Market Overview

Talmer Bancorp, Inc. reports first quarter 2016 net income of $19.7 million, representing $0.28 of earnings per diluted average common share

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Talmer Bancorp, Inc. declares cash dividend on common stock of $0.05 per share

TROY, Mich., April 27, 2016 /PRNewswire/ -- Talmer Bancorp, Inc. (NASDAQ: TLMR) ("Talmer") today reported first quarter 2016 net income of $19.7 million, compared to $13.1 million for the fourth quarter of 2015 and $9.4 million for the first quarter of 2015.  Earnings per diluted common share were $0.28 for the first quarter of 2016, compared to $0.19 for the fourth quarter of 2015 and $0.12 for the first quarter of 2015.  Core earnings per diluted average share, a non-GAAP financial measurement, was $0.31 per diluted average common share for the first quarter of 2016, compared to $0.38 and $0.20 per diluted average common share for the fourth quarter of 2015 and the first quarter of 2015, respectively.  In addition, on April 27, 2016, the Board of Directors of Talmer declared a quarterly cash dividend on its Class A common stock of $0.05 per share.  The dividend will be paid on May 25, 2016, to our Class A common shareholders of record as of May 11, 2016.  Please see the section entitled "Reconciliation of Non-GAAP Financial Measures", for a discussion on the limitations of our core earnings per average diluted share and a reconciliation of this non-GAAP financial measure to the most comparable GAAP measure.

Talmer Bancorp, Inc. logo.

Quarterly Results Summary

(Dollars in thousands, except per share data)


1st Qtr 2016


4th Qtr 2015


1st Qtr 2015

Earnings Summary







Net interest income


$

56,098



$

58,378



$

51,032


Total provision (benefit) for loan losses


(1,111)



(4,583)



1,993


Noninterest income


13,624



23,575



21,430


Noninterest expense


48,270



68,602



56,595


Income before income taxes


22,563



17,934



13,874


Income tax provision


2,880



4,821



4,441


Net income


19,683



13,113



9,433


Per Share Data







Diluted earnings per common share


$

0.28



$

0.19



$

0.12


Core earnings per common share (1)


0.31



0.38



0.20


Tangible book value per share (1)


10.97



10.72



10.37


Average diluted common shares (in thousands)


69,706



69,973



75,103


Performance and Capital Ratios







Return on average assets (annualized)


1.19

%


0.80

%


0.62

%

Return on average equity (annualized)


10.69



7.25



4.97


Net interest margin (fully taxable equivalent) (2)


3.73



3.89



3.80


Core efficiency ratio (1)


59.46



59.51



68.61


Tangible average equity to tangible average assets (1)


10.88



10.79



12.31


Common equity tier 1 capital (3)


12.15



11.99



13.87


Tier 1 leverage ratio (3)


10.30



10.21



11.65


Tier 1 risk-based capital (3)


12.15



11.99



13.87


Total risk-based capital (3)


13.13



13.00



14.97


Asset Quality Ratios







Net charge-offs (recoveries) to average loans (annualized)


0.04

%


(0.23)

%


0.43

%

Nonperforming assets as a percentage of total assets


1.18



1.30



1.55


Nonperforming loans as a percent of total loans


1.08



1.20



1.25


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


1.06



1.12



1.17


(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)     First quarter 2016 is estimated.

 

First Quarter 2016 Compared to Fourth Quarter 2015

  • Net income was $19.7 million, or $0.28 per diluted average common share, in the first quarter of 2016, compared to $13.1 million, or $0.19 per diluted average common share, for the fourth quarter of 2015. Core earnings per diluted average share, a non-GAAP financial measurement, was $0.31 per diluted average common share for the first quarter of 2016, compared to $0.38 for the fourth quarter of 2015. First quarter of 2016 net income was impacted by three non-core items: a $6.6 million detriment to earnings due to the change in fair value of our loan servicing rights, $2.9 million of transaction and integration related expenses and a $4.3 million benefit due to finalization of a settlement with the Internal Revenue Service discussed further below. Fourth quarter of 2015 net income was impacted by three non-core items: a $20.4 million charge resulting from the early termination of the Talmer Bank and Trust's FDIC loss share agreements and the FDIC's warrant, the $1.4 million benefit to earnings due to the change in fair value of our loan servicing rights and $328 thousand of transaction and integration costs. The net negative impact to our earnings per diluted common share for the first quarter of 2016 from these non-core items was approximately $0.03 per diluted share, compared to $0.19 per diluted common share for the fourth quarter of 2015. Please see the section entitled "Reconciliation of Non-GAAP Financial Measures", for a discussion on the limitations of our core earnings per average diluted share and a reconciliation of this non-GAAP financial measure to the most comparable GAAP measure.
  • Net loans increased during the first quarter of 2016 by $118.6 million, driven by strong growth in commercial real estate and residential real estate lending, partially offset by acquired loan run-off.
  • Total deposits increased $138.2 million, to $5.2 billion as of March 31, 2016, compared to December 31, 2015, primarily due to increases in time deposits and demand deposits, partially offset by a decline in money market and savings deposits.
  • Net interest income decreased to $56.1 million in the first quarter of 2016, compared to $58.4 million in the fourth quarter of 2015. The decline in net interest income was primarily due to a $2.0 million decrease in interest on loans due significantly to the run-off of acquired, higher-yielding loans and the impact of one less day in the quarter. Our net interest margin decreased 16 basis points to 3.73% in the first quarter of 2016, compared to 3.89% in the fourth quarter of 2015, also primarily due to the run-off of acquired, higher-yielding loans.
  • Noninterest income decreased $10.0 million to $13.6 million in the first quarter of 2016, compared to the fourth quarter of 2015. Noninterest income was impacted by a detriment to earnings of $6.6 million due to the change in the fair value of loan servicing rights, compared to a benefit to earnings of $1.4 million in the fourth quarter of 2015, which is a key component of the $7.7 million decrease in mortgage banking and other loan fees. In addition, accelerated discount on acquired loans decreased $2.5 million in the first quarter of 2016, compared to the fourth quarter of 2015.
  • Noninterest expense decreased $20.3 million, to $48.3 million in the first quarter of 2016, compared to the fourth quarter of 2015, primarily due to $20.4 million of net loss on the early termination of Talmer Bank and Trust's FDIC loss share agreements and the FDIC's warrant recognized in the fourth quarter of 2015, in addition to overall declines in core operating expenses, partially offset by an increase of $2.5 million in merger and acquisition expense. Excluding non-core expenses, noninterest expense declined by $2.5 million.
  • Total shareholder's equity of $748.7 million as of March 31, 2016, increased $23.5 million compared to December 31, 2015. The increase is primarily the result of net income of $19.7 million in the first quarter of 2016.
  • The income tax provision for the first quarter of 2016 was $2.9 million resulting in an effective tax rate of 12.8%, which is approximately $4.6 million lower than an assumed 33% normalized tax rate. The lower effective tax rate in the first quarter of 2016, compared to previous quarters, is primarily due to the finalization of a settlement 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 resulting in a benefit of $4.3 million. Talmer Bank and Trust, as successor to First Place Bank, was granted court approval to act as substitute agent for First Place Financial Corp. for the purpose of amending various returns, which ultimately impact the tax filings of Talmer Bank and Trust.

Income Statement

Net Interest Income and Net Interest Margin

Net interest income for the first quarter of 2016 was $56.1 million, compared to $58.4 million in the prior quarter.  Our net interest margin was 3.73% in the first quarter of 2016, a decline of 16 basis points from 3.89% in the fourth quarter of 2015. The decreases in net interest income and net interest margin in the first quarter were due significantly to the run-off of acquired, higher-yielding loans.  The decrease in net interest income was also impacted by one less day in the quarter.

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 first quarter of 2016 and the fourth quarter of 2015, the yield on loans was 4.66% and 4.83%, respectively, while the yield generated using only the expected coupon would have been 4.06% and 4.17%, 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. The excess accretable yield benefited net interest margin by 48 basis points in the first quarter of 2016 compared to 52 basis points in the fourth quarter of 2015.  Therefore, excluding the benefit of excess accretable yield, our net interest margin in the first quarter of 2016 was 3.25% compared to 3.37% in the fourth quarter of 2015.

Noninterest Income

Noninterest income decreased $10.0 million to $13.6 million in the first quarter of 2016, compared to the fourth quarter of 2015.  The most significant contributor to this decline was a decrease in mortgage banking and other loan fees of $7.7 million.  The decrease in mortgage banking and other loan fees was impacted by a detriment to earnings of $6.6 million due to the change in the fair value of loan servicing rights compared to a benefit of $1.4 million in the fourth quarter of 2015. The change in the fair value of loan servicing rights in the first quarter of 2016 was due mainly to downward movements in market interest rates during the period compared to the rising rate environment in the fourth quarter of 2015.  First quarter of 2016 noninterest income was also impacted by a decrease in accelerated discount on acquired loans.  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.

As we have noted in prior quarters, we have chosen not to hedge our 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.  The cumulative acquisition-to-date detriment to pre-tax earnings due to the changes in fair value has been $6.0 million since the majority of our servicing rights were acquired on January 1, 2013.

Noninterest Expense

Noninterest expense in the first quarter of 2016 decreased $20.3 million, to $48.3 million, compared to the fourth quarter of 2015.  The decrease in noninterest expense is primarily due to the $20.4 million net loss on the early termination of Talmer Bank and Trust's FDIC loss share agreements and the FDIC's warrant recognized in the fourth quarter of 2015, in addition to other declines in core operating expenses, partially offset by an increase of $2.5 million in merger and acquisition expense.

The efficiency ratio is a measure of noninterest expense as a percentage of net interest income and noninterest income. Our efficiency ratio was 69.23% in the first quarter of 2016, compared to 83.71% in the fourth quarter of 2015. Our core efficiency ratio was 59.46% and 59.51%, for the first quarter of 2016 and fourth quarter of 2015, respectively.  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 core efficiency ratio for the first quarter of 2016 excludes the detriment received from the fair value adjustment to our loan servicing rights of $6.6 million and transaction and integration related costs of $2.9 million.  The core efficiency ratio for the fourth quarter of 2015 excludes the $20.4 million charge we took to terminate Talmer Bank and Trust'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.

Credit Quality

The first quarter of 2016 resulted in a benefit for loan losses of $1.1 million, compared to a benefit for loan losses of $4.6 million in the fourth quarter of 2015.  The decrease in the benefit for loan losses was primarily due to a decrease in net credit recoveries on loans.  At March 31, 2016, the allowance for loan losses was $52.4 million, or 1.06% of total loans, compared to $54.0 million, or 1.12% of total loans, at December 31, 2015.  The decrease in both the allowance for loan losses and the allowance as a percentage of total loans for the quarter was primarily due to credit recoveries on acquired loans that were paid off, payments received on loans previously carrying an allowance for loan loss, continued reductions in the percentage of nonperforming loans to total loans, and to a lesser extent, increases in collateral and cash flow expectations on loans individually evaluated for impairment.

During the first quarter of 2016, we completed re-estimations of cash flow expectations for purchased credit impaired loans acquired in each of our acquisitions.  For the re-estimations, changes in cash flow expectations on loans resulted in net relief of loan loss provisions of $963 thousand.  The re-estimations also resulted in a $15.7 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 $117.8 million to $6.7 billion at March 31, 2016 compared to $6.6 billion at December 31, 2015.  The primary drivers of the increase in assets in the quarter ended March 31, 2016 were increases in net total loans of $118.6 million and securities available-for-sale of $55.8 million, partially offset by decreases in loans held for sale of $33.2 million and cash and cash equivalents of $23.5 million.

Net total loans at March 31, 2016 increased $118.6 million to $4.9 billion, compared to December 31, 2015.  Loan growth was primarily driven by growth in commercial real estate and residential real estate lending. We continue to be focused on sourcing quality loan growth to overcome the run-off of higher-yielding acquired loans.  Acquired loans totaled $1.3 billion, or 27.0% of total loans, $1.4 billion, or 29.7% of total loans, and $1.8 billion, or 40.9% of total loans at March 31, 2016, December 31, 2015 and March 31, 2015, respectively.  Acquired loans are reported on the balance sheet at the contractual balance, net of remaining discount resulting from acquisition accounting and charge-offs taken since acquisition.

Total liabilities were $6.0 billion at March 31, 2016, compared to $5.9 billion at December 31, 2015.  The $94.3 million increase in liabilities in the quarter ended March 31, 2016 was primarily due to an increase in total deposits of $138.2 million, partially offset by a decrease in long-term debt of $64.6 million.  The increase in total deposits was due to increases in time deposits of $109.2 million and demand deposits of $76.1 million, partially offset by declines in money market and savings deposits of $40.4 million and other brokered funds of $6.7 million.

Total shareholders' equity of $748.7 million as of March 31, 2016 increased $23.5 million compared to December 31, 2015.  The increase is primarily the result of our net income of $19.7 million.  Our Tier 1 leverage ratio was estimated to be 10.30% at March 31, 2016, compared to 10.21% at December 31, 2015. 

Pending Merger

On January 26, 2016, the boards of directors of Chemical Financial Corporation (Nasdaq: CHFC), the holding company for Chemical Bank, and Talmer announced the execution of a definitive agreement for Chemical Financial Corporation to partner with Talmer in a cash and common stock merger transaction.  The completion of the merger is subject to receipt of regulatory approvals and satisfaction of other customary closing conditions, including approval of both Chemical Financial Corporation and Talmer shareholders.

Due to the pending merger and Chemical Financial Corporation's filed registration statement on Form S-4 with the Securities and Exchange Commission, Talmer will not be holding a conference webcast to review the first quarter 2016 financial results.

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 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 regarding the proposed merger with Chemical Financial Corporation and statements regarding our continued focus on sourcing quality loan growth to overcome the run-off of higher-yielding acquired loans.  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 the inability to complete the merger transaction with Chemical Financial Corporation due to the failure to satisfy each party's respective conditions to completion, including the receipt of required regulatory approvals and receipt of required shareholder approvals, the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement with Chemical Financial Corporation, 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, and 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.

 

Talmer Bancorp, Inc.






Consolidated Balance Sheets






(Unaudited)






(Dollars in thousands, except per share data)

March 31,
 2016


December 31,
 2015


March 31,
 2015

Assets






Cash and due from banks

$

88,727



$

74,734



$

77,957


Interest-bearing deposits with other banks

146,406



137,589



303,926


Federal funds sold and other short-term investments

128,682



175,000



104,000


Total cash and cash equivalents

363,815



387,323



485,883


Securities available-for-sale

946,543



890,770



730,393


Federal Home Loan Bank stock

29,621



29,621



20,744


Loans held for sale, at fair value

25,040



58,223



66,556


Loans:






Commercial real estate

1,616,801



1,568,097



1,572,038


Residential real estate (includes $24.4 million, $22.2 million, and $21.7 million,
respectively, measured at fair value) (1)

1,604,940



1,547,799



1,577,454


Commercial and industrial

1,279,402



1,257,406



977,687


Real estate construction (includes $0, $0, and $431 thousand, respectively, measured at
fair value) (1)

235,007



241,603



149,148


Consumer

187,586



191,795



196,659


Total loans

4,923,736



4,806,700



4,472,986


  Less: Allowance for loan losses

(52,378)



(53,953)



(52,465)


Net total loans

4,871,358



4,752,747



4,420,521


Premises and equipment

42,446



43,570



48,150


Other real estate owned and repossessed assets

26,536



28,259



42,921


Loan servicing rights

51,348



58,113



54,409


Core deposit intangible

12,196



12,808



14,796


Goodwill

3,524



3,524



3,524


Company-owned life insurance

108,958



107,065



103,924


Income tax benefit

173,596



177,183



182,554


FDIC indemnification asset





50,702


FDIC receivable





7,839


Other assets

58,708



46,684



47,273


Total assets

$

6,713,689



$

6,595,890



$

6,280,189


Liabilities






Deposits:






Noninterest-bearing demand deposits

$

1,040,950



$

1,011,414



$

964,163


Interest-bearing demand deposits

896,179



849,599



784,001


Money market and savings deposits

1,274,534



1,314,909



1,257,919


Time deposits

1,719,111



1,609,895



1,312,992


Other brokered funds

222,024



228,764



459,499


Total deposits

5,152,798



5,014,581



4,778,574


Short-term borrowings

334,480



348,998



216,747


Long-term debt

399,476



464,057



462,493


FDIC clawback liability





27,881


FDIC warrants payable





4,472


Other liabilities

78,265



43,039



36,173


Total liabilities

5,965,019



5,870,675



5,526,340


Shareholders' equity






Preferred stock - $1.00 par value






Authorized - 20,000,000 shares at 3/31/2016, 12/31/2015, and 3/31/2015






Issued and outstanding - 0 shares at 3/31/2016, 12/31/2015, and 3/31/2015






Common stock:






Class A Voting Common Stock - $1.00 par value






Authorized - 198,000,000 shares at 3/31/2016, 12/31/2015, and 3/31/2015






Issued and outstanding - 66,844,244 shares at 3/31/2016, 66,114,798 shares at
12/31/2015, and 70,938,113 shares at 3/31/2015

66,844



66,115



70,938


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






Authorized - 2,000,000 shares at 3/31/2016, 12/31/2015, and 3/31/2015






Issued and outstanding - 0 shares at 3/31/2016, 12/31/2015, and 3/31/2015






Additional paid-in-capital

319,207



316,571



385,755


Retained earnings

355,493



339,130



290,516


Accumulated other comprehensive income, net of tax

7,126



3,399



6,640


Total shareholders' equity

748,670



725,215



753,849


Total liabilities and shareholders' equity

$

6,713,689



$

6,595,890



$

6,280,189




(1)     Amounts represent loans for which Talmer has elected the fair value option.

 


 


Talmer Bancorp, Inc.



Consolidated Statements of Income



(Unaudited)





Three months ended March 31,

(Dollars in thousands, except per share data)


2016


2015

Interest income





Interest and fees on loans


$

56,360



$

59,938


Interest on investments





Taxable


3,240



2,323


Tax-exempt


1,991



1,615


Total interest on securities


5,231



3,938


Interest on interest-earning cash balances


184



86


Interest on federal funds and other short-term investments


468



165


Dividends on FHLB stock


312



245


FDIC indemnification asset




(9,250)


Total interest income


62,555



55,122


Interest Expense





Interest-bearing demand deposits


401



290


Money market and savings deposits


667



471


Time deposits


3,114



1,827


Other brokered funds


618



623


Interest on short-term borrowings


657



79


Interest on long-term debt


1,000



800


Total interest expense


6,457



4,090


Net interest income


56,098



51,032


Provision (benefit) for loan losses


(1,111)



1,993


Net interest income after provision for loan losses


57,209



49,039


Noninterest income





Deposit fee income


2,397



2,320


Mortgage banking and other loan fees


(3,880)



(1,261)


Net gain on sales of loans


5,238



8,618


Accelerated discount on acquired loans


5,052



8,198


Net gain (loss) on sales of securities


333



(107)


Company-owned life insurance


750



740


FDIC loss share income




(1,068)


Other income


3,734



3,990


Total noninterest income


13,624



21,430


Noninterest expense





Salary and employee benefits


25,813



29,212


Occupancy and equipment expense


6,007



7,666


Data processing fees


1,743



1,854


Professional service fees


3,290



3,543


Merger and acquisition expense


2,874



1,412


Marketing expense


1,529



1,095


Other employee expense


808



934


Insurance expense


1,550



1,530


FDIC loss share expense




949


Other expense


4,656



8,400


Total noninterest expense


48,270



56,595


Income before income taxes


22,563



13,874


Income tax provision


2,880



4,441


Net income


$

19,683



$

9,433


Earnings per common share:





Basic


$

0.30



$

0.13


Diluted


$

0.28



$

0.12


Average common shares outstanding - basic


65,636



70,216


Average common shares outstanding - diluted


69,706



75,103


Total comprehensive income


$

23,410



$

12,223


 


Talmer Bancorp, Inc.





Consolidated Statements of Income





(Unaudited)







2016


2015

(Dollars in thousands, except per share data)


1st Qtr


4th Qtr


3rd Qtr


2nd Qtr


1st Qtr

Interest income











Interest and fees on loans


$

56,360



$

58,400



$

60,078



$

58,319



$

59,938


Interest on investments











Taxable


3,240



3,234



2,731



2,375



2,323


Tax-exempt


1,991



1,933



1,873



1,658



1,615


Total interest on securities


5,231



5,167



4,604



4,033



3,938


Interest on interest-earning cash balances


184



77



107



117



86


Interest on federal funds and other short-term investments


468



383



342



269



165


Dividends on FHLB stock


312



275



285



224



245


FDIC indemnification asset






(4,366)



(8,548)



(9,250)


Total interest income


62,555



64,302



61,050



54,414



55,122


Interest Expense











Interest-bearing demand deposits


401



395



401



382



290


Money market and savings deposits


667



732



620



562



471


Time deposits


3,114



2,891



2,582



2,131



1,827


Other brokered funds


618



483



541



607



623


Interest on short-term borrowings


657



329



350



209



79


Interest on long-term debt


1,000



1,094



909



914



800


Total interest expense


6,457



5,924



5,403



4,805



4,090


Net interest income


56,098



58,378



55,647



49,609



51,032


Provision (benefit) for loan losses


(1,111)



(4,583)



700



(7,313)



1,993


Net interest income after provision for loan losses


57,209



62,961



54,947



56,922



49,039


Noninterest income











Deposit fee income


2,397



2,513



2,494



2,561



2,320


Mortgage banking and other loan fees


(3,880)



3,853



(1,721)



4,698



(1,261)


Net gain on sales of loans


5,238



5,404



6,815



8,748



8,618


Accelerated discount on acquired loans


5,052



7,556



9,491



7,444



8,198


Net gain (loss) on sales of securities


333



(2)



202



6



(107)


Company-owned life insurance


750



779



740



856



740


FDIC loss share income






(2,696)



(5,928)



(1,068)


Other income


3,734



3,472



4,017



3,713



3,990


Total noninterest income


13,624



23,575



19,342



22,098



21,430


Noninterest expense











Salary and employee benefits


25,813



27,535



27,665



28,685



29,212


Occupancy and equipment expense


6,007



5,993



6,472



8,415



7,666


Data processing fees


1,743



1,603



1,356



1,805



1,854


Professional service fees


3,290



2,771



3,197



3,275



3,543


Merger and acquisition expense


2,874



328



113



419



1,412


Marketing expense


1,529



1,224



1,748



1,483



1,095


Other employee expense


808



943



722



826



934


Insurance expense


1,550



1,571



1,305



1,527



1,530


Net loss on early termination of FDIC loss share agreements and warrant




20,364








FDIC loss share expense






292



133



949


Other expense


4,656



6,270



4,959



6,725



8,400


Total noninterest expense


48,270



68,602



47,829



53,293



56,595


Income before income taxes


22,563



17,934



26,460



25,727



13,874


Income tax provision


2,880



4,821



6,425



8,179



4,441


Net income


$

19,683



$

13,113



$

20,035



$

17,548



$

9,433


Earnings per common share:











Basic


$

0.30



$

0.20



$

0.29



$

0.25



$

0.13


Diluted


$

0.28



$

0.19



$

0.27



$

0.23



$

0.12


Average common shares outstanding - basic


65,636



65,388



68,731



70,301



70,216


Average common shares outstanding - diluted


69,706



69,973



73,222



74,900



75,103


Total comprehensive income


$

23,410



$

10,710



$

23,601



$

13,144



$

12,223


 


Talmer Bancorp, Inc.










Loan and Deposit Data










(Unaudited)










(Dollars in thousands)

March 31,
 2016


December 31,
 2015


September 30,
2015


June 30,
2015


March 31,
 2015

Loans










Commercial real estate










 Non-owner occupied

$

1,056,937



$

1,039,305



$

1,029,412



$

1,010,063



$

1,016,704


 Owner-occupied

534,903



503,814



504,278



499,541



522,033


 Farmland

24,961



24,978



27,839



30,077



33,301


Total commercial real estate

1,616,801



1,568,097



1,561,529



1,539,681



1,572,038


Residential real estate

1,604,940



1,547,799



1,542,661



1,531,049



1,577,454


Commercial and industrial

1,279,402



1,257,406



1,210,613



1,091,147



977,687


Real estate construction

235,007



241,603



222,184



182,618



149,148


Consumer

187,586



191,795



164,601



180,478



196,659


Total loans

$

4,923,736



$

4,806,700



$

4,701,588



$

4,524,973



$

4,472,986












Deposits










Noninterest-bearing demand deposits

$

1,040,950



$

1,011,414



$

1,050,375



$

1,002,053



$

964,163


Interest-bearing demand deposits

896,179



849,599



813,609



821,557



784,001


Money market and savings deposits

1,274,534



1,314,909



1,314,798



1,276,726



1,257,919


Time deposits

1,719,111



1,609,895



1,611,315



1,427,126



1,312,992


Other brokered funds

222,024



228,764



335,354



380,611



459,499


Total deposits

$

5,152,798



$

5,014,581



$

5,125,451



$

4,908,073



$

4,778,574












 


Talmer Bancorp, Inc.




Impaired Assets




(Unaudited)





2016


2015

(Dollars in thousands)

1st Qtr


4th Qtr


3rd Qtr


2nd Qtr


1st Qtr

Nonperforming troubled debt restructurings










  Commercial real estate

$

5,763



$

7,485



$

9,109



$

19,369



$

17,648


  Residential real estate

4,548



5,485



6,218



5,970



6,041


  Commercial and industrial

3,900



1,167



1,750



2,066



1,519


  Real estate construction

175



187



345



538



414


  Consumer

103



127



117



111



117


    Total nonperforming troubled debt restructurings

14,489



14,451



17,539



28,054



25,739


Nonaccrual loans other than nonperforming troubled debt
restructurings










  Commercial real estate

9,499



9,313



12,611



11,326



12,300


  Residential real estate

12,391



12,905



13,354



16,234



14,124


  Commercial and industrial

16,606



20,501



9,869



3,422



3,125


  Real estate construction

57



226



224



265



451


  Consumer

57



79



149



217



254


  Total nonaccrual loans other than nonperforming troubled debt
  restructurings

38,610



43,024



36,207



31,464



30,254


    Total nonaccrual loans

53,099



57,475



53,746



59,518



55,993


Other real estate owned and repossessed assets (1)

26,434



28,157



32,950



45,873



41,470


    Total nonperforming assets

79,533



85,632



86,696



105,391



97,463


Performing troubled debt restructurings










  Commercial real estate

16,350



15,340



15,682



6,796



11,548


  Residential real estate

7,240



5,749



5,587



5,976



4,944


  Commercial and industrial

3,777



3,438



3,637



3,166



3,164


  Real estate construction

420



420



495



431



345


  Consumer

250



242



235



240



220


  Total performing troubled debt restructurings

28,037



25,189



25,636



16,609



20,221


    Total impaired assets

$

107,570



$

110,821



$

112,332



$

122,000



$

117,684


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

$

384



$

297



$

196



$

340



$

72



(1)     Excludes closed branches and operating facilities.

 


Talmer Bancorp, Inc.




Analysis of Allowance for Loan Losses




(Unaudited)





2016


2015

(Dollars in thousands)

1st Qtr


4th Qtr


3rd Qtr


2nd Qtr


1st Qtr

Balance at beginning of period

$

53,953



$

55,837



$

52,906



$

52,465



$

55,172


Loan charge-offs:










  Commercial real estate

(2,174)



(3,581)



(1,725)



(3,706)



(5,429)


  Residential real estate

(1,290)



(2,153)



(1,054)



(1,233)



(2,461)


  Commercial and industrial

(978)



(2,689)



(767)



(2,009)



(2,084)


  Real estate construction

(100)



(197)



(60)



(726)



(543)


  Consumer

(510)



(552)



(631)



(263)



(481)


  Total loan charge-offs

(5,052)



(9,172)



(4,237)



(7,937)



(10,998)


Recoveries of loans previously charged-off:










  Commercial real estate

1,390



6,873



2,523



10,102



4,243


  Residential real estate

2,244



977



1,986



1,259



635


  Commercial and industrial

603



3,931



1,333



3,964



747


  Real estate construction

267



23



403



254



535


  Consumer

84



67



223



112



138


  Total loan recoveries

4,588



11,871



6,468



15,691



6,298


  Net (charge-offs) recoveries

(464)



2,699



2,231



7,754



(4,700)


Provision (benefit) for loan losses

(1,111)



(4,583)



700



(7,313)



1,993


Balance at end of period

52,378



53,953



55,837



52,906



52,465


 

Talmer Bancorp, Inc.


Net Interest Income and Net Interest Margin


(Unaudited)



For the three months ended


March 31, 2016


December 31, 2015


March 31, 2015

(Dollars in thousands)

Average
Balance

Interest (1)

Average
Rate (2)


Average
Balance

Interest (1)

Average
Rate (2)


Average
Balance

Interest (1)

Average
Rate (2)

Earning assets:












Interest-earning balances

$

143,092


$

184


0.52

%


$

113,284


$

77


0.27

%


$

156,828


$

86


0.22

%

Federal funds sold and other short-term
investments

186,516


468


1.01



187,283


383


0.81



97,419


165


0.69


Investment securities (3):












  Taxable

606,907


3,240


2.15



603,922


3,234


2.12



494,079


2,323


1.91


  Tax-exempt

283,325


1,991


3.71



282,258


1,933


3.57



236,469


1,615


3.69


Federal Home Loan Bank stock

29,621


312


4.24



25,796


275


4.23



20,681


245


4.81


Gross loans (4)

4,864,600


56,360


4.66



4,800,952


58,400


4.83



4,430,342


59,938


5.49


FDIC indemnification asset









62,485


(9,250)


(60.03)


  Total earning assets

6,114,061


62,555


4.16

%


6,013,495


64,302


4.28

%


5,498,303


55,122


4.11

%

Non-earning assets:












Cash and due from banks

87,674





89,269





91,194




Allowance for loan losses

(54,878)





(54,211)





(53,268)




Premises and equipment

43,262





44,017





48,376




Core deposit intangible

12,519





13,129





14,201




Goodwill

3,524





3,524





2,075




Other real estate owned and repossessed
assets

27,268





31,813





48,562




Loan servicing rights

56,202





56,633





60,185




FDIC receivable





30,369





5,473




Company-owned life insurance

107,627





106,438





100,923




Other non-earning assets

242,344





231,797





234,697




  Total assets

$

6,639,603





$

6,566,273





$

6,050,721




Interest-bearing liabilities:












Deposits:












  Interest-bearing demand deposits

$

854,954


$

401


0.19

%


$

836,466


$

395


0.19

%


$

772,181


$

290


0.15

%

  Money market and savings deposits

1,294,281


667


0.21



1,351,197


732


0.21



1,211,958


471


0.16


  Time deposits

1,609,640


3,114


0.78



1,632,608


2,891


0.70



1,264,103


1,827


0.59


  Other brokered funds

296,551


618


0.84



246,998


483


0.78



589,239


623


0.43


Short-term borrowings

345,929


657


0.76



142,894


329


0.91



49,839


79


0.65


Long-term debt

417,212


1,000


0.96



489,660


1,094


0.89



402,023


800


0.81


  Total interest-bearing liabilities

4,818,567


6,457


0.54

%


4,699,823


5,924


0.50

%


4,289,343


4,090


0.39

%

Noninterest-bearing liabilities and shareholders' equity:










Noninterest-bearing demand deposits

1,026,597





1,067,500





921,359




FDIC clawback liability









27,107




Other liabilities

58,060





75,527





53,547




Shareholders' equity

736,379





723,423





759,365




  Total liabilities and shareholders' 
  equity

$

6,639,603





$

6,566,273





$

6,050,721




Net interest income


$

56,098





$

58,378





$

51,032



Interest spread



3.62

%




3.78

%




3.72

%

Net interest margin as a percentage of interest-earning assets

3.69

%




3.85

%




3.76

%

Tax equivalent effect



0.04

%




0.04

%




0.04

%

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

3.73

%




3.89

%




3.80

%


(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 $619 thousand, $610 thousand, and $534 thousand on tax-exempt securities for the three months ended March 31, 2016, December 31, 2015, and March 31, 2015, 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)





2016


2015

(Dollars in thousands, except per share data)

1st Qtr


4th Qtr


3rd Qtr


2nd Qtr


1st Qtr

Tangible shareholders' equity:










Total shareholders' equity

$

748,670



$

725,215



$

714,768



$

766,406



$

753,849


Less:










Core deposit intangibles

12,196



12,808



13,470



14,131



14,796


Goodwill

3,524



3,524



3,524



3,524



3,524


Tangible shareholders' equity

$

732,950



$

708,883



$

697,774



$

748,751



$

735,529


Tangible book value per share:










Shares outstanding

66,844



66,115



66,128



71,129



70,938


Tangible book value per share

$

10.97



$

10.72



$

10.55



$

10.53



$

10.37


Tangible average equity to tangible average assets:










Average assets

$

6,639,603



$

6,566,273



$

6,492,209



$

6,296,629



$

6,050,721


Average equity

736,379



723,423



731,040



758,284



759,365


Average core deposit intangibles

12,519



13,129



13,802



14,465



14,201


Average goodwill

3,524



3,524



3,524



3,524



2,075


Tangible average equity to tangible average assets

10.88

%


10.79

%


11.02

%


11.79

%


12.31

%

Core efficiency ratio:










Net interest income

$

56,098



$

58,378



$

55,647



$

49,609



$

51,032


Noninterest income

13,624



23,575



19,342



22,098



21,430


Total revenue

69,722



81,953



74,989



71,707



72,462


Less:










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

(6,625)



1,446



(3,831)



3,146



(4,084)


FDIC loss sharing income





(2,696)



(5,928)



(1,068)


Total core revenue

76,347



80,507



81,516



74,489



77,614


Total noninterest expense

48,270



68,602



47,829



53,293



56,595


Less:










Transaction and integration related costs

2,874



328



113



419



3,347


Net loss on early termination of FDIC loss share and warrant agreements



20,364








Property efficiency review







1,820




Total core noninterest expense

$

45,396



$

47,910



$

47,716



$

51,054



$

53,248


Efficiency ratio

69.23

%


83.71

%


63.78

%


74.32

%


78.10

%

Core efficiency ratio

59.46



59.51



58.54



68.54



68.61


Core earnings per diluted average share:










Diluted EPS available to common shareholders

$

0.28



$

0.19



$

0.27



$

0.23



$

0.12


Impact to pre-tax net income due to non-core items listed above

(9,499)



(19,246)



(6,640)



(5,021)



(8,499)


Estimated income tax impact of above non-core items

3,022



6,122



2,112



1,597



2,704


After-tax non-core item:










Benefit due to finalization of a settlement with the Internal Revenue Service

4,306










After-tax impact of non-core items

(2,171)



(13,124)



(4,528)



(3,424)



(5,795)


Portion of non-core items allocated to participating securities

(21)



(146)



(47)



(34)



(33)


Impact of non-core items applicable to common shareholders

(2,192)



(13,270)



(4,575)



(3,458)



(5,828)


Weighted average common shares outstanding - diluted

69,706



69,973



73,222



74,900



75,103


Impact to diluted EPS of non-core items

$

(0.03)



$

(0.19)



$

(0.06)



$

(0.05)



$

(0.08)


Core diluted EPS applicable to common shareholders

0.31



0.38



0.33



0.28



0.20



(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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SOURCE Talmer Bank and Trust

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