INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Supplemental Data
Non-performing assets(1) | ||||||||
March 31, | December 31, | |||||||
2013 | 2012 | |||||||
(Dollars in thousands) | ||||||||
Non-accrual loans | $ | 27,821 | $ | 32,929 | ||||
Loans 90 days or more past due and still accruing interest | 59 | 7 | ||||||
Total non-performing loans | 27,880 | 32,936 | ||||||
Other real estate and repossessed assets | 23,639 | 26,133 | ||||||
Total non-performing assets | $ | 51,519 | $ | 59,069 | ||||
As a percent of Portfolio Loans | ||||||||
Non-performing loans | 2.00 | % | 2.32 | % | ||||
Allowance for loan losses | 2.93 | 3.12 | ||||||
Non-performing assets to total assets | 2.45 | 2.92 | ||||||
Allowance for loan losses as a percent of non-performing loans | 146.22 | 134.43 | ||||||
(1) Excludes loans classified as “troubled debt restructured” that are not past due and vehicle service contract counterparty receivables, net.
Troubled debt restructurings (“TDR”) | ||||||||||||
March 31, 2013 | ||||||||||||
Commercial | Retail | Total | ||||||||||
(In thousands) | ||||||||||||
Performing TDR’s | $ | 44,626 | $ | 83,985 | $ | 128,611 | ||||||
Non-performing TDR’s (1) | 6,349 | 8,499 | (2) | 14,848 | ||||||||
Total | $ | 50,975 | $ | 92,484 | $ | 143,459 | ||||||
December 31, 2012 | ||||||||||||
Commercial | Retail | Total | ||||||||||
(In thousands) | ||||||||||||
Performing TDR’s | $ | 40,753 | $ | 85,977 | $ | 126,730 | ||||||
Non-performing TDR’s (1) | 7,756 | 9,177 | (2) | 16,933 | ||||||||
Total | $ | 48,509 | $ | 95,154 | $ | 143,663 |
(1) Included in non-performing assets 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 | Three months ended | |||||||||||||||
March 31, | ||||||||||||||||
2013 | 2012 | |||||||||||||||
Unfunded | Unfunded | |||||||||||||||
Loans | Commitments | Loans | Commitments | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Balance at beginning of period | $ | 44,275 | $ | 598 | $ | 58,884 | $ | 1,286 | ||||||||
Additions (deduction) | ||||||||||||||||
Provision for loan losses | (691 | ) | - | 5,131 | - | |||||||||||
Recoveries credited to allowance | 1,451 | - | 1,880 | - | ||||||||||||
Loans charged against the allowance | (4,270 | ) | - | (9,889 | ) | - | ||||||||||
Additions (deductions) included in non-interest expense | - | (19 | ) | - | (47 | ) | ||||||||||
Balance at end of period | $ | 40,765 | $ | 579 | $ | 56,006 | $ | 1,239 | ||||||||
Net loans charged against the allowance to average Portfolio Loans | 0.82 | % | 2.07 | % |
Alternative Sources of Funds
March 31, | December 31, | |||||||||||||||||
2013 | 2012 | |||||||||||||||||
Average | Average | |||||||||||||||||
Amount | Maturity | Rate | Amount | Maturity | Rate | |||||||||||||
(Dollars in thousands) | ||||||||||||||||||
Brokered CDs(1) | $ | 14,594 | 0.5 years | 1.73 | % | $ | 14,591 | 0.6 years | 1.70 | % | ||||||||
Fixed-rate FHLB advances | 17,622 | 4.3 years | 6.38 | 17,622 | 4.5 years | 6.38 | ||||||||||||
Variable-rate FHLB advances(1) | - | - | ||||||||||||||||
Total | $ | 32,216 | 2.6 years | 4.28 | % | $ | 32,213 | 2.7 years | 4.26 | % |
(1) | Certain of these items have had their average maturity and rate altered through the use of derivative instruments, such as pay-fixed interest-rate swaps. |
Capitalization | ||||||||
March 31, | December 31, | |||||||
2013 | 2012 | |||||||
(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 | ||||||||
Convertible preferred stock | 85,299 | 84,204 | ||||||
Common stock | 253,437 | 251,237 | ||||||
Accumulated deficit | (187,698 | ) | (192,408 | ) | ||||
Accumulated other comprehensive loss | (6,953 | ) | (8,058 | ) | ||||
Total shareholders’ equity | 144,085 | 134,975 | ||||||
Total capitalization | $ | 192,753 | $ | 183,643 |
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Non-Interest Income
Three months ended | ||||||||||||
March 31, | December 31, | March 31, | ||||||||||
2013 | 2012 | 2012 | ||||||||||
(In thousands) | ||||||||||||
Service charges on deposit accounts | $ | 3,406 | $ | 4,395 | $ | 4,201 | ||||||
Interchange income | 1,757 | 2,135 | 2,322 | |||||||||
Net gains (losses) on assets | ||||||||||||
Mortgage loans | 3,637 | 5,282 | 3,860 | |||||||||
Securities | 84 | 72 | 684 | |||||||||
Other than temporary impairment loss on securities | ||||||||||||
Total impairment loss | - | (7 | ) | (177 | ) | |||||||
Loss recognized in other comprehensive income | - | - | ||||||||||
Net impairment loss recognized in earnings | - | (7 | ) | (177 | ) | |||||||
Mortgage loan servicing | 622 | 882 | 736 | |||||||||
Investment and insurance commissions | 450 | 560 | 447 | |||||||||
Bank owned life insurance | 338 | 401 | 424 | |||||||||
Title insurance fees | 484 | 484 | 508 | |||||||||
Increase in fair value of U.S. Treasury warrant | (1,045 | ) | (74 | ) | (154 | ) | ||||||
Net gain on branch sale | - | 5,402 | - | |||||||||
Other | 1,335 | 1,865 | 1,733 | |||||||||
Total non-interest income | $ | 11,068 | $ | 21,397 | $ | 14,584 |
Capitalized Mortgage Loan Servicing Rights | ||||||||
Three months ended March 31, | ||||||||
2013 | 2012 | |||||||
(In thousands) | ||||||||
Balance at beginning of period | $ | 11,013 | $ | 11,229 | ||||
Originated servicing rights capitalized | 1,029 | 924 | ||||||
Amortization | (1,210 | ) | (1,062 | ) | ||||
Change in valuation allowance | 758 | 704 | ||||||
Balance at end of period | $ | 11,590 | $ | 11,795 | ||||
Valuation allowance at end of period | $ | 5,329 | $ | 5,840 |
Mortgage Loan Activity
Three months ended | ||||||||||||
March 31, | December 31, | March 31, | ||||||||||
2013 | 2012 | 2012 | ||||||||||
(Dollars in thousands) | ||||||||||||
Mortgage loans originated | $ | 128,732 | $ | 153,821 | $ | 112,798 | ||||||
Mortgage loans sold | 130,456 | 143,138 | 112,141 | |||||||||
Mortgage loans sold with servicing rights released | 14,537 | 23,459 | 15,340 | |||||||||
Net gains on the sale of mortgage loans | 3,637 | 5,282 | 3,860 | |||||||||
Net gains as a percent of mortgage loans sold (“Loan Sales Margin”) | 2.79 | % | 3.69 | % | 3.44 | % | ||||||
Fair value adjustments included in the Loan Sales Margin | (0.74 | ) | (0.15 | ) | 0.92 |
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Non-Interest Expense | ||||||||||||
Three months ended | ||||||||||||
March 31, | December 31, | March 31, | ||||||||||
2013 | 2012 | 2012 | ||||||||||
(In thousands) | ||||||||||||
Compensation | $ | 8,205 | $ | 9,804 | $ | 9,945 | ||||||
Performance-based compensation | 1,062 | 2,140 | 85 | |||||||||
Payroll taxes and employee benefits | 2,040 | 2,441 | 2,452 | |||||||||
Compensation and employee benefits | 11,307 | 14,385 | 12,482 | |||||||||
Occupancy, net | 2,424 | 2,416 | 2,716 | |||||||||
Loan and collection | 2,226 | 1,836 | 2,890 | |||||||||
Data processing | 1,916 | 2,049 | 1,933 | |||||||||
Furniture, fixtures and equipment | 1,032 | 1,145 | 1,196 | |||||||||
Communications | 780 | 886 | 973 | |||||||||
Legal and professional fees | 692 | 1,058 | 897 | |||||||||
Provision for loss reimbursement on sold loans | 663 | 361 | 432 | |||||||||
Net losses on other real estate and repossessed assets | 652 | 943 | 987 | |||||||||
FDIC deposit insurance | 630 | 817 | 857 | |||||||||
Advertising | 570 | 652 | 556 | |||||||||
Interchange expense | 410 | 478 | 406 | |||||||||
Credit card and bank service fees | 334 | 383 | 651 | |||||||||
Supplies | 250 | 248 | 394 | |||||||||
Amortization of intangible assets | 203 | 249 | 272 | |||||||||
Vehicle service contract counterparty contingencies | 127 | 551 | 471 | |||||||||
Recoveries related to unfunded lending commitments | (19 | ) | (91 | ) | (47 | ) | ||||||
Other | 1,276 | 1,541 | (17 | ) | ||||||||
Total non-interest expense | $ | 25,473 | $ | 29,907 | $ | 28,049 |
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Average Balances and Rates | ||||||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||||||
March 31, | ||||||||||||||||||||||||
2013 | 2012 | |||||||||||||||||||||||
Average | Average | |||||||||||||||||||||||
Balance | Interest | Rate(3) | Balance | Interest | Rate(3) | |||||||||||||||||||
Assets (1) | (Dollars in thousands) | |||||||||||||||||||||||
Taxable loans | $ | 1,436,527 | $ | 20,649 | 5.81 | % | $ | 1,582,444 | $ | 24,270 | 6.16 | % | ||||||||||||
Tax-exempt loans (2) | 5,884 | 61 | 4.20 | 7,239 | 76 | 4.22 | ||||||||||||||||||
Taxable securities | 199,876 | 670 | 1.36 | 184,798 | 658 | 1.43 | ||||||||||||||||||
Tax-exempt securities (2) | 24,200 | 238 | 3.99 | 27,145 | 296 | 4.39 | ||||||||||||||||||
Cash – interest bearing | 186,065 | 120 | 0.26 | 318,573 | 199 | 0.25 | ||||||||||||||||||
Other investments | 20,838 | 212 | 4.13 | 20,828 | 197 | 3.80 | ||||||||||||||||||
Interest Earning Assets | 1,873,390 | 21,950 | 4.73 | 2,141,027 | 25,696 | 4.82 | ||||||||||||||||||
Cash and due from banks | 45,583 | 56,080 | ||||||||||||||||||||||
Other assets, net | 142,300 | 164,120 | ||||||||||||||||||||||
Total Assets | $ | 2,061,273 | $ | 2,361,227 | ||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||
Savings and interest-bearing checking | $ | 894,348 | 282 | 0.13 | $ | 1,053,896 | 472 | 0.18 | ||||||||||||||||
Time deposits | 423,713 | 1,247 | 1.19 | 576,967 | 1,952 | 1.36 | ||||||||||||||||||
Other borrowings | 67,802 | 865 | 5.17 | 83,384 | 1,172 | 5.65 | ||||||||||||||||||
Interest Bearing Liabilities | 1,385,863 | 2,394 | 0.70 | 1,714,247 | 3,596 | 0.84 | ||||||||||||||||||
Non-interest bearing deposits | 493,952 | 504,019 | ||||||||||||||||||||||
Other liabilities | 41,683 | 39,252 | ||||||||||||||||||||||
Shareholders’ equity | 139,775 | 103,709 | ||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 2,061,273 | $ | 2,361,227 | ||||||||||||||||||||
Net Interest Income | $ | 19,556 | $ | 22,100 | ||||||||||||||||||||
Net Interest Income as a Percent of Average Interest Earning Assets | 4.21 | % | 4.14 | % |
(1) | All domestic. |
(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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Commercial Loan Portfolio Analysis as of March 31, 2013 | ||||||||||||||||||||
Total Commercial Loans | ||||||||||||||||||||
Watch Credits | Percent of Loan | |||||||||||||||||||
Loan Category | All Loans | Performing | Non- performing | Total | Category in Watch Credit | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Land | $ | 11,919 | $ | 1,491 | $ | 1,995 | $ | 3,486 | 29.2 | % | ||||||||||
Land Development | 13,627 | 4,001 | 840 | 4,841 | 35.5 | |||||||||||||||
Construction | 15,346 | 883 | 157 | 1,040 | 6.8 | |||||||||||||||
Income Producing | 224,615 | 33,902 | 4,099 | 38,001 | 16.9 | |||||||||||||||
Owner Occupied | 213,004 | 25,194 | 4,100 | 29,294 | 13.8 | |||||||||||||||
Total Commercial Real Estate Loans (1) | $ | 478,511 | $ | 65,471 | 11,191 | $ | 76,662 | 16.0 | ||||||||||||
Other Commercial Loans(1) | $ | 133,820 | $ | 13,047 | 404 | $ | 13,451 | 10.1 | ||||||||||||
Total non-performing commercial loans | $ | 11,595 |
(1) | The total of these two categories is different than the March 31, 2013, Consolidated Statement of Financial Condition due primarily to loans in process. |
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