INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Supplemental Data
Non-performing assets(1)
September 30, 2011 | December 31, 2010 | |||||||
(Dollars in thousands) | ||||||||
Non-accrual loans | $ | 50,586 | $ | 66,652 | ||||
Loans 90 days or more past due and still accruing interest | 313 | 928 | ||||||
Total non-performing loans | 50,899 | 67,580 | ||||||
Other real estate and repossessed assets | 34,029 | 39,413 | ||||||
Total non-performing assets | $ | 84,928 | $ | 106,993 | ||||
As a percent of Portfolio Loans | ||||||||
Non-performing loans | 3.13 | % | 3.73 | % | ||||
Allowance for loan losses | 3.61 | 3.75 | ||||||
Non-performing assets to total assets | 3.66 | 4.22 | ||||||
Allowance for loan losses as a percent of non-performing loans | 115.56 | 100.50 |
(1) | Excludes loans classified as “troubled debt restructured” that are not past due and vehicle service contract counterparty receivables, net. |
Troubled debt restructurings (“TDR”)
September 30, 2011 | |||||||||||||
Commercial | Retail | Total | |||||||||||
(In thousands) | |||||||||||||
Performing TDR’s | $ | 22,273 | $ | 90,378 | $ | 112,651 | |||||||
Non-performing TDR’s (1) | 4,552 | 13,753 | (2) | 18,305 | |||||||||
Total | $ | 26,825 | $ | 104,131 | $ | 130,956 |
December 31, 2010 | |||||||||||||
Commercial | Retail | Total | |||||||||||
(In thousands) | |||||||||||||
Performing TDR’s | $ | 16,957 | $ | 96,855 | $ | 113,812 | |||||||
Non-performing TDR’s (1) | 7,814 | 16,616 | (2) | 24,430 | |||||||||
Total | $ | 24,771 | $ | 113,471 | $ | 138,242 |
(1) | Included in non-performing loans table above. |
(2) | Also includes loans on non-accrual at the time of modification until six payments are received on a timely basis. |
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Allowance for loan losses
Nine months ended September 30, | ||||||||||||||||
2011 | 2010 | |||||||||||||||
Loans | Unfunded Commitments | Loans | Unfunded Commitments | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Balance at beginning of period | $ | 67,915 | $ | 1,322 | $ | 81,717 | $ | 1,858 | ||||||||
Additions (deduction) | ||||||||||||||||
Provision for loan losses | 21,029 | - | 39,237 | - | ||||||||||||
Recoveries credited to allowance | 3,080 | - | 2,656 | - | ||||||||||||
Loans charged against the allowance | (33,204 | ) | - | (51,866 | ) | - | ||||||||||
Additions (deductions) included in non-interest expense | - | 12 | - | (471 | ) | |||||||||||
Balance at end of period | $ | 58,820 | $ | 1,334 | $ | 71,744 | $ | 1,387 | ||||||||
Net loans charged against the allowance to average Portfolio Loans (annualized) | 2.35 | % | 3.13 | % |
Alternative Sources of Funds
September 30, 2011 | December 31, 2010 | |||||||||||||||||
Amount | Average Maturity | Rate | Amount | Average Maturity | Rate | |||||||||||||
(Dollars in thousands) | ||||||||||||||||||
Brokered CDs | $ | 34,148 | 1.0 years | 1.82 | % | $ | 273,546 | 2.4 years | 2.89 | % | ||||||||
Fixed rate FHLB advances | 32,719 | 3.3 years | 4.13 | 21,022 | 5.9 years | 6.34 | ||||||||||||
Variable rate FHLB advances(1) | 3,000 | 2.6 years | 0.35 | 50,000 | 0.8 years | 0.41 | ||||||||||||
Total | $ | 69,867 | 2.1 years | 2.84 | % | $ | 344,568 | 2.4 years | 2.74 | % |
(1) | Certain of these items have had their average maturity and rate altered through the use of derivative instruments, including pay-fixed interest rate swaps. |
Capitalization
September 30, 2011 | December 31, 2010 | |||||||
(In thousands) | ||||||||
Subordinated debentures | $ | 50,175 | $ | 50,175 | ||||
Amount not qualifying as regulatory capital | (1,507 | ) | (1,507 | ) | ||||
Amount qualifying as regulatory capital | 48,668 | 48,668 | ||||||
Shareholders’ Equity | ||||||||
Preferred stock | 78,802 | 75,700 | ||||||
Common stock | 248,505 | 246,407 | ||||||
Accumulated deficit | (204,491 | ) | (189,902 | ) | ||||
Accumulated other comprehensive loss | (12,014 | ) | (13,120 | ) | ||||
Total shareholders’ equity | 110,802 | 119,085 | ||||||
Total capitalization | $ | 159,470 | $ | 167,753 |
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Non-Interest Income
Three months ended | Nine months ended | |||||||||||||||||||
September 30, | June 30, | September 30, | September 30, | |||||||||||||||||
2011 | 2011 | 2010 | 2011 | 2010 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Service charges on deposit accounts | $ | 4,623 | $ | 4,784 | $ | 5,516 | $ | 13,689 | $ | 16,624 | ||||||||||
Interchange income | 2,356 | 2,308 | 2,075 | 6,832 | 6,097 | |||||||||||||||
Net gains (losses) on assets | ||||||||||||||||||||
Mortgage loans | 2,025 | 1,793 | 3,829 | 5,753 | 8,044 | |||||||||||||||
Securities | (57 | ) | 115 | (3 | ) | 271 | 1,625 | |||||||||||||
Other than temporary loss on securities available for sale | ||||||||||||||||||||
Total impairment loss | (4 | ) | 327 | (316 | ) | (146 | ) | (434 | ) | |||||||||||
Loss recognized in other comprehensive income | - | (327 | ) | - | - | - | ||||||||||||||
Net impairment loss recognized in earnings | (4 | ) | - | (316 | ) | (146 | ) | (434 | ) | |||||||||||
Mortgage loan servicing | (2,655 | ) | (126 | ) | (1,377 | ) | (1,885 | ) | (2,988 | ) | ||||||||||
Investment and insurance commissions | 534 | 524 | 506 | 1,613 | 1,304 | |||||||||||||||
Bank owned life insurance | 496 | 464 | 502 | 1,385 | 1,453 | |||||||||||||||
Title insurance fees | 299 | 318 | 533 | 1,090 | 1,393 | |||||||||||||||
Decrease in fair value of U.S. Treasury warrant | 29 | 642 | - | 1,025 | - | |||||||||||||||
Gain on extinguishment of debt | - | - | (20 | ) | - | 18,066 | ||||||||||||||
Other | 1,609 | 1,634 | 1,233 | 4,795 | 3,420 | |||||||||||||||
Total non-interest income | $ | 9,255 | $ | 12,456 | $ | 12,478 | $ | 34,422 | $ | 54,604 |
Capitalized Mortgage Loan Servicing Rights
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In thousands) | ||||||||||||||||
Balance at beginning of period | $ | 14,741 | $ | 13,022 | $ | 14,661 | $ | 15,273 | ||||||||
Originated servicing rights capitalized | 573 | 1,084 | 2,068 | 2,539 | ||||||||||||
Amortization | (688 | ) | (1,104 | ) | (2,011 | ) | (2,495 | ) | ||||||||
Change in valuation allowance | (3,077 | ) | (1,335 | ) | (3,169 | ) | (3,650 | ) | ||||||||
Balance at end of period | $ | 11,549 | $ | 11,667 | $ | 11,549 | $ | 11,667 | ||||||||
Valuation allowance at end of period | $ | 6,379 | $ | 5,952 | $ | 6,379 | $ | 5,952 |
Mortgage Loan Activity
Three months ended | Nine months ended | |||||||||||||||||||
September 30, | June 30, | September 30, | September 30, | |||||||||||||||||
2011 | 2011 | 2010 | 2011 | 2010 | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Mortgage loans originated | $ | 89,526 | $ | 74,612 | $ | 153,920 | $ | 259,711 | $ | 337,827 | ||||||||||
Mortgage loans sold | 80,993 | 63,369 | 124,383 | 265,850 | 299,674 | |||||||||||||||
Mortgage loans sold with servicing rights released | 25,179 | 18,428 | 20,411 | 60,179 | 53,022 | |||||||||||||||
Net gains on the sale of mortgage loans | 2,025 | 1,793 | 3,829 | 5,753 | 8,044 | |||||||||||||||
Net gains as a percent of mortgage | ||||||||||||||||||||
loans sold (“Loan Sales Margin”) | 2.50 | % | 2.83 | % | 3.08 | % | 2.16 | % | 2.68 | % | ||||||||||
Fair value adjustments included in the Loan | ||||||||||||||||||||
Sales Margin | 0.15 | 0.63 | 0.83 | (0.14 | ) | 0.45 |
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Non-Interest Expense
Three months ended | Nine months ended | |||||||||||||||||||
September 30, | June 30, | September 30, | September 30, | |||||||||||||||||
2011 | 2011 | 2010 | 2011 | 2010 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Compensation | $ | 10,158 | $ | 10,020 | $ | 10,336 | $ | 29,990 | $ | 30,754 | ||||||||||
Performance-based compensation | 281 | 334 | 357 | 772 | 1,656 | |||||||||||||||
Payroll taxes and employee benefits | 2,215 | 2,675 | 2,113 | 7,270 | 7,039 | |||||||||||||||
Compensation and employee benefits | 12,654 | 13,029 | 12,806 | 38,032 | 39,449 | |||||||||||||||
Loan and collection | 2,658 | 3,580 | 3,805 | 10,105 | 11,376 | |||||||||||||||
Occupancy, net | 2,651 | 2,663 | 2,721 | 8,415 | 8,225 | |||||||||||||||
Data processing | 2,502 | 2,415 | 2,248 | 7,227 | 7,187 | |||||||||||||||
Vehicle service contract counterparty contingencies | 1,345 | 1,311 | 5,968 | 5,002 | 14,247 | |||||||||||||||
Furniture, fixtures and equipment | 1,308 | 1,502 | 1,591 | 4,228 | 4,958 | |||||||||||||||
Net losses on other real estate and repossessed assets | 1,931 | 777 | 1,296 | 4,114 | 4,879 | |||||||||||||||
Credit card and bank service fees | 869 | 1,013 | 1,378 | 2,929 | 4,553 | |||||||||||||||
FDIC deposit insurance | 885 | 652 | 1,651 | 2,772 | 5,216 | |||||||||||||||
Communications | 863 | 889 | 1,054 | 2,700 | 3,142 | |||||||||||||||
Legal and professional fees | 751 | 801 | 831 | 2,330 | 2,861 | |||||||||||||||
Advertising | 740 | 670 | 692 | 1,964 | 2,145 | |||||||||||||||
Supplies | 376 | 392 | 429 | 1,170 | 1,237 | |||||||||||||||
Amortization of intangible assets | 343 | 343 | 320 | 1,029 | 965 | |||||||||||||||
Costs (recoveries) related to unfunded lending commitments | (172 | ) | 89 | (807 | ) | 12 | (471 | ) | ||||||||||||
Other | 1,758 | 1,779 | 1,525 | 5,206 | 4,634 | |||||||||||||||
Total non-interest expense | $ | 31,462 | $ | 31,905 | $ | 37,508 | $ | 97,235 | $ | 114,603 |
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Average Balances and Rates
Three Months Ended September 30, | ||||||||||||||||||||||||
2011 | 2010 | |||||||||||||||||||||||
Average Balance | Interest | Rate(3) | Average Balance | Interest | Rate(3) | |||||||||||||||||||
Assets (1) | (Dollars in thousands) | |||||||||||||||||||||||
Taxable loans | $ | 1,668,940 | $ | 27,140 | 6.47 | % | $ | 2,012,966 | $ | 34,269 | 6.77 | % | ||||||||||||
Tax-exempt loans (2) | 7,728 | 82 | 4.21 | 9,398 | 101 | 4.26 | ||||||||||||||||||
Taxable securities | 49,911 | 297 | 2.36 | 76,935 | 509 | 2.62 | ||||||||||||||||||
Tax-exempt securities (2) | 29,259 | 301 | 4.08 | 35,441 | 383 | 4.29 | ||||||||||||||||||
Cash – interest bearing | 282,170 | 179 | 0.25 | 358,183 | 260 | 0.29 | ||||||||||||||||||
Other investments | 21,005 | 188 | 3.55 | 26,443 | 165 | 2.48 | ||||||||||||||||||
Interest Earning Assets | 2,059,013 | 28,187 | 5.44 | 2,519,366 | 35,687 | 5.63 | ||||||||||||||||||
Cash and due from banks | 56,233 | 53,518 | ||||||||||||||||||||||
Other assets, net | 192,282 | 173,850 | ||||||||||||||||||||||
Total Assets | $ | 2,307,528 | $ | 2,746,734 | ||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||
Savings and NOW | $ | 1,008,525 | 608 | 0.24 | $ | 1,092,202 | 648 | 0.24 | ||||||||||||||||
Time deposits | 577,723 | 2,622 | 1.80 | 938,930 | 6,089 | 2.57 | ||||||||||||||||||
Other borrowings | 86,696 | 1,183 | 5.41 | 183,589 | 1,965 | 4.25 | ||||||||||||||||||
Interest Bearing Liabilities | 1,672,944 | 4,413 | 1.05 | 2,214,721 | 8,702 | 1.56 | ||||||||||||||||||
Demand deposits | 477,093 | 361,517 | ||||||||||||||||||||||
Other liabilities | 42,614 | 48,905 | ||||||||||||||||||||||
Shareholders’ equity | 114,877 | 121,591 | ||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 2,307,528 | $ | 2,746,734 | ||||||||||||||||||||
Net Interest Income | $ | 23,774 | $ | 26,985 | ||||||||||||||||||||
Net Interest Income as a Percent of Earning Assets | 4.59 | % | 4.26 | % |
(1) | All domestic, except for $0.01 million and $0.2 million for the three months ended September 30, 2011 and 2010, respectively, of average payment plan receivables included in taxable loans for customers domiciled in Canada. |
(2) | Interest on tax-exempt loans and securities is not presented on a fully tax equivalent basis due to the current net operating loss carryforward position and the deferred tax asset valuation allowance. |
(3) | Annualized. |
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Average Balances and Rates
Nine Months Ended September 30, | ||||||||||||||||||||||||
2011 | 2010 | |||||||||||||||||||||||
Average Balance | Interest | Rate(3) | Average Balance | Interest | Rate(3) | |||||||||||||||||||
Assets (1) | (Dollars in thousands) | |||||||||||||||||||||||
Taxable loans | $ | 1,728,076 | $ | 84,554 | 6.54 | % | $ | 2,126,705 | $ | 109,760 | 6.90 | % | ||||||||||||
Tax-exempt loans (2) | 8,064 | 254 | 4.21 | 9,795 | 312 | 4.26 | ||||||||||||||||||
Taxable securities | 51,010 | 1,108 | 2.90 | 86,830 | 2,571 | 3.96 | ||||||||||||||||||
Tax-exempt securities (2) | 30,087 | 931 | 4.14 | 49,516 | 1,594 | 4.30 | ||||||||||||||||||
Cash – interest bearing | 319,288 | 605 | 0.25 | 319,548 | 609 | 0.25 | ||||||||||||||||||
Other investments | 22,486 | 580 | 3.45 | 27,094 | 577 | 2.85 | ||||||||||||||||||
Interest Earning Assets | 2,159,011 | 88,032 | 5.45 | 2,619,488 | 115,423 | 5.89 | ||||||||||||||||||
Cash and due from banks | 52,475 | 53,742 | ||||||||||||||||||||||
Other assets, net | 191,215 | 160,960 | ||||||||||||||||||||||
Total Assets | $ | 2,402,701 | $ | 2,834,190 | ||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||
Savings and NOW | $ | 1,005,436 | 1,805 | 0.24 | $ | 1,088,437 | 2,181 | 0.27 | ||||||||||||||||
Time deposits | 687,043 | 10,881 | 2.12 | 1,028,119 | 20,283 | 2.64 | ||||||||||||||||||
Other borrowings | 95,337 | 3,738 | 5.24 | 212,901 | 7,372 | 4.63 | ||||||||||||||||||
Interest Bearing Liabilities | 1,787,816 | 16,424 | 1.23 | 2,329,457 | 29,836 | 1.71 | ||||||||||||||||||
Demand deposits | 456,514 | 343,340 | ||||||||||||||||||||||
Other liabilities | 43,977 | 55,486 | ||||||||||||||||||||||
Shareholders’ equity | 114,394 | 105,907 | ||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 2,402,701 | $ | 2,834,190 | ||||||||||||||||||||
Net Interest Income | $ | 71,608 | $ | 85,587 | ||||||||||||||||||||
Net Interest Income as a Percent of Earning Assets | 4.43 | % | 4.37 | % |
(1) | All domestic, except for $0.02 million and $0.5 million for the nine months ended September 30, 2011 and 2010, respectively, of average payment plan receivables included in taxable loans for customers domiciled in Canada. |
(2) | Interest on tax-exempt loans and securities is not presented on a fully tax equivalent basis due to the current net operating loss carryforward position and the deferred tax asset valuation allowance. |
(3) | Annualized. |
6
Commercial Loan Portfolio Analysis as of September 30, 2011
Total Commercial Loans | ||||||||||||||||||||
Watch Credits | Percent of Loan | |||||||||||||||||||
Loan Category | All Loans | Performing | Non- performing | Total | Category in Watch Credit | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Land | $ | 18,872 | $ | 3,992 | $ | 2,441 | $ | 6,433 | 34.1 | % | ||||||||||
Land Development | 19,854 | 9,855 | 1,707 | 11,562 | 58.2 | |||||||||||||||
Construction | 18,422 | 4,058 | 396 | 4,454 | 24.2 | |||||||||||||||
Income Producing | 278,912 | 57,929 | 10,175 | 68,104 | 24.4 | |||||||||||||||
Owner Occupied | 174,978 | 27,574 | 4,891 | 32,465 | 18.6 | |||||||||||||||
Total Commercial Real Estate Loans (1) | $ | 511,038 | $ | 103,408 | 19,610 | $ | 123,018 | 24.1 | ||||||||||||
Other Commercial Loans(1) | $ | 143,284 | $ | 18,585 | 2,717 | $ | 21,302 | 14.9 | ||||||||||||
Total non-performing commercial loans | $ | 22,327 |
(1) | The total of these two categories is different than the September 30, 2011, Consolidated Statement of Financial Condition due primarily to loans in process. |
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