TROY, Mich., Jan. 26, 2016 /PRNewswire/ -- Talmer Bancorp, Inc. (NASDAQ: TLMR) ("Talmer") today reported fourth quarter 2015 net income of $13.1 million, compared to $20.0 million for the third quarter of 2015 and $12.5 million for the fourth quarter of 2014. Earnings per diluted common share were $0.19 for the fourth quarter of 2015, compared to $0.27 for the third quarter of 2015 and $0.16 for the fourth quarter of 2014. In addition, on January 25, 2016, the Board of Directors of Talmer increased the quarterly cash dividend on its Class A common stock to $0.05 from $0.01 per share. The dividend will be paid on February 18, 2016, to our Class A common shareholders of record as of February 4, 2016.
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On December 28, 2015, Talmer Bank and Trust ("the Bank") entered into an early termination agreement with the Federal Deposit Insurance Corporation ("FDIC") that terminated the Bank's loss share agreements with the FDIC. Also on December 28, 2015, Talmer entered into an agreement with the FDIC that terminated the FDIC's warrant to purchase 390,000 shares of our Class B non-voting common stock. The early loss share and warrant termination resulted in a pre-tax charge of $20.4 million, or approximately $13.9 million, or $0.20 per diluted average share, after-tax. As a result of the settlement, there was no negative accretion on the FDIC indemnification asset for the fourth quarter nor will there be any future expenses associated with the FDIC clawback liability or FDIC warrant.
Quarterly Results Summary
(Dollars in thousands, except per share data) 4th Qtr 2015 3rd Qtr 2015 4th Qtr 2014
-------------------------------------------- ------------ ------------ ------------
Earnings Summary
Net interest income $58,378 $55,647 $51,463
Total provision (benefit) for loan losses (4,583) 700 2,994
Noninterest income 23,575 19,342 15,834
Noninterest expense 68,602 47,829 48,098
Income before income taxes 17,934 26,460 16,205
Income tax provision 4,821 6,425 3,703
----- ----- -----
Net income 13,113 20,035 12,502
Per Share Data
Diluted earnings per common share $0.19 $0.27 $0.16
Tangible book value per share (1) 10.72 10.55 10.61
Average diluted common shares (in thousands) 69,973 73,222 75,759
Performance and Capital Ratios
Return on average assets (annualized) 0.80% 1.23% 0.85%
Return on average equity (annualized) 7.25 10.96 6.63
Net interest margin (fully taxable equivalent) (2) 3.89 3.76 3.89
Core efficiency ratio (1) 59.51 58.54 67.09
Tangible average equity to tangible average assets (1) 10.79 11.02 12.67
Common equity tier 1 capital (3) 11.95 12.12 N/A
Tier 1 leverage ratio (3) 10.21 10.21 11.56
Tier 1 risk-based capital (3) 11.95 12.12 15.20
Total risk-based capital (3) 12.96 13.20 16.44
Asset Quality Ratios
Net charge-offs (recoveries) to average loans (annualized) (0.23)% (0.19)% 0.34%
Nonperforming assets as a percentage of total assets 1.30 1.33 1.78
Nonperforming loans as a percent of total loans 1.20 1.14 1.34
Allowance for loan losses as a percentage of period-end loans 1.12 1.19 1.30
(1) Denotes a non-GAAP Financial Measure, see section entitled "Reconciliation of Non-GAAP Financial Measures."
(2) Presented on a tax equivalent basis using a 35% tax rate for all periods presented.
(3) Fourth quarter 2015 is estimated. Third and fourth quarters of 2015 are under Basel III transitional and fourth quarter 2014 is under Basel I.
Fourth Quarter 2015 Compared to Third Quarter 2015
-- Net income was $13.1 million, or $0.19 per diluted average common share,
in the fourth quarter of 2015, compared to $20.0 million, or $0.27 per
diluted average common share, for the third quarter of 2015. The
decrease in net income in the fourth quarter of 2015 was primarily due
to the after-tax charge resulting from the early termination of the
Bank's FDIC loss share agreements and the FDIC's warrant of
approximately $13.9 million, or $0.20 per diluted average share.
-- Net loans increased during the fourth quarter of 2015 by $107.0 million,
driven by strong growth in commercial and industrial lending, partially
offset by acquired loan run-off.
-- Total deposits declined $110.9 million, to $5.0 billion as of December
31, 2015, compared to September 30, 2015, primarily due to a decline in
brokered deposits of $106.6 million.
-- Net interest income increased to $58.4 million in the fourth quarter of
2015, compared to $55.6 million in the third quarter of 2015. Net
interest income growth was primarily due to the benefit provided by a
$4.4 million reduction in negative accretion on the FDIC indemnification
asset, partially offset by a $1.7 million decrease in interest on loans
due significantly to the run-off of acquired, higher-yielding loans.
Our net interest margin increased 13 basis points to 3.89% in the fourth
quarter of 2015, compared to 3.76% in the third quarter of 2015, due in
large part to the removal of the negative yield on the FDIC
indemnification asset.
-- Noninterest income increased $4.2 million to $23.6 million in the fourth
quarter of 2015, compared to the third quarter of 2015. Noninterest
income was impacted by a benefit to earnings of $1.4 million due to the
change in the fair value of loan servicing rights, compared to a
detriment to earnings of $3.8 million in the third quarter of 2015,
which is a key component of the $5.6 million increase in mortgage
banking and other loan fees. Fourth quarter of 2015 noninterest income
also benefited from the Bank's early termination of the FDIC loss share
agreements as we did not have to record a liability due to the FDIC for
what would have been the FDIC's share of recoveries on covered loans
recognized in the fourth quarter of 2015.
-- Noninterest expense increased $20.8 million, to $68.6 million in the
fourth quarter of 2015, compared to the third quarter of 2015, primarily
due to the $20.4 million net loss on the early termination of the Bank's
FDIC loss share agreements and the FDIC's warrant.
-- Total shareholder's equity of $725.2 million as of December 31, 2015,
increased $10.4 million compared to September 30, 2015. The increase is
primarily the result of fourth quarter of 2015 net income of $13.1
million, partially offset by a decrease in accumulated other
comprehensive income primarily due to a decrease in the fair value of
our investment securities portfolio.
Income Statement
Net Interest Income and Net Interest Margin
Net interest income for the fourth quarter of 2015 was $58.4 million, compared to $55.6 million in the prior quarter. Our net interest margin was 3.89% in the fourth quarter of 2015, an increase of 13 basis points from 3.76% in the third quarter of 2015. The increase in our net interest margin in the fourth quarter was due in large part to the removal of the negative yield on the FDIC indemnification asset as the Bank terminated its FDIC loss share agreements.
Our net interest margin benefits from discount accretion on our purchased credit impaired loan portfolio, a component of the accretable yield. The accretable yield for purchased credit impaired loans includes both the expected coupon of the loan and the discount accretion, and is recognized as interest income over the expected remaining life of the loans. For the fourth and third quarters of 2015, the yield on loans was 4.83% and 5.09%, respectively, while the yield generated using only the expected coupon would have been 4.17% and 4.34%, 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, prior to the fourth quarter of 2015, was also adversely impacted by the negative yield on the FDIC indemnification asset. The combination of the excess accretable yield, offset by the negative yield on the FDIC indemnification asset in the third quarter of 2015, benefited net interest margin by 52 basis points in the fourth quarter of 2015 compared to 30 basis points in the third quarter of 2015. Therefore, excluding the benefit of excess accretable yield and negative yield on the FDIC indemnification asset, our net interest margin in the fourth quarter of 2015 was 3.37% compared to 3.46% in the third quarter of 2015. The decline in our core net interest margin was due in large part to the decline in yield on our loan portfolio driven by run-off of higher yielding acquired loans being replaced with new loans with lower, current market-competitive rates.
Noninterest Income
Noninterest income increased $4.2 million to $23.6 million in the fourth quarter of 2015, compared to the third quarter of 2015. The most significant contributor to this increase was an increase in mortgage banking and other loan fees of $5.6 million. The increase in mortgage banking and other loan fees was impacted by a benefit of $1.4 million due to the change in the fair value of loan servicing rights compared to a detriment to earnings of $3.8 million in the third quarter of 2015. The change in the fair value of loan servicing rights in the fourth quarter of 2015 was due mainly to upward movements in market interest rates during the period compared to the falling rate environment in the third quarter of 2015. Fourth quarter of 2015 noninterest income also benefited from the termination of the Bank's FDIC loss share agreements. FDIC loss share income was negative $2.7 million in the third quarter of 2015, representing the amounts due to the FDIC related to significant credit recoveries on covered loans.
As we have noted in prior quarters, we have chosen not to hedge our investment in loan servicing rights, though we may choose to do so in future periods. 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. 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 $658 thousand since the majority of our servicing rights were acquired on January 1, 2013.
Noninterest Expense
Noninterest expense in the fourth quarter of 2015 increased $20.8 million, to $68.6 million, compared to the third quarter of 2015. The increase in noninterest expense is primarily due to the pre-tax charge of $20.4 million taken in the fourth quarter of 2015 as a result of the early termination of the Bank's FDIC loss share agreements and the FDIC's warrant.
Our core efficiency ratio was 59.51% and 58.54%, for the fourth and third quarters of 2015, respectively. The efficiency ratio is a measure of noninterest expense as a percent of net interest income and noninterest income. The core efficiency ratio begins with the efficiency ratio and then excludes certain items deemed by management to not be related to regular operations. The fourth quarter of 2015 core efficiency ratio excludes the $20.4 million charge we took to terminate the Bank's FDIC loss share agreements and the FDIC's warrant, the benefit received from the fair value adjustment to our loan servicing rights of $1.4 million and transaction and integration related costs of $328 thousand. The third quarter of 2015 core efficiency ratio excludes the detriment received from the fair value adjustment to our loan servicing rights of $3.8 million, transaction and integration related costs of $113 thousand, and the FDIC loss sharing income, which was a detriment of $2.7 million.
Credit Quality
As a result of the early termination of the Bank's FDIC loss share agreements in the fourth quarter of 2015 all loans and allowance previously classified as covered were reclassified to uncovered.
The fourth quarter of 2015 resulted in a benefit for loan losses of $4.6 million, compared to a provision for loan losses of $700 thousand in the third quarter of 2015. The increase to a benefit for loan losses was primarily due to increases in credit recoveries on acquired loans. At December 31, 2015, the allowance for loan losses on loans was $54.0 million, or 1.12% of total loans, compared to $55.8 million, or 1.19% of total loans, at September 30, 2015. The decrease in the allowance for loan losses for the quarter was primarily due to credit recoveries on acquired loans that were paid off and from payments received on loans previously carrying an allowance for loan loss.
During the fourth 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 $731 thousand. The re-estimations also resulted in a $10.7 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.
All of our acquired loan portfolios are continuing to perform significantly better than initially anticipated.
Balance Sheet and Capital Management
Total assets increased $91.9 million to $6.6 billion at December 31, 2015 compared to $6.5 billion at September 30, 2015. The primary drivers of the increase in assets in the quarter ended December 31, 2015 were increases in net total loans of $107.0 million and cash and cash equivalents of $57.8 million, partially offset by a decrease in loans held for sale of $42.0 million and the elimination of the FDIC indemnification asset of $30.6 million and the FDIC receivable of $2.6 million. The decrease in loans held for sale primarily reflects a reduction in the overall volume of residential loan originations.
Net total loans at December 31, 2015 increased $107.0 million to $4.8 billion, compared to September 30, 2015. Loan growth was primarily driven by growth in commercial and industrial loans. We continue to be focused on sourcing quality loan growth to overcome the run-off of higher-yielding acquired loans. Acquired loans, which total $1.4 billion, or 29.7% of total loans, at December 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.
Total liabilities were $5.9 billion at December 31, 2015 compared to $5.8 billion at September 30, 2015. The $81.4 million increase in liabilities in the quarter ended December 31, 2015 was primarily due to an increase in short-term borrowings of $246.9 million, partially offset by decreases in total deposits of $110.9 million and long-term debt of $20.9 million and the elimination of our FDIC clawback liability of $27.3 million and FDIC warrant payable of $4.5 million in the fourth quarter of 2015. The decrease in total deposits was primarily due to decreases in brokered deposits of $106.6 million and noninterest-bearing demand deposits of $39.0 million, partially offset by growth in interest-bearing demand deposits of $36.0 million.
Total shareholders' equity of $725.2 million as of December 31, 2015 increased $10.4 million compared to September 30, 2015. The increase is primarily the result of our net income of $13.1 million, partially offset by a decrease in accumulated other comprehensive income primarily due to a decrease in the fair value of our investment securities portfolio. Our Tier 1 leverage ratio was estimated to be 10.21% at December 31, 2015, compared to 10.21% at September 30, 2015.
Subsequent Event
In January 2016, a settlement was finalized with the Internal Revenue Service regarding First Place Financial Corp.'s utilization of bad debt expense incurred prior to Talmer's acquisition of First Place Bank involving several tax years. The Bank, as successor to First Place Bank, was granted court approval to act as substitute agent for First Place Financial Corp. consolidated group for the purposes of amending various returns, which ultimately impact the tax filings of the Bank. The benefit expected as a result of the amended filings is approximately $4.2 million that will be recorded in the first quarter of 2016 as an offset to the quarterly income tax expense.
We are in the process of re-examining the tax attributes associated with our prior acquisitions and we have identified information that may cause us to adjust our estimated deferred tax assets associated with our acquisition of Talmer West Bank on January 1, 2014. While our analysis is not yet complete, it is possible that we may need to reduce the deferred tax assets associated with our acquisition of Talmer West Bank by approximately $16 million. If we make this adjustment, we would reduce our currently reported equity by a like amount, which we expect would have only an immaterial effect on our reported regulatory capital ratios, since a large majority of our deferred tax assets are disallowed from regulatory capital both before and after the adoption of Basel III. If we conclude that an adjustment is necessary, we anticipate reducing the bargain purchase gain recorded as a result of our acquisition of Talmer West Bank in the first quarter of 2014. A one-time adjustment of this nature would have no impact on our future earnings. We are performing this analysis in consultation with our tax, legal and accounting experts. We plan to have the result of our analysis and a conclusion on this matter known before we file our Annual Report on Form 10-K due February 29, 2016.
As announced and further described in a separate press release issued by Talmer today, Talmer has entered into a merger agreement with Chemical Financial Corporation.
Conference Call and Webcast
In light of today's announcement that Talmer has entered into a merger agreement with Chemical Financial Corporation, Talmer has cancelled its live conference webcast to review fourth quarter 2015 financial results that was scheduled for 10:00 a.m. ET on Thursday, January 28, 2016. Instead, Talmer and Chemical Financial Corporation will jointly host a live conference call today at 11:00 a.m. ET to discuss the merger and Talmer will also discuss its fourth quarter 2015 financial results. Anyone interested may access the conference call on a live basis by dialing toll-free at 1-800-289-0459 and entering 430440 for the participant passcode. The call will also be broadcast live over the Internet hosted on Chemical Financial Corporation's website at www.chemicalbankmi.com under the "Investor Info" section.
A slide-show presentation regarding the merger will be discussed on the call and will be available for download at www.talmerbank.com under the "Investor Relations" section, and at www.chemicalbankmi.com under the "Investor Info" section.
An audio replay of the call will be available after the event on Talmer's and Chemical Financial Corporation's websites for at least 14 days.
About Talmer Bancorp, Inc.
Headquartered in Troy, Michigan, Talmer Bancorp, Inc. is the holding company for Talmer Bank and Trust. Talmer Bank and Trust operates branches and lending offices in Michigan, Ohio, Illinois, Indiana, Maryland and Nevada and offers 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.
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, include, among others, statements related to the impact of interest rates on earnings, statements regarding the proposed merger with Chemical Financial Corporation and statements regarding the potential adjustment to our deferred tax assets related to our acquisition of Talmer West Bank, including whether an adjustment will be required, and if required, the timing, size and impact of any such adjustment. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to risks, uncertainties and other factors, such as a downturn in the economy, unanticipated losses related to the integration of, and accounting for, our acquisition transactions, access to funding sources, greater than expected noninterest expenses, volatile credit and financial markets both domestic and foreign, potential deterioration in real estate values, regulatory changes, excessive loan losses, and risks and uncertainties set forth in the joint press release issued by Talmer and Chemical Financial Corporation issued the date hereof with respect to the merger agreement entered into by Talmer and Chemical Financial Corporation, 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.
Talmer Bancorp, Inc.
Consolidated Balance Sheets
(Unaudited)
(Dollars in thousands, except per share data) December 31, September 30, December 31,
2015 2015 2014
--- ---- ---- ----
Assets
Cash and due from banks $74,734 $82,822 $86,185
Interest-bearing deposits with other banks 137,589 106,740 96,551
Federal funds sold and other short-term investments 175,000 140,000 71,000
------- ------- ------
Total cash and cash equivalents 387,323 329,562 253,736
Securities available-for-sale 890,770 880,705 740,819
Federal Home Loan Bank stock 29,621 25,416 20,212
Loans held for sale, at fair value 58,223 100,255 93,453
Loans:
Commercial real estate 1,568,097 1,561,529 1,497,600
Residential real estate (includes $22.2 million, $20.9 million, and $18.3 million, respectively, measured at fair value) (1) 1,547,799 1,542,661 1,534,238
Commercial and industrial 1,257,406 1,210,613 902,125
Real estate construction (includes $0, $0, and $1.2 million, respectively, measured at fair 241,603 222,184 141,075
value) (1)
Consumer 191,795 164,601 174,089
------- ------- -------
Total loans 4,806,700 4,701,588 4,249,127
Less: Allowance for loan losses (53,953) (55,837) (55,172)
------- ------- -------
Net total loans 4,752,747 4,645,751 4,193,955
Premises and equipment 43,570 44,133 48,389
Other real estate owned and repossessed assets 28,259 33,553 48,743
Loan servicing rights 58,113 55,786 70,598
Core deposit intangible 12,808 13,470 13,035
Goodwill 3,524 3,524 -
Company-owned life insurance 107,065 105,975 97,782
Income tax benefit 177,183 180,719 177,472
FDIC indemnification asset - 30,551 67,026
FDIC receivable - 2,618 6,062
Other assets 46,684 52,017 40,982
------ ------ ------
Total assets $6,595,890 $6,504,035 $5,872,264
========== ========== ==========
Liabilities
Deposits:
Noninterest-bearing demand deposits $1,011,414 $1,050,375 $887,567
Interest-bearing demand deposits 849,599 813,609 660,697
Money market and savings deposits 1,314,909 1,314,798 1,170,236
Time deposits 1,609,895 1,611,315 1,188,178
Other brokered funds 228,764 335,354 642,185
------- ------- -------
Total deposits 5,014,581 5,125,451 4,548,863
Short-term borrowings 348,998 102,090 135,743
Long-term debt 464,057 484,981 353,972
FDIC clawback liability - 27,269 26,905
FDIC warrants payable - 4,513 4,633
Other liabilities 43,039 44,963 40,541
------ ------ ------
Total liabilities 5,870,675 5,789,267 5,110,657
--------- --------- ---------
Shareholders' equity
Preferred stock - $1.00 par value
Authorized - 20,000,000 shares at 12/31/2015, 9/30/2015 and 12/31/2014
Issued and outstanding - 0 shares at 12/31/2015, 9/30/2015 and 12/31/2014 - - -
Common stock:
Class A Voting Common Stock - $1.00 par value
Authorized - 198,000,000 shares at 12/31/2015, 9/30/2015, and 12/31/2014
Issued and outstanding - 66,114,798 shares at 12/31/2015, 66,127,598 shares at 9/30/2015 and 70,532,122 shares at 12/31/2014 66,115 66,128 70,532
Class B Non-Voting Common Stock - $1.00 par value
Authorized - 2,000,000 shares at 12/31/2015, 9/30/2015 and 12/31/2014
Issued and outstanding - 0 shares at 12/31/2015, 9/30/2015 and 12/31/2014 - - -
Additional paid-in-capital 316,571 316,160 405,436
Retained earnings 339,130 326,678 281,789
Accumulated other comprehensive income, net of tax 3,399 5,802 3,850
----- ----- -----
Total shareholders' equity 725,215 714,768 761,607
------- ------- -------
Total liabilities and shareholders' equity $6,595,890 $6,504,035 $5,872,264
========== ========== ==========
(1) Amounts represent loans for which the Company has elected the fair value option.
Talmer Bancorp, Inc.
Consolidated Statements of Income
(Unaudited)
Three months ended December 31, Year ended December 31,
------------------------------- -----------------------
(Dollars in thousands, except per share data) 2015 2014 2015 2014
-------------------------------------------- ---- ---- ---- ----
Interest income
Interest and fees on loans $58,400 $58,271 $236,735 $226,674
Interest on investments
Taxable 3,234 2,263 10,663 8,509
Tax-exempt 1,933 1,610 7,079 6,232
----- ----- ----- -----
Total interest on securities 5,167 3,873 17,742 14,741
Interest on interest-earning cash balances 77 94 387 640
Interest on federal funds and other short-term investments 383 126 1,159 527
Dividends on FHLB stock 275 177 1,029 867
FDIC indemnification asset - (7,539) (22,164) (26,426)
Total interest income 64,302 55,002 234,888 217,023
Interest Expense
Interest-bearing demand deposits 395 194 1,468 824
Money market and savings deposits 732 457 2,385 1,930
Time deposits 2,891 1,546 9,431 6,080
Other brokered funds 483 527 2,254 879
Interest on short-term borrowings 329 90 967 420
Interest on long-term debt 1,094 725 3,717 2,627
----- --- ----- -----
Total interest expense 5,924 3,539 20,222 12,760
----- ----- ------ ------
Net interest income 58,378 51,463 214,666 204,263
Provision (benefit) for loan losses (4,583) 2,994 (9,203) 4,327
------ ----- ------ -----
Net interest income after provision for loan losses 62,961 48,469 223,869 199,936
Noninterest income
Deposit fee income 2,513 2,692 9,888 12,225
Mortgage banking and other loan fees 3,853 (865) 5,569 1,163
Net gain on sales of loans 5,404 4,939 29,585 17,747
Accelerated discount on acquired loans 7,556 3,742 32,689 18,197
Net gain (loss) on sales of securities (2) - 99 (2,066)
Company-owned life insurance 779 805 3,115 2,691
Net gain on sale of branches - - - 14,410
Bargain purchase gain - - - 41,977
FDIC loss sharing income - (244) (9,692) (6,211)
Other income 3,472 4,765 15,192 17,366
----- ----- ------ ------
Total noninterest income 23,575 15,834 86,445 117,499
Noninterest expense
Salary and employee benefits 27,535 25,632 113,097 121,744
Occupancy and equipment expense 5,993 6,911 28,546 31,806
Data processing fees 1,603 789 6,618 6,399
Professional service fees 2,771 3,323 12,786 12,952
Bank acquisition and due diligence fees 328 329 2,272 3,765
Marketing expense 1,224 1,226 5,550 4,923
Other employee expense 943 658 3,425 2,674
Insurance expense 1,571 1,615 5,933 5,697
FDIC loss sharing expense - 406 1,374 2,158
Net loss on early termination of FDIC loss share agreements and warrant 20,364 - 20,364 -
Other expense 6,270 7,209 26,354 26,762
----- ----- ------ ------
Total noninterest expense 68,602 48,098 226,319 218,880
------ ------ ------- -------
Income before income taxes 17,934 16,205 83,995 98,555
Income tax provision 4,821 3,703 23,866 7,705
Net income $13,113 $12,502 $60,129 $90,850
======= ======= ======= =======
Earnings per common share:
Basic $0.20 $0.18 $0.87 $1.30
Diluted $0.19 $0.16 $0.81 $1.21
Average common shares outstanding - basic 65,388 70,136 68,646 69,605
Average common shares outstanding - diluted 69,973 75,759 73,331 75,150
Total comprehensive income $10,710 $14,265 $59,678 $102,696
Talmer Bancorp, Inc.
Consolidated Statements of Income
(Unaudited)
2015 2014
---- ----
(Dollars in thousands, except per share data) 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr
-------------------------------------------- ------- ------- ------- ------- -------
Interest income
Interest and fees on loans $58,400 $60,078 $58,319 $59,938 $58,271
Interest on investments
Taxable 3,234 2,731 2,375 2,323 2,263
Tax-exempt 1,933 1,873 1,658 1,615 1,610
----- ----- ----- ----- -----
Total interest on securities 5,167 4,604 4,033 3,938 3,873
Interest on interest-earning cash balances 77 107 117 86 94
Interest on federal funds and other short-term investments 383 342 269 165 126
Dividends on FHLB stock 275 285 224 245 177
FDIC indemnification asset - (4,366) (8,548) (9,250) (7,539)
Total interest income 64,302 61,050 54,414 55,122 55,002
Interest Expense
Interest-bearing demand deposits 395 401 382 290 194
Money market and savings deposits 732 620 562 471 457
Time deposits 2,891 2,582 2,131 1,827 1,546
Other brokered funds 483 541 607 623 527
Interest on short-term borrowings 329 350 209 79 90
Interest on long-term debt 1,094 909 914 800 725
----- --- --- --- ---
Total interest expense 5,924 5,403 4,805 4,090 3,539
----- ----- ----- ----- -----
Net interest income 58,378 55,647 49,609 51,032 51,463
Provision (benefit) for loan losses (4,583) 700 (7,313) 1,993 2,994
------ --- ------ ----- -----
Net interest income after provision for loan losses 62,961 54,947 56,922 49,039 48,469
Noninterest income
Deposit fee income 2,513 2,494 2,561 2,320 2,692
Mortgage banking and other loan fees 3,853 (1,721) 4,698 (1,261) (865)
Net gain on sales of loans 5,404 6,815 8,748 8,618 4,939
FDIC loss sharing income - (2,696) (5,928) (1,068) (244)
Accelerated discount on acquired loans 7,556 9,491 7,444 8,198 3,742
Net gain (loss) on sales of securities (2) 202 6 (107) -
Company-owned life insurance 779 740 856 740 805
Other income 3,472 4,017 3,713 3,990 4,765
----- ----- ----- ----- -----
Total noninterest income 23,575 19,342 22,098 21,430 15,834
Noninterest expense
Salary and employee benefits 27,535 27,665 28,685 29,212 25,632
Occupancy and equipment expense 5,993 6,472 8,415 7,666 6,911
Data processing fees 1,603 1,356 1,805 1,854 789
Professional service fees 2,771 3,197 3,275 3,543 3,323
FDIC loss sharing expense - 292 133 949 406
Bank acquisition and due diligence fees 328 113 419 1,412 329
Marketing expense 1,224 1,748 1,483 1,095 1,226
Other employee expense 943 722 826 934 658
Insurance expense 1,571 1,305 1,527 1,530 1,615
Net loss on early termination of FDIC loss share agreements and warrant 20,364 - - - -
Other expense 6,270 4,959 6,725 8,400 7,209
----- ----- ----- ----- -----
Total noninterest expense 68,602 47,829 53,293 56,595 48,098
------ ------ ------ ------ ------
Income before income taxes 17,934 26,460 25,727 13,874 16,205
Income tax provision 4,821 6,425 8,179 4,441 3,703
----- -----
Net income $13,113 $20,035 $17,548 $9,433 $12,502
======= ======= ======= ====== =======
Earnings per common share:
Basic $0.20 $0.29 $0.25 $0.13 $0.18
Diluted $0.19 $0.27 $0.23 $0.12 $0.16
Average common shares outstanding - basic 65,388 68,731 70,301 70,216 70,136
Average common shares outstanding - diluted 69,973 73,222 74,900 75,103 75,759
Total comprehensive income $10,710 $23,601 $13,144 $12,227 $14,265
Talmer Bancorp, Inc.
Loan Data
(Unaudited)
(Dollars in thousands) December 31, September 30, June 30, March 31, December 31,
2015 2015 2015 2015 2014
---- ---- ---- ---- ----
Uncovered loans
Commercial real estate
Non-owner occupied $1,039,305 $988,635 $924,174 $919,043 $888,650
Owner-occupied 503,814 472,269 445,927 459,002 417,843
Farmland 24,978 23,517 25,682 26,617 4,445
------ ------ ------ ------ -----
Total commercial real estate 1,568,097 1,484,421 1,395,783 1,404,662 1,310,938
Residential real estate 1,547,799 1,452,290 1,434,678 1,474,025 1,426,012
Commercial and industrial 1,257,406 1,196,717 1,066,353 948,303 869,477
Real estate construction 241,603 217,035 175,192 140,705 131,686
Consumer 191,795 164,496 172,120 187,698 164,524
------- ------- ------- ------- -------
Total uncovered loans 4,806,700 4,514,959 4,244,126 4,155,393 3,902,637
Covered loans
Commercial real estate
Non-owner occupied - 40,777 85,889 97,661 108,692
Owner-occupied - 32,009 53,614 63,031 70,492
Farmland - 4,322 4,395 6,684 7,478
--- ----- ----- ----- -----
Total commercial real estate - 77,108 143,898 167,376 186,662
Residential real estate - 90,371 96,371 103,429 108,226
Commercial and industrial - 13,896 24,794 29,384 32,648
Real estate construction - 5,149 7,426 8,443 9,389
Consumer - 105 8,358 8,961 9,565
--- --- ----- ----- -----
Total covered loans - 186,629 280,847 317,593 346,490
--- ------- ------- ------- -------
Total loans $4,806,700 $4,701,588 $4,524,973 $4,472,986 $4,249,127
========== ========== ========== ========== ==========
Talmer Bancorp, Inc.
Impaired Assets
(Unaudited)
2015 2014
---- ----
(Dollars in thousands) 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr
------- ------- ------- ------- -------
Uncovered
Nonperforming troubled debt restructurings
Commercial real estate $7,485 $5,519 $4,652 $4,031 $2,644
Residential real estate 5,485 4,600 4,364 4,418 3,984
Commercial and industrial 1,167 705 414 43 180
Real estate construction 187 135 202 147 -
Consumer 127 115 91 89 83
--- --- --- --- ---
Total nonperforming troubled debt restructurings 14,451 11,074 9,723 8,728 6,891
Nonaccrual loans other than nonperforming troubled debt restructurings
Commercial real estate 9,313 12,421 11,075 11,120 11,112
Residential real estate 12,905 12,962 15,769 13,683 13,390
Commercial and industrial 20,501 9,236 2,705 1,892 3,370
Real estate construction 226 198 236 - 174
Consumer 79 149 217 254 174
--- --- --- --- ---
Total nonaccrual loans other than nonperforming troubled debt
restructurings 43,024 34,966 30,002 26,949 28,220
Total nonaccrual loans 57,475 46,040 39,725 35,677 35,111
Other real estate owned and repossessed assets (1) 28,157 27,329 37,612 30,761 36,872
------ ------ ------ ------ ------
Total nonperforming assets 85,632 73,369 77,337 66,438 71,983
Performing troubled debt restructurings
Commercial real estate 15,340 13,973 3,741 2,625 3,785
Residential real estate 5,749 2,402 2,392 1,875 1,368
Commercial and industrial 3,438 3,433 2,597 2,171 840
Real estate construction 420 197 131 89 90
Consumer 242 235 233 220 234
Total performing troubled debt restructurings 25,189 20,240 9,094 6,980 6,317
Total uncovered impaired assets $110,821 $93,609 $86,431 $73,418 $78,300
======== ======= ======= ======= =======
Loans 90 days or more past due and still accruing, excluding loans
accounted for under ASC 310-30 $297 $196 $340 $72 $53
Covered
Nonperforming troubled debt restructurings
Commercial real estate - 3,590 14,717 13,617 14,343
Residential real estate $ - $1,618 $1,606 $1,623 $1,363
Commercial and industrial - 1,045 1,652 1,476 2,043
Real estate construction - 210 336 267 272
Consumer - 2 20 28 13
--- --- --- --- ---
Total nonperforming troubled debt restructurings - 6,465 18,331 17,011 18,034
Nonaccrual loans other than nonperforming troubled debt restructurings
Commercial real estate - 190 251 1,180 1,380
Residential real estate - 392 465 441 485
Commercial and industrial - 633 717 1,233 1,517
Real estate construction - 26 29 451 441
--- --- --- --- ---
Total nonaccrual loans other than nonperforming troubled debt
restructurings - 1,241 1,462 3,305 3,823
Total nonaccrual loans - 7,706 19,793 20,316 21,857
Other real estate owned and repossessed assets - 5,621 8,261 10,709 10,719
--- ----- ----- ------ ------
Total nonperforming assets - 13,327 28,054 31,025 32,576
Performing troubled debt restructurings
Commercial real estate - 1,709 3,055 8,923 9,017
Residential real estate - 3,185 3,584 3,069 3,046
Commercial and industrial - 204 569 993 1,137
Real estate construction - 298 300 256 264
Consumer - - 7 - -
--- --- --- --- ---
Total performing troubled debt restructurings - 5,396 7,515 13,241 13,464
Total covered impaired assets $ - $18,723 $35,569 $44,266 $46,040
=== === ======= ======= ======= =======
Loans 90 days or more past due and still accruing, excluding loans
accounted for under ASC 310-30 $ - $ - $ - $ - $ -
(1) Excludes closed branches and operating facilities.
Talmer Bancorp, Inc.
Net Interest Income and Net Interest Margin
(Unaudited)
For the three months ended
--------------------------
December 31, 2015 September 30, 2015 December 31, 2014
----------------- ------------------ -----------------
(Dollars in thousands) Average Interest (1) Average Rate Average Interest (1) Average Rate Average Interest (1) Average Rate
(2) (2) (2)
Balance Balance Balance
------- ------- -------
Earning assets:
Interest-earning balances $113,284 $77 0.27% $172,781 $107 0.24% $147,713 $94 0.25%
Federal funds sold and other short-term investments 187,283 383 0.81 182,826 342 0.74 69,897 126 0.71
Investment securities (3):
Taxable 603,922 3,234 2.12 575,071 2,731 1.88 519,774 2,263 1.73
Tax-exempt 282,258 1,933 3.57 266,357 1,873 3.69 223,580 1,610 3.82
Federal Home Loan Bank stock 25,796 275 4.23 25,416 285 4.46 18,671 177 3.77
Gross loans (4) 4,800,952 58,400 4.83 4,682,709 60,078 5.09 4,243,329 58,271 5.45
FDIC indemnification asset - - - 35,211 (4,366) (49.20) 77,865 (7,539) (38.41)
--- --- --- ------ ------ ------ ------ ------ ------
Total earning assets 6,013,495 64,302 4.28% 5,940,371 61,050 4.12% 5,300,829 55,002 4.16%
--------- ------ ---- --------- ------ ---- --------- ------ ----
Non-earning assets:
Cash and due from banks 89,269 91,225 101,884
Allowance for loan losses (54,211) (53,900) (52,808)
Premises and equipment 44,017 44,552 50,130
Core deposit intangible 13,129 13,802 13,334
Goodwill 3,524 3,524 -
Other real estate owned and repossessed assets 31,813 43,420 48,983
Loan servicing rights 56,633 58,038 73,059
FDIC receivable 30,369 3,878 11,013
Company-owned life insurance 106,438 105,377 97,081
Other non-earning assets 231,797 241,922 223,685
Total assets $6,566,273 $6,492,209 $5,867,190
========== ========== ==========
Interest-bearing liabilities:
Deposits:
Interest-bearing demand deposits $836,466 $395 0.19% $823,741 $401 0.19% $676,994 $194 0.11%
Money market and savings deposits 1,351,197 732 0.21 1,293,737 620 0.19 1,174,132 457 0.15
Time deposits 1,632,608 2,891 0.70 1,523,096 2,582 0.67 1,219,758 1,546 0.50
Other brokered funds 246,998 483 0.78 365,825 541 0.59 543,784 527 0.38
Short-term borrowings 142,894 329 0.91 219,663 350 0.63 165,515 90 0.22
Long-term debt 489,660 1,094 0.89 407,154 909 0.89 326,924 725 0.88
Total interest-bearing liabilities 4,699,823 5,924 0.50% 4,633,216 5,403 0.46% 4,107,107 3,539 0.34%
--------- ----- ---- --------- ----- ---- --------- ----- ----
Noninterest-bearing liabilities and shareholders' equity:
Noninterest-bearing demand deposits 1,067,500 1,051,400 934,143
FDIC clawback liability - 28,774 25,923
Other liabilities 75,527 47,779 45,272
Shareholders' equity 723,423 731,040 754,745
Total liabilities and shareholders' equity $6,566,273 $6,492,209 $5,867,190
========== ========== ==========
Net interest income $58,378 $55,647 $51,463
======= ======= =======
Interest spread 3.78% 3.66% 3.82%
==== ==== ====
Net interest margin as a percentage of interest-earning assets 3.85% 3.72% 3.85%
==== ==== ====
Tax equivalent effect 0.04% 0.04% 0.04%
==== ==== ====
Net interest margin as a percentage of interest-earning assets (FTE) 3.89% 3.76% 3.89%
==== ==== ====
(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 $610 thousand, $604 thousand, and $542 thousand on tax-exempt securities for the three months ended December 31, 2015, September 30, 2015, and December 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.
Talmer Bancorp, Inc.
Net Interest Income and Net Interest Margin
(Unaudited)
For the year ended December 31,
-------------------------------
2015 2014
---- ----
(Dollars in thousands) Average Interest (1) Average Average Interest (1) Average
Balance Rate (2) Balance Rate (2)
------- ------- ------- -------
Earning assets:
Interest-earning balances $162,391 $387 0.24% $265,155 $640 0.24%
Federal funds sold and other short-term
investments 155,353 1,159 0.75 73,453 527 0.72
Investment securities (3):
Taxable 550,701 10,663 1.94 505,754 8,509 1.68
Tax-exempt 259,414 7,079 3.61 197,786 6,232 4.22
Federal Home Loan Bank stock 23,089 1,029 4.46 17,841 867 4.86
Gross loans (4) 4,618,639 236,735 5.13 3,925,198 226,674 5.77
FDIC indemnification asset 35,993 (22,164) (61.58) 105,034 (26,426) (25.16)
------ ------- ------ ------- ------- ------
Total earning assets 5,805,580 234,888 4.09% 5,090,221 217,023 4.31%
--------- ------- ---- --------- ------- ----
Non-earning assets:
Cash and due from banks 89,657 97,935
Allowance for loan losses (53,067) (56,094)
Premises and equipment 46,163 55,125
Core deposit intangible 13,898 15,055
Goodwill 3,167 -
Other real estate owned and repossessed assets 42,199 53,513
Loan servicing rights 57,702 75,863
FDIC receivable 11,684 7,592
Company-owned life insurance 104,284 81,245
Other non-earning assets 237,047 225,793
Total assets $6,358,314 $5,646,248
========== ==========
Interest-bearing liabilities:
Deposits:
Interest-bearing demand deposits $815,528 $1,468 0.18% $689,225 $824 0.12%
Money market and savings deposits 1,281,622 2,385 0.19 1,289,388 1,930 0.15
Time deposits 1,444,631 9,431 0.65 1,247,907 6,080 0.49
Other brokered funds 420,354 2,254 0.54 268,080 879 0.33
Short-term borrowings 121,408 967 0.80 153,951 420 0.27
Long-term debt 440,660 3,717 0.84 257,487 2,627 1.02
Total interest-bearing liabilities 4,524,203 20,222 0.45% 3,906,038 12,760 0.33%
--------- ------ ---- --------- ------ ----
Noninterest-bearing liabilities and shareholders' equity:
Noninterest-bearing demand deposits 1,005,905 943,321
FDIC clawback liability 20,939 25,823
Other liabilities 59,843 39,300
Shareholders' equity 747,424 731,766
Total liabilities and shareholders' equity $6,358,314 $5,646,248
========== ==========
Net interest income $214,666 $204,263
======== ========
Interest spread 3.64% 3.98%
==== ====
Net interest margin as a percentage of interest-earning assets 3.70% 4.01%
==== ====
Tax equivalent effect 0.03% 0.03%
==== ====
Net interest margin as a percentage of interest-earning assets (FTE) 3.73% 4.04%
==== ====
(1) Interest income is shown on actual basis and does not include taxable equivalent adjustments.
(2) Average rates are presented on an annual basis and include a taxable equivalent adjustment to interest income of $2.3 million and $2.1 million on tax-exempt securities for the years ended December 31, 2015 and 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.
Talmer Bancorp, Inc.
Reconciliation of Non-GAAP Financial Measures (1)
(Unaudited)
2015 2014
---- ----
(Dollars in thousands, except per share data) 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter 4th Quarter
----------- ----------- ----------- ----------- -----------
Tangible shareholders' equity:
Total shareholders' equity $725,215 $714,768 $766,406 $753,849 $761,607
Less:
Core deposit intangibles 12,808 13,470 14,131 14,796 13,035
Goodwill 3,524 3,524 3,524 3,524 -
-----
Tangible shareholders' equity $708,883 $697,774 $748,751 $735,529 $748,572
======== ======== ======== ======== ========
Tangible book value per share:
Shares outstanding 66,115 66,128 71,129 70,938 70,532
Tangible book value per share $10.72 $10.55 $10.53 $10.37 $10.61
Tangible average equity to tangible average assets:
Average assets $6,566,273 $6,492,209 $6,296,629 $6,050,721 $5,865,624
Average equity 723,423 731,040 758,284 759,365 754,722
Average core deposit intangibles 13,129 13,802 14,465 14,201 13,334
Average goodwill 3,524 3,524 3,524 2,075 -
Tangible average equity to tangible average assets 10.79% 11.02% 11.79% 12.31% 12.67%
Core efficiency ratio:
Net interest income $58,378 $55,647 $49,609 $51,032 $51,463
Noninterest income 23,575 19,342 22,098 21,430 15,834
------ ------ ------ ------ ------
Total revenue 81,953 74,989 71,707 72,462 67,297
Less:
(Expense)/benefit due to change in the fair value of loan servicing rights 1,446 (3,831) 3,146 (4,084) (3,656)
FDIC loss sharing income - (2,696) (5,928) (1,068) (244)
--- ------ ------ ------ ----
Total core revenue 80,507 81,516 74,489 77,614 71,197
Total noninterest expense 68,602 47,829 53,293 56,595 48,098
Less:
Transaction and integration related costs 328 113 419 3,347 329
Net loss on early termination of FDIC loss share and warrant agreements 20,364 - - - -
Property efficiency review - - 1,820 - -
--- --- ----- --- ---
Total core noninterest expense $47,910 $47,716 $51,054 $53,248 $47,769
Core efficiency ratio 59.51% 58.54% 68.54% 68.61% 67.09%
(1) Management believes these non-GAAP financial measures provide useful information to both management and investors that is supplementary to our financial condition and results of operations in accordance with GAAP; however, we do acknowledge that our non-GAAP financial measures have a number of limitations. As such, you should not view these disclosures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable to non-GAAP financial measures that other companies use.
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