INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Supplemental Data
Non-performing assets(1) | ||||||||
December 31, | ||||||||
2013 | 2012 | |||||||
(Dollars in thousands) | ||||||||
Non-accrual loans | $ | 17,905 | $ | 32,929 | ||||
Loans 90 days or more past due and still accruing interest | - | 7 | ||||||
Total non-performing loans | 17,905 | 32,936 | ||||||
Other real estate and repossessed assets | 18,282 | 26,133 | ||||||
Total non-performing assets | $ | 36,187 | $ | 59,069 | ||||
As a percent of Portfolio Loans | ||||||||
Non-performing loans | 1.30 | % | 2.32 | % | ||||
Allowance for loan losses | 2.35 | 3.12 | ||||||
Non-performing assets to total assets | 1.64 | 2.92 | ||||||
Allowance for loan losses as a percent of non-performing loans | 180.54 | 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”) | ||||||||||||
December 31, 2013 | ||||||||||||
Commercial | Retail | Total | ||||||||||
(In thousands) | ||||||||||||
Performing TDR’s | $ | 35,134 | $ | 79,753 | $ | 114,887 | ||||||
Non-performing TDR’s (1) | 4,347 | 4,988 | (2) | 9,335 | ||||||||
Total | $ | 39,481 | $ | 84,741 | $ | 124,222 |
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 | Twelve months ended | |||||||||||||||
December 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 | (3,988 | ) | - | 6,887 | - | |||||||||||
Recoveries credited to allowance | 8,270 | - | 6,522 | - | ||||||||||||
Loans charged against the allowance | (16,232 | ) | - | (27,408 | ) | - | ||||||||||
Reclassification to loans held for sale | - | (610 | ) | |||||||||||||
Deductions included in non-interest expense | - | (90 | ) | - | (688 | ) | ||||||||||
Balance at end of period | $ | 32,325 | $ | 508 | $ | 44,275 | $ | 598 | ||||||||
Net loans charged against the allowance to average Portfolio Loans | 0.58 | % | 1.39 | % |
Alternative Sources of Funds
December 31, | ||||||||||||||||||
2013 | 2012 | |||||||||||||||||
Average | Average | |||||||||||||||||
Amount | Maturity | Rate | Amount | Maturity | Rate | |||||||||||||
(Dollars in thousands) | ||||||||||||||||||
Brokered CDs | $ | 13,469 | 0.3 years | 1.33 | % | $ | 14,591 | 0.6 years | 1.70 | % | ||||||||
Fixed-rate FHLB advances | 17,181 | 3.5 years | 6.38 | 17,622 | 4.5 years | 6.38 | ||||||||||||
Total | $ | 30,650 | 2.1 years | 4.16 | % | $ | 32,213 | 2.7 years | 4.26 | % |
Capitalization | ||||||||
December 31, | ||||||||
2013 | 2012 | |||||||
(In thousands) | ||||||||
Subordinated debentures | $ | 40,723 | $ | 50,175 | ||||
Amount not qualifying as regulatory capital | (1,223 | ) | (1,507 | ) | ||||
Amount qualifying as regulatory capital | 39,500 | 48,668 | ||||||
Shareholders’ equity | ||||||||
Convertible preferred stock | - | 84,204 | ||||||
Common stock | 351,173 | 251,237 | ||||||
Accumulated deficit | (110,347 | ) | (192,408 | ) | ||||
Accumulated other comprehensive loss | (9,245 | ) | (8,058 | ) | ||||
Total shareholders’ equity | 231,581 | 134,975 | ||||||
Total capitalization | $ | 271,081 | $ | 183,643 |
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Non-Interest Income | ||||||||||||||||||||
Three months ended | Twelve months ended | |||||||||||||||||||
December 31, | September 30, | December 31, | December 31, | |||||||||||||||||
2013 | 2013 | 2012 | 2013 | 2012 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Service charges on deposit accounts | $ | 3,473 | $ | 3,614 | $ | 4,395 | $ | 14,076 | $ | 17,887 | ||||||||||
Interchange income | 1,820 | 1,852 | 2,135 | 7,362 | 9,188 | |||||||||||||||
Net gains (losses) on assets | ||||||||||||||||||||
Mortgage loans | 1,607 | 1,570 | 5,282 | 10,022 | 17,323 | |||||||||||||||
Securities | 190 | 14 | 72 | 395 | 1,226 | |||||||||||||||
Other than temporary impairment loss on securities | ||||||||||||||||||||
Total impairment loss | - | - | (7 | ) | (26 | ) | (339 | ) | ||||||||||||
Loss recognized in other comprehensive income | - | - | - | - | - | |||||||||||||||
Net impairment loss recognized in earnings | - | - | (7 | ) | (26 | ) | (339 | ) | ||||||||||||
Mortgage loan servicing | 1,192 | 338 | 882 | 3,806 | 166 | |||||||||||||||
Investment and insurance commissions | 429 | 447 | 560 | 1,709 | 2,146 | |||||||||||||||
Bank owned life insurance | 335 | 353 | 401 | 1,363 | 1,622 | |||||||||||||||
Title insurance fees | 421 | 409 | 484 | 1,682 | 1,963 | |||||||||||||||
Increase in fair value of U.S. Treasury warrant | - | - | (74 | ) | (1,025 | ) | (285 | ) | ||||||||||||
Net gain on branch sale | - | - | 5,402 | - | 5,402 | |||||||||||||||
Other | 1,446 | 1,240 | 1,865 | 5,465 | 7,266 | |||||||||||||||
Total non-interest income | $ | 10,913 | $ | 9,837 | $ | 21,397 | $ | 44,829 | $ | 63,565 |
Capitalized Mortgage Loan Servicing Rights | ||||||||||||||||
Three months ended December 31, | Twelve months ended December 31, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
(In thousands) | ||||||||||||||||
Balance at beginning of period | $ | 13,051 | $ | 10,205 | $ | 11,013 | $ | 11,229 | ||||||||
Originated servicing rights capitalized | 549 | 1,058 | 3,210 | 4,006 | ||||||||||||
Amortization | (634 | ) | (1,328 | ) | (3,745 | ) | (4,679 | ) | ||||||||
Change in valuation allowance | 744 | 1,078 | 3,232 | 457 | ||||||||||||
Balance at end of period | $ | 13,710 | $ | 11,013 | $ | 13,710 | $ | 11,013 | ||||||||
Valuation allowance at end of period | $ | 2,855 | $ | 6,087 | $ | 2,855 | $ | 6,087 |
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Mortgage Loan Activity
Three months ended | Twelve months ended | |||||||||||||||||||
December 31, | September 30, | December 31, | December 31, | |||||||||||||||||
2013 | 2013 | 2012 | 2013 | 2012 | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Mortgage loans originated | $ | 72,317 | $ | 97,391 | $ | 153,821 | $ | 419,494 | $ | 538,717 | ||||||||||
Mortgage loans sold | 66,917 | 96,989 | 143,138 | 407,235 | 510,488 | |||||||||||||||
Mortgage loans sold with servicing rights released | 10,849 | 16,017 | 23,459 | 57,099 | 83,296 | |||||||||||||||
Net gains on the sale of mortgage loans | 1,607 | 1,570 | 5,282 | 10,022 | 17,323 | |||||||||||||||
Net gains as a percent of mortgage loans sold (“Loan Sales Margin”) | 2.40 | % | 1.62 | % | 3.69 | % | 2.46 | % | 3.39 | % | ||||||||||
Fair value adjustments included in the Loan Sales Margin | (0.38 | ) | (0.89 | ) | (0.15 | ) | (0.55 | ) | 0.28 |
Non-Interest Expense | ||||||||||||||||||||
Three months ended | Twelve months ended | |||||||||||||||||||
December 31, | September 30, | December 31, | December 31, | |||||||||||||||||
2013 | 2013 | 2012 | 2013 | 2012 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Compensation | $ | 8,435 | $ | 8,529 | $ | 9,804 | $ | 33,515 | $ | 39,002 | ||||||||||
Performance-based compensation | 1,821 | 2,104 | 2,140 | 6,507 | 5,672 | |||||||||||||||
Payroll taxes and employee benefits | 2,055 | 1,958 | 2,441 | 7,902 | 9,309 | |||||||||||||||
Compensation and employee benefits | 12,311 | 12,591 | 14,385 | 47,924 | 53,983 | |||||||||||||||
Occupancy, net | 2,257 | 2,017 | 2,416 | 8,845 | 10,104 | |||||||||||||||
Data processing | 1,971 | 2,090 | 2,049 | 8,019 | 8,009 | |||||||||||||||
Loan and collection | 1,374 | 1,584 | 1,836 | 6,886 | 9,965 | |||||||||||||||
Vehicle service contract counterparty contingencies | 1,434 | 149 | 551 | 4,837 | 1,629 | |||||||||||||||
Furniture, fixtures and equipment | 1,122 | 1,051 | 1,145 | 4,293 | 4,635 | |||||||||||||||
Communications | 714 | 695 | 886 | 2,919 | 3,677 | |||||||||||||||
Legal and professional fees | 616 | 487 | 1,058 | 2,459 | 4,175 | |||||||||||||||
FDIC deposit insurance | 409 | 685 | 817 | 2,435 | 3,306 | |||||||||||||||
Advertising | 552 | 652 | 652 | 2,433 | 2,494 | |||||||||||||||
Provision for loss reimbursement on sold loans | (284 | ) | 1,417 | 361 | 2,152 | 1,112 | ||||||||||||||
Interchange expense | 407 | 410 | 478 | 1,645 | 1,799 | |||||||||||||||
Credit card and bank service fees | 288 | 310 | 383 | 1,263 | 2,091 | |||||||||||||||
Net losses on other real estate and repossessed assets | 146 | 119 | 943 | 1,237 | 2,854 | |||||||||||||||
Supplies | 257 | 277 | 248 | 1,028 | 1,281 | |||||||||||||||
Amortization of intangible assets | 203 | 203 | 249 | 812 | 1,065 | |||||||||||||||
Write-down of property and equipment held for sale | - | - | - | - | 860 | |||||||||||||||
Recoveries related to unfunded lending commitments | (33 | ) | (86 | ) | (91 | ) | (90 | ) | (688 | ) | ||||||||||
Other | 1,225 | 1,283 | 1,541 | 5,021 | 4,384 | |||||||||||||||
Total non-interest expense | $ | 24,969 | $ | 25,934 | $ | 29,907 | $ | 104,118 | $ | 116,735 |
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Average Balances and Tax Equivalent Rates | ||||||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||||||
December 31, | ||||||||||||||||||||||||
2013 | 2012 | |||||||||||||||||||||||
Average | Average | |||||||||||||||||||||||
Balance | Interest | Rate(3) | Balance | Interest | Rate(3) | |||||||||||||||||||
Assets (1) | (Dollars in thousands) | |||||||||||||||||||||||
Taxable loans | $ | 1,386,716 | $ | 19,515 | 5.60 | % | $ | 1,503,104 | $ | 22,285 | 5.91 | % | ||||||||||||
Tax-exempt loans (2) | 5,084 | 82 | 6.40 | 6,432 | 104 | 6.43 | ||||||||||||||||||
Taxable securities | 398,843 | 1,287 | 1.28 | 201,790 | 688 | 1.36 | ||||||||||||||||||
Tax-exempt securities (2) | 41,483 | 516 | 4.93 | 24,766 | 373 | 5.99 | ||||||||||||||||||
Cash – interest bearing | 107,258 | 87 | 0.32 | 345,904 | 220 | 0.25 | ||||||||||||||||||
Other investments | 22,854 | 244 | 4.24 | 20,696 | 210 | 4.04 | ||||||||||||||||||
Interest Earning Assets | 1,962,238 | 21,731 | 4.40 | 2,102,692 | 23,880 | 4.53 | ||||||||||||||||||
Cash and due from banks | 44,388 | 51,863 | ||||||||||||||||||||||
Other assets, net | 185,766 | 150,592 | ||||||||||||||||||||||
Total Assets | $ | 2,192,392 | $ | 2,305,147 | ||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||
Savings and interest-bearing checking | $ | 916,736 | 267 | 0.12 | $ | 1,030,245 | 378 | 0.15 | ||||||||||||||||
Time deposits | 438,418 | 1,076 | 0.97 | 514,696 | 1,583 | 1.22 | ||||||||||||||||||
Other borrowings | 58,989 | 831 | 5.59 | 67,850 | 879 | 5.15 | ||||||||||||||||||
Interest Bearing Liabilities | 1,414,143 | 2,174 | 0.61 | 1,612,791 | 2,840 | 0.70 | ||||||||||||||||||
Non-interest bearing deposits | 512,234 | 521,874 | ||||||||||||||||||||||
Other liabilities | 35,894 | 43,363 | ||||||||||||||||||||||
Shareholders’ equity | 230,121 | 127,119 | ||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 2,192,392 | $ | 2,305,147 | ||||||||||||||||||||
Net Interest Income | $ | 19,557 | $ | 21,040 | ||||||||||||||||||||
Net Interest Income as a Percent of Average Interest Earning Assets | 3.96 | % | 3.99 | % |
(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% |
(3) | Annualized. |
5
Average Balances and Tax Equivalent Rates | ||||||||||||||||||||||||
Twelve Months Ended | ||||||||||||||||||||||||
December 31, | ||||||||||||||||||||||||
2013 | 2012 | |||||||||||||||||||||||
Average | Average | |||||||||||||||||||||||
Balance | Interest | Rate | Balance | Interest | Rate | |||||||||||||||||||
Assets (1) | (Dollars in thousands) | |||||||||||||||||||||||
Taxable loans | $ | 1,408,305 | $ | 80,434 | 5.71 | % | $ | 1,543,592 | $ | 93,494 | 6.06 | % | ||||||||||||
Tax-exempt loans (2) | 5,491 | 354 | 6.45 | 6,864 | 440 | 6.41 | ||||||||||||||||||
Taxable securities | 305,468 | 4,059 | 1.33 | 216,355 | 2,934 | 1.36 | ||||||||||||||||||
Tax-exempt securities (2) | 32,051 | 1,680 | 5.24 | 26,111 | 1,593 | 6.10 | ||||||||||||||||||
Cash – interest bearing | 139,082 | 396 | 0.28 | 337,311 | 858 | 0.25 | ||||||||||||||||||
Other investments | 21,673 | 901 | 4.16 | 20,645 | 782 | 3.79 | ||||||||||||||||||
Interest Earning Assets | 1,912,070 | 87,824 | 4.59 | 2,150,878 | 100,101 | 4.65 | ||||||||||||||||||
Cash and due from banks | 44,745 | 53,926 | ||||||||||||||||||||||
Other assets, net | 164,281 | 159,925 | ||||||||||||||||||||||
Total Assets | $ | 2,121,096 | $ | 2,364,729 | ||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||
Savings and interest-bearing checking | $ | 908,740 | 1,131 | 0.12 | $ | 1,060,882 | 1,830 | 0.17 | ||||||||||||||||
Time deposits | 423,291 | 4,575 | 1.08 | 552,903 | 7,083 | 1.28 | ||||||||||||||||||
Other borrowings | 65,517 | 3,456 | 5.27 | 72,240 | 4,230 | 5.86 | ||||||||||||||||||
Interest Bearing Liabilities | 1,397,548 | 9,162 | 0.66 | 1,686,025 | 13,143 | 0.78 | ||||||||||||||||||
Non-interest bearing deposits | 500,673 | 523,926 | ||||||||||||||||||||||
Other liabilities | 38,462 | 40,719 | ||||||||||||||||||||||
Shareholders’ equity | 184,413 | 114,059 | ||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 2,121,096 | $ | 2,364,729 | ||||||||||||||||||||
Net Interest Income | $ | 78,662 | $ | 86,958 | ||||||||||||||||||||
Net Interest Income as a Percent of Average Interest Earning Assets | 4.11 | % | 4.04 | % |
(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 December 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 | $ | 11,507 | $ | 1,472 | $ | 742 | $ | 2,214 | 19.2 | % | ||||||||||
Land Development | 12,604 | 3,216 | 295 | 3,511 | 27.9 | |||||||||||||||
Construction | 7,643 | 441 | - | 441 | 5.8 | |||||||||||||||
Income Producing | 251,006 | 21,702 | 1,898 | 23,600 | 9.4 | |||||||||||||||
Owner Occupied | 206,156 | 20,358 | 1,849 | 22,207 | 10.8 | |||||||||||||||
Total Commercial Real Estate Loans (1) | $ | 488,916 | $ | 47,189 | 4,784 | $ | 51,973 | 10.6 | ||||||||||||
Other Commercial Loans(1) | $ | 146,270 | $ | 12,315 | 585 | $ | 12,900 | 8.8 | ||||||||||||
Total non-performing commercial loans | $ | 5,369 |
(1) | The total of these two categories is different than the December 31, 2013, Consolidated Statement of Financial Condition due primarily to loans in process. |
7