INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Supplemental Data
Supplemental Data
Exhibit 99.2
Non-performing assets
September 30, | December 31, | |||||||
2008 | 2007 | |||||||
(dollars in thousands) | ||||||||
Non-accrual loans | $ | 111,756 | $ | 72,682 | ||||
Loans 90 days or more past due and still accruing interest | 2,893 | 4,394 | ||||||
Restructured loans | 173 | |||||||
Total non-performing loans | 114,649 | 77,249 | ||||||
Other real estate | 19,993 | 9,723 | ||||||
Total non-performing assets | $ | 134,642 | $ | 86,972 | ||||
As a percent of Portfolio Loans | ||||||||
Non-performing loans | 4.58 | % | 3.07 | % | ||||
Allowance for loan losses | 2.15 | 1.80 | ||||||
Non-performing assets to total assets | 4.29 | 2.68 | ||||||
Allowance for loan losses as a percent of non-performing loans | 47 | 59 |
Allowance for loan losses
Nine months ended | ||||||||||||||||
September 30, | ||||||||||||||||
2008 | 2007 | |||||||||||||||
Unfunded | Unfunded | |||||||||||||||
Loans | Commitments | Loans | Commitments | |||||||||||||
(in thousands) | ||||||||||||||||
Balance at beginning of period | $ | 45,294 | $ | 1,936 | $ | 26,879 | $ | 1,881 | ||||||||
Additions (deduction) | ||||||||||||||||
Provision charged to operating expense | 44,039 | (583 | ) | 33,420 | 347 | |||||||||||
Recoveries credited to allowance | 2,707 | 1,741 | ||||||||||||||
Loans charged against the allowance | (38,142 | ) | (19,713 | ) | ||||||||||||
Balance at end of period | $ | 53,898 | $ | 1,353 | $ | 42,327 | $ | 2,228 | ||||||||
Net loans charged against the allowance to average Portfolio Loans (annualized) | 1.85 | % | 0.96 | % |
Alternative Sources of Funds
September 30, | December 31, | |||||||||||||||||||||||
2008 | 2007 | |||||||||||||||||||||||
Average | Average | |||||||||||||||||||||||
Amount | Maturity | Rate | Amount | Maturity | Rate | |||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||
Brokered CDs(1,2) | $ | 201,709 | 1.2 years | 3.65 | % | $ | 516,077 | 1.9 years | 4.72 | % | ||||||||||||||
Fixed rate FHLB advances(1) | 309,777 | 2.5 years | 3.21 | 240,509 | 1.3 years | 4.81 | ||||||||||||||||||
Variable rate FHLB advances(1) | 10,000 | .5 years | 2.00 | 20,000 | .3 years | 4.35 | ||||||||||||||||||
Securities sold under agreements to Repurchase(1) | 35,000 | 2.2 years | 4.42 | 35,000 | 2.9 years | 4.42 | ||||||||||||||||||
FRB — Discount borrowing | 255,000 | .2 years | 2.25 | |||||||||||||||||||||
Federal funds purchased | 54,452 | 1 day | 4.00 | |||||||||||||||||||||
Total | $ | 811,486 | 1.4 years | 3.06 | % | $ | 866,038 | 1.6 years | 4.68 | % | ||||||||||||||
(1) | Certain of these items have had their average maturity and rate altered through the use of derivative instruments, including pay-fixed and pay-variable interest rate swaps. |
Capitalization
September 30, | December 31, | |||||||
2008 | 2007 | |||||||
(in thousands) | ||||||||
Unsecured debt | $ | 3,000 | ||||||
Subordinated debentures | $ | 92,888 | 92,888 | |||||
Amount not qualifying as regulatory capital | (2,788 | ) | (2,788 | ) | ||||
Amount qualifying as regulatory capital | 90,100 | 90,100 | ||||||
Shareholders’ Equity | ||||||||
Preferred stock, no par value | ||||||||
Common stock, par value $1.00 per share | 22,782 | 22,601 | ||||||
Capital surplus | 196,954 | 195,302 | ||||||
Retained earnings | 16,621 | 22,770 | ||||||
Accumulated other comprehensive loss | (11,072 | ) | (171 | ) | ||||
Total shareholders’ equity | 225,285 | 240,502 | ||||||
Total capitalization | $ | 315,385 | $ | 333,602 | ||||
2
Non-Interest Income
Three months ended | Nine months ended | |||||||||||||||||||
September 30, | June 30, | September 30, | September 30, | |||||||||||||||||
2008 | 2008 | 2007 | 2008 | 2007 | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Service charges on deposit accounts | $ | 6,416 | $ | 6,164 | $ | 6,565 | $ | 18,227 | $ | 17,833 | ||||||||||
Net gains (losses) on assets | ||||||||||||||||||||
Mortgage loans | 969 | 1,141 | 1,094 | 3,977 | 3,413 | |||||||||||||||
Securities | (6,711 | ) | 837 | 52 | (8,037 | ) | 259 | |||||||||||||
VISA check card interchange income | 1,468 | 1,495 | 1,287 | 4,334 | 3,529 | |||||||||||||||
Mortgage loan servicing | 340 | 1,528 | 633 | 1,545 | 1,872 | |||||||||||||||
Mutual fund and annuity commissions | 680 | 644 | 517 | 1,748 | 1,463 | |||||||||||||||
Bank owned life insurance | 506 | 484 | 471 | 1,468 | 1,368 | |||||||||||||||
Title insurance fees | 307 | 384 | 363 | 1,108 | 1,207 | |||||||||||||||
Manufactured home loan origination fees and commissions | 10 | 239 | ||||||||||||||||||
Other | 1,473 | 1,460 | 1,537 | 4,707 | 4,789 | |||||||||||||||
Total non-interest income | $ | 5,448 | $ | 14,137 | $ | 12,529 | $ | 29,077 | $ | 35,972 | ||||||||||
Mortgage Loan Activity
Three months ended | Nine months ended | |||||||||||||||||||
September 30, | June 30, | September 30, | September 30, | |||||||||||||||||
2008 | 2008 | 2007 | 2008 | 2007 | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Mortgage loans originated | $ | 74,506 | $ | 111,316 | $ | 113,563 | $ | 304,064 | $ | 359,991 | ||||||||||
Mortgage loans sold | 52,837 | 80,238 | 77,154 | 217,524 | 224,279 | |||||||||||||||
Mortgage loans sold with servicing rights released | 16,760 | 11,660 | 14,121 | 36,302 | 38,404 | |||||||||||||||
Net gains on the sale of mortgage loans | 969 | 1,141 | 1,094 | 3,977 | 3,413 | |||||||||||||||
Net gains as a percent of mortgage loans sold (“Loan Sale Margin”) | 1.83 | % | 1.42 | % | 1.42 | % | 1.82 | % | 1.52 | % | ||||||||||
SFAS #133/#159 adjustments included in the Loan Sale Margin | (0.03 | ) | (0.25 | ) | (0.06 | ) | 0.28 | (0.03 | ) |
Capitalized Real Estate Mortgage Loan Servicing Rights
Three months ended | Nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
(in thousands) | ||||||||||||||||
Balance at beginning of period | $ | 16,551 | $ | 15,443 | $ | 15,780 | $ | 14,782 | ||||||||
Originated servicing rights capitalized | 403 | 760 | 2,035 | 2,222 | ||||||||||||
Amortization | (346 | ) | (381 | ) | (1,478 | ) | (1,220 | ) | ||||||||
(Increase)/decrease in impairment reserve | (348 | ) | 8 | (77 | ) | 46 | ||||||||||
Balance at end of period | $ | 16,260 | $ | 15,830 | $ | 16,260 | $ | 15,830 | ||||||||
Impairment reserve at end of period | $ | 396 | $ | 22 | $ | 396 | $ | 22 | ||||||||
3
Non-Interest Expense
Three months ended | Nine months ended | |||||||||||||||||||
September 30, | June 30, | September 30, | September 30, | |||||||||||||||||
2008 | 2008 | 2007 | 2008 | 2007 | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Salaries | $ | 10,110 | $ | 9,727 | $ | 9,771 | $ | 29,993 | $ | 30,548 | ||||||||||
Performance-based compensation and benefits | 1,336 | 1,443 | 1,287 | 4,083 | 3,761 | |||||||||||||||
Other benefits | 2,577 | 2,638 | 2,563 | 7,939 | 8,064 | |||||||||||||||
Compensation and employee benefits | 14,023 | 13,808 | 13,621 | 42,015 | 42,373 | |||||||||||||||
Occupancy, net | 2,871 | 2,813 | 2,521 | 8,798 | 7,870 | |||||||||||||||
Loan and collection | 2,008 | 2,031 | 1,285 | 5,895 | 3,512 | |||||||||||||||
Furniture, fixtures and equipment | 1,662 | 1,825 | 1,798 | 5,304 | 5,689 | |||||||||||||||
Data processing | 1,760 | 1,712 | 1,753 | 5,197 | 5,103 | |||||||||||||||
Loss on other real estate and repossessed assets | 425 | 1,560 | 80 | 2,091 | 172 | |||||||||||||||
Advertising | 1,575 | 1,168 | 1,472 | 3,843 | 3,965 | |||||||||||||||
Credit card and bank service fees | 1,273 | 1,174 | 939 | 3,493 | 2,876 | |||||||||||||||
Communications | 968 | 1,021 | 962 | 3,004 | 2,806 | |||||||||||||||
Deposit insurance | 275 | 418 | 100 | 1,526 | 360 | |||||||||||||||
Amortization of intangible assets | 760 | 761 | 934 | 2,314 | 2,439 | |||||||||||||||
Supplies | 519 | 472 | 590 | 1,534 | 1,778 | |||||||||||||||
Legal and professional | 527 | 463 | 504 | 1,408 | 1,467 | |||||||||||||||
Branch acquisition and conversion costs | 330 | |||||||||||||||||||
Goodwill impairment | 343 | |||||||||||||||||||
Other | 2,010 | 1,965 | 1,813 | 5,676 | 5,056 | |||||||||||||||
Total non-interest expense | $ | 30,656 | $ | 31,191 | $ | 28,372 | $ | 92,098 | $ | 86,139 | ||||||||||
4
Average Balances and Tax Equivalent Rates
Three Months Ended | ||||||||||||||||||||||||
September 30, | ||||||||||||||||||||||||
2008 | 2007 | |||||||||||||||||||||||
Average | Average | |||||||||||||||||||||||
Balance | Interest | Rate | Balance | Interest | Rate | |||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||
Taxable loans(1) | $ | 2,584,151 | $ | 46,294 | 7.14 | % | $ | 2,528,039 | $ | 50,835 | 8.00 | % | ||||||||||||
Tax-exempt loans(1,2) | 11,953 | 205 | 6.82 | 9,079 | 163 | 7.12 | ||||||||||||||||||
Taxable securities | 142,483 | 2,078 | 5.80 | 163,321 | 2,308 | 5.61 | ||||||||||||||||||
Tax-exempt securities(2) | 145,911 | 2,630 | 7.17 | 223,634 | 3,897 | 6.91 | ||||||||||||||||||
Other investments | 45,362 | 466 | 4.09 | 20,196 | 232 | 4.56 | ||||||||||||||||||
Interest Earning Assets — Continuing Operations | 2,929,860 | 51,673 | 7.02 | 2,944,269 | 57,435 | 7.75 | ||||||||||||||||||
Cash and due from banks | 56,922 | 34,873 | ||||||||||||||||||||||
Taxable loans — discontinued operations | 604 | |||||||||||||||||||||||
Other assets, net | 224,626 | 245,888 | ||||||||||||||||||||||
Total Assets | $ | 3,211,408 | $ | 3,225,634 | ||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||
Savings and NOW | $ | 966,415 | 2,262 | 0.93 | $ | 996,125 | 4,942 | 1.97 | ||||||||||||||||
Time deposits | 814,434 | 7,315 | 3.57 | 1,432,098 | 17,648 | 4.89 | ||||||||||||||||||
Long-term debt | 1,995 | 23 | 4.57 | |||||||||||||||||||||
Other borrowings | 790,353 | 7,099 | 3.57 | 160,699 | 2,941 | 7.26 | ||||||||||||||||||
Interest Bearing Liabilities— Continuing Operations | 2,571,202 | 16,676 | 2.58 | 2,590,917 | 25,554 | 3.91 | ||||||||||||||||||
Demand deposits | 314,116 | 316,873 | ||||||||||||||||||||||
Time deposits — discontinued operations | 434 | |||||||||||||||||||||||
Other liabilities | 89,951 | 71,430 | ||||||||||||||||||||||
Shareholders’ equity | 236,139 | 245,980 | ||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 3,211,408 | $ | 3,225,634 | ||||||||||||||||||||
Tax Equivalent Net Interest Income | $ | 34,997 | $ | 31,881 | ||||||||||||||||||||
Tax Equivalent Net Interest Income as a Percent of Earning Assets | 4.76 | % | 4.31 | % | ||||||||||||||||||||
(1) | All domestic | |
(2) | Interest on tax-exempt loans and securities is presented on a fully tax equivalent basis assuming a marginal tax rate of 35% |
5
Average Balances and Tax Equivalent Rates
Nine Months Ended | ||||||||||||||||||||||||
September 30, | ||||||||||||||||||||||||
2008 | 2007 | |||||||||||||||||||||||
Average | Average | |||||||||||||||||||||||
Balance | Interest | Rate | Balance | Interest | Rate | |||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||
Taxable loans(1) | $ | 2,575,809 | $ | 140,925 | 7.30 | % | $ | 2,520,661 | $ | 151,152 | 8.01 | % | ||||||||||||
Tax-exempt loans(1,2) | 10,969 | 582 | 7.09 | 9,450 | 489 | 6.92 | ||||||||||||||||||
Taxable securities | 152,812 | 6,558 | 5.73 | 185,707 | 7,377 | 5.31 | ||||||||||||||||||
Tax-exempt securities(2) | 179,914 | 9,562 | 7.10 | 230,998 | 12,087 | 7.00 | ||||||||||||||||||
Other investments | 32,553 | 1,185 | 4.86 | 25,732 | 1,010 | 5.25 | ||||||||||||||||||
Interest Earning Assets — Continuing Operations | 2,952,057 | 158,812 | 7.18 | 2,972,548 | 172,115 | 7.73 | ||||||||||||||||||
Cash and due from banks | 53,354 | 30,663 | ||||||||||||||||||||||
Taxable loans — discontinued operations | 11,274 | |||||||||||||||||||||||
Other assets, net | 226,367 | 244,780 | ||||||||||||||||||||||
Total Assets | $ | 3,231,778 | $ | 3,259,265 | ||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||
Savings and NOW | $ | 985,938 | 8,281 | 1.12 | $ | 964,895 | 13,919 | 1.93 | ||||||||||||||||
Time deposits | 928,304 | 28,699 | 4.13 | 1,486,616 | 54,457 | 4.90 | ||||||||||||||||||
Long-term debt | 330 | 12 | 4.86 | 2,491 | 86 | 4.62 | ||||||||||||||||||
Other borrowings | 689,296 | 20,499 | 3.97 | 163,237 | 8,495 | 6.96 | ||||||||||||||||||
Interest Bearing Liabilities— Continuing Operations | 2,603,868 | 57,491 | 2.95 | 2,617,239 | 76,957 | 3.93 | ||||||||||||||||||
Demand deposits | 300,411 | 303,045 | ||||||||||||||||||||||
Time deposits — discontinued operations | 8,176 | |||||||||||||||||||||||
Other liabilities | 87,530 | 77,548 | ||||||||||||||||||||||
Shareholders’ equity | 239,969 | 253,257 | ||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 3,231,778 | $ | 3,259,265 | ||||||||||||||||||||
Tax Equivalent Net Interest Income | $ | 101,321 | $ | 95,158 | ||||||||||||||||||||
Tax Equivalent Net Interest Income as a Percent of Earning Assets | 4.58 | % | 4.27 | % | ||||||||||||||||||||
(1) | All domestic | |
(2) | Interest on tax-exempt loans and securities is presented on a fully tax equivalent basis assuming a marginal tax rate of 35% |
6
Commercial Loan Portfolio Analysis as of September 30, 2008
Total Commercial Loans | ||||||||||||||||||||
Percent of | ||||||||||||||||||||
Watch Credits | Loan | |||||||||||||||||||
Non- | Category in | |||||||||||||||||||
All Loans | Performing | performing | Total | Watch Credit | ||||||||||||||||
Loan Category | (dollars in thousands) | |||||||||||||||||||
Land | $ | 39,843 | $ | 7,874 | $ | 10,900 | $ | 18,774 | 47.1 | % | ||||||||||
Land Development | 62,904 | 17,129 | 19,551 | 36,680 | 58.3 | % | ||||||||||||||
Construction | 54,954 | 9,622 | 6,609 | 16,231 | 29.5 | % | ||||||||||||||
Income Producing | 422,557 | 56,075 | 28,617 | 84,692 | 20.0 | % | ||||||||||||||
Owner Occupied | 223,792 | 24,234 | 5,045 | 29,279 | 13.1 | % | ||||||||||||||
Total Commercial Real Estate Loans(1) | $ | 804,050 | $ | 114,934 | $ | 70,722 | $ | 185,656 | 23.1 | % | ||||||||||
Other Commercial Loans(1) | $ | 205,523 | $ | 17,628 | 3,497 | $ | 21,125 | 10.3 | % | |||||||||||
Total non-performing commercial loans | $ | 74,219 | ||||||||||||||||||
(1) | The total of these two categories is different than the September 30, 2008, Consolidated Statement of Financial Condition due primarily to loans in process. |
7