 47,775 | 48,376 | 57,661 | |||||||||||||||||||||||
Core deposit intangible | 14,465 | 14,201 | 15,740 | |||||||||||||||||||||||
Goodwill | 3,524 | 2,075 | — | |||||||||||||||||||||||
Other real estate owned and repossessed assets | 44,888 | 48,562 | 56,155 | |||||||||||||||||||||||
Loan servicing rights | 55,986 | 60,185 | 76,431 | |||||||||||||||||||||||
FDIC receivable | 6,830 | 5,473 | 6,380 | |||||||||||||||||||||||
Company-owned life insurance | 104,327 | 100,923 | 90,228 | |||||||||||||||||||||||
Other non-earning assets | 236,881 | 234,697 | 215,431 | |||||||||||||||||||||||
Total assets | $ | 6,296,629 | $ | 6,050,721 | $ | 5,446,347 | ||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||||
Deposits: | ||||||||||||||||||||||||||
Interest-bearing demand deposits | $ | 828,482 | $ | 382 | 0.19 | % | $ | 772,181 | $ | 290 | 0.15 | % | $ | 714,231 | $ | 216 | 0.12 | % | ||||||||
Money market and savings deposits | 1,267,347 | 562 | 0.18 | 1,211,958 | 471 | 0.16 | 1,352,163 | 492 | 0.15 | |||||||||||||||||
Time deposits | 1,353,226 | 2,131 | 0.63 | 1,264,103 | 1,827 | 0.59 | 1,215,585 | 1,432 | 0.47 | |||||||||||||||||
Other brokered funds | 483,716 | 607 | 0.50 | 589,239 | 623 | 0.43 | 80,478 | 35 | 0.17 | |||||||||||||||||
Short-term borrowings | 75,819 | 209 | 1.10 | 49,839 | 79 | 0.65 | 126,382 | 33 | 0.11 | |||||||||||||||||
Long-term debt | 463,210 | 914 | 0.79 | 402,023 | 800 | 0.81 | 209,721 | 627 | 1.20 | |||||||||||||||||
Total interest-bearing liabilities | 4,471,800 | 4,805 | 0.43 | % | 4,289,343 | 4,090 | 0.39 | % | 3,698,560 | 2,835 | 0.31 | % | ||||||||||||||
Noninterest-bearing liabilities and shareholders' equity: | ||||||||||||||||||||||||||
Noninterest-bearing demand deposits | 976,044 | 921,359 | 965,966 | |||||||||||||||||||||||
FDIC clawback liability | 28,087 | 27,107 | 25,787 | |||||||||||||||||||||||
Other liabilities | 62,414 | 53,547 | 46,052 | |||||||||||||||||||||||
Shareholders' equity | 758,284 | 759,365 | 709,982 | |||||||||||||||||||||||
Total liabilities and shareholders' equity | $ | 6,296,629 | $ | 6,050,721 | $ | 5,446,347 | ||||||||||||||||||||
Net interest income | $ | 49,609 | $ | 51,032 | $ | 52,378 | ||||||||||||||||||||
Interest spread | 3.41 | % | 3.72 | % | 4.27 | % | ||||||||||||||||||||
Net interest margin as a percentage of interest-earning assets | 3.46 | % | 3.76 | % | 4.31 | % | ||||||||||||||||||||
Tax equivalent effect | 0.04 | % | 0.04 | % | 0.03 | % | ||||||||||||||||||||
Net interest margin as a percentage of interest-earning assets (FTE) | 3.50 | % | 3.80 | % | 4.34 | % | ||||||||||||||||||||
(1) First quarter 2015 information is revised to reflect the impact from adjustments to the acquisition date fair value of certain loans and their related changes to interest income in the First of Huron Corporation (Signature Bank) acquisition within the measurement period. These adjustments decreased first quarter 2015 interest income by $6 thousand compared to previously reported levels.
(2) Interest income is shown on actual basis and does not include taxable equivalent adjustments.
(3) Average rates are presented on an annual basis and include a taxable equivalent adjustment to interest income of $540 thousand, $534 thousand, and $425 thousand on tax-exempt securities for the three months ended June 30, 2015, March 31, 2015, and June 30, 2014, respectively, using the statutory tax rate of 35%.
(4) 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.
(5) Includes nonaccrual loans.
13
Talmer Bancorp, Inc.
Net Interest Income and Net Interest Margin
(Unaudited)
For the six months ended | |||||||||||||||||
June 30, 2015 | June 30, 2014 | ||||||||||||||||
(Dollars in thousands) | Average Balance | Interest (1) | Average Rate (2) | Average Balance | Interest (1) | Average Rate (2) | |||||||||||
Earning assets: | |||||||||||||||||
Interest-earning balances | $ | 176,459 | $ | 203 | 0.23 | % | $ | 324,900 | $ | 387 | 0.24 | % | |||||
Federal funds sold and other short-term investments | 125,159 | 434 | 0.70 | 73,597 | 271 | 0.74 | |||||||||||
Investment securities (3): | |||||||||||||||||
Taxable | 510,948 | 4,698 | 1.85 | 500,586 | 4,005 | 1.61 | |||||||||||
Tax-exempt | 243,657 | 3,273 | 3.54 | 174,161 | 3,178 | 4.97 | |||||||||||
Federal Home Loan Bank stock | 20,529 | 469 | 4.61 | 17,677 | 513 | 5.86 | |||||||||||
Gross uncovered loans (4) | 4,175,903 | 98,424 | 4.75 | 3,236,360 | 80,890 | 5.04 | |||||||||||
Gross covered loans (4) | 315,846 | 19,833 | 12.66 | 495,323 | 29,385 | 11.96 | |||||||||||
FDIC indemnification asset | 54,685 | (17,798 | ) | (65.63 | ) | 121,740 | (12,224 | ) | (20.25 | ) | |||||||
Total earning assets | 5,623,186 | 109,536 | 3.96 | % | 4,944,344 | 106,405 | 4.39 | % | |||||||||
Non-earning assets: | |||||||||||||||||
Cash and due from banks | 88,729 | 100,634 | |||||||||||||||
Allowance for loan losses | (52,145 | ) | (58,027 | ) | |||||||||||||
Premises and equipment | 48,074 | 56,694 | |||||||||||||||
Core deposit intangible | 14,334 | 12,264 | |||||||||||||||
Goodwill | 2,803 | — | |||||||||||||||
Other real estate owned and repossessed assets | 46,715 | 57,847 | |||||||||||||||
Loan servicing rights | 58,074 | 78,238 | |||||||||||||||
FDIC receivable | 6,155 | 6,722 | |||||||||||||||
Company-owned life insurance | 102,634 | 65,732 | |||||||||||||||
Other non-earning assets | 235,798 | 215,133 | |||||||||||||||
Total assets | $ | 6,174,357 | $ | 5,479,581 | |||||||||||||
Interest-bearing liabilities: | |||||||||||||||||
Deposits: | |||||||||||||||||
Interest-bearing demand deposits | $ | 800,487 | $ | 672 | 0.17 | % | $ | 711,766 | $ | 440 | 0.12 | % | |||||
Money market and savings deposits | 1,239,805 | 1,033 | 0.17 | 1,374,101 | 986 | 0.14 | |||||||||||
Time deposits | 1,308,911 | 3,958 | 0.61 | 1,268,122 | 2,923 | 0.46 | |||||||||||
Other brokered funds | 536,186 | 1,230 | 0.46 | 80,240 | 64 | 0.16 | |||||||||||
Short-term borrowings | 62,900 | 288 | 0.92 | 114,577 | 208 | 0.37 | |||||||||||
Long-term debt | 432,786 | 1,714 | 0.80 | 210,722 | 1,201 | 1.15 | |||||||||||
Total interest-bearing liabilities | 4,381,075 | 8,895 | 0.41 | % | 3,759,528 | 5,822 | 0.31 | % | |||||||||
Noninterest-bearing liabilities and shareholders' equity: | |||||||||||||||||
Noninterest-bearing demand deposits | 948,856 | 951,432 | |||||||||||||||
FDIC clawback liability | 27,600 | 25,433 | |||||||||||||||
Other liabilities | 58,004 | 43,078 | |||||||||||||||
Shareholders' equity | 758,822 | 704,110 | |||||||||||||||
Total liabilities and shareholders' equity | $ | 6,174,357 | $ | 5,483,581 | |||||||||||||
Net interest income | $ | 100,641 | $ | 100,583 | |||||||||||||
Interest spread | 3.55 | % | 4.08 | % | |||||||||||||
Net interest margin as a percentage of interest-earning assets | 3.61 | % | 4.10 | % | |||||||||||||
Tax equivalent effect | 0.03 | % | 0.04 | % | |||||||||||||
Net interest margin as a percentage of interest-earning assets (FTE) | 3.64 | % | 4.14 | % | |||||||||||||
(2) Average rates are presented on an annual basis and include a taxable equivalent adjustment to interest income of $1.0 million and $1.1 million on tax-exempt securities for the six months ended June 30, 2015 and June 30, 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.
14
Talmer Bancorp, Inc.
Reconciliation of Non-GAAP Financial Measures (1)
(Unaudited)
2015 | 2014 | ||||||||||||||||||
(Dollars in thousands, except per share data) | 2nd Quarter | 1st Quarter (2) | 4th Quarter | 3rd Quarter | 2nd Quarter | ||||||||||||||
Tangible shareholders' equity: | |||||||||||||||||||
Total shareholders' equity | $ | 766,406 | $ | 753,849 | $ | 761,607 | $ | 746,652 | $ | 727,945 | |||||||||
Less: | |||||||||||||||||||
Core deposit intangibles | 14,131 | 14,796 | 13,035 | 13,696 | 15,378 | ||||||||||||||
Goodwill | 3,524 | 3,524 | — | — | — | ||||||||||||||
Tangible shareholders' equity | $ | 748,751 | $ | 735,529 | $ | 748,572 | $ | 732,956 | $ | 712,567 | |||||||||
Tangible book value per share: | |||||||||||||||||||
Shares outstanding | 71,129 | 70,938 | 70,532 | 70,504 | 70,451 | ||||||||||||||
Tangible book value per share | $ | 10.53 | $ | 10.37 | $ | 10.61 | $ | 10.40 | $ | 10.11 | |||||||||
Tangible average equity to tangible average assets: | |||||||||||||||||||
Average assets | $ | 6,296,629 | $ | 6,050,721 | $ | 5,865,624 | $ | 5,747,108 | $ | 5,446,347 | |||||||||
Average equity | 758,284 | 759,365 | 754,722 | 738,870 | 709,982 | ||||||||||||||
Average core deposit intangibles | 14,465 | 14,201 | 13,334 | 14,398 | 15,740 | ||||||||||||||
Average goodwill | 3,524 | 2,075 | — | — | — | ||||||||||||||
Tangible average equity to tangible average assets | 11.79 | % | 12.31 | % | 12.67 | % | 12.64 | % | 12.78 | % | |||||||||
Core efficiency ratio: | |||||||||||||||||||
Net interest income | $ | 49,609 | $ | 51,032 | $ | 51,463 | $ | 52,217 | $ | 52,378 | |||||||||
Noninterest income | 22,098 | 21,430 | 15,834 | 29,974 | 13,951 | ||||||||||||||
Total revenue | 71,707 | 72,462 | 67,297 | 82,191 | 66,329 | ||||||||||||||
Less: | |||||||||||||||||||
(Expense)/benefit due to change in the fair value of loan servicing rights | 3,146 | (4,084 | ) | (3,656 | ) | (176 | ) | (4,200 | ) | ||||||||||
FDIC loss sharing income | (5,928 | ) | (1,068 | ) | (244 | ) | (2,420 | ) | (3,434 | ) | |||||||||
Net gains on sales of branches | — | — | — | 14,410 | — | ||||||||||||||
Total core revenue | 74,489 | 77,614 | 71,197 | 70,377 | 73,963 | ||||||||||||||
Total noninterest expense | 53,293 | 56,595 | 48,098 | 51,263 | 54,071 | ||||||||||||||
Less: | |||||||||||||||||||
Transaction and integration related costs | 419 | 3,347 | 329 | 1,428 | 837 | ||||||||||||||
Property efficiency review | 1,820 | — | — | — | — | ||||||||||||||
Total core noninterest expense | 51,054 | 53,248 | 47,769 | 49,835 | 53,234 | ||||||||||||||
Core efficiency ratio | 68.54 | % | 68.61 | % | 67.09 | % | 70.81 | % | 71.97 | % | |||||||||
(2) First quarter 2015 information has been revised to reflect the impact to the financial statements from adjustments to the acquisition date fair value of certain assets and liabilities in the First of Huron Corporation (Signature Bank) acquisition within the measurement period. These adjustments decreased first quarter 2015 net income and period end equity by $4 thousand compared to previously reported levels.
15