Talmer Bancorp, Inc. reports first quarter 2014 net income of $32.7 million, representing $0.45 of earnings per diluted average share

By PR Newswire,  May 06, 2014, 09:16:00 PM EDT


Completed acquisition of Michigan Commerce Bank (Talmer West Bank)

Successful completion of initial public offering resulting in net proceeds of $42.1 million

TROY, Mich., May 6, 2014 /PRNewswire/ -- Talmer Bancorp, Inc. (NASDAQ:TLMR) ("Talmer") today reported first quarter 2014 net income of $32.7 million, compared to $12.6 million for the fourth quarter 2013 and $60.5 million for the first quarter 2013.  Earnings per diluted share were $0.45 for the first quarter 2014, compared to $0.18 for the fourth quarter 2013 and $0.89 for the first quarter 2013.

Talmer Bancorp President and CEO David Provost commented, "We continue to execute on our strategic plans to build a leading Midwest community bank.  Success in our priorities of building scale, delivering solid earning asset growth and effectively integrating acquired institutions is evident in our financial results.  In early 2014, we completed the acquisition of Talmer West Bank, consolidated from four former banking subsidiaries of Capitol Bancorp.  This acquisition expanded our presence into additional markets including Western Michigan and Northern Indiana.  We are excited to welcome these employees and customers and look forward to further expansion of our presence in a number of these markets."

"We have invested significantly over the last few years to build the necessary infrastructure for a larger and more complex institution.  These enhancements have resulted in financial controls and risk management practices that have proven scalable and allowed us to strategically focus on our growth initiatives in a highly competitive banking environment.  In the first quarter we completed the charter integration of First Place Bank into Talmer Bank and Trust, a significant final step in a long and costly process to deal with problem assets and build an effective control environment.  Work and opportunity remain to continue to centralize back office functions and realize synergies in the near term, but I am proud of the efforts of our team in combining two very different institutions in such a short period of time."

"Although the era of distressed bank acquisitions is winding down, we are pleased with how we have been able to combine formerly struggling institutions into a larger, community focused and profitable enterprise.  We have utilized the financial flexibility provided by successful acquisitions to build a bank capable of delivering sustained growth.  While attractive acquisition opportunities remain in our sights, we are also prepared to drive the next chapter of our story based on both a greater emphasis on organic growth and the continuing realization of operating synergies from previous acquisitions."

 

Quarterly Results Summary



























(Dollars in thousands, except per share data)



1st Qtr 2014



4th Qtr 2013



1st Qtr 2013

Earnings Summary













Net interest income



$      48,123



$      39,284



$      40,657

Total provision for loan losses



3,926



3,250



2,260

Noninterest income



53,012



23,638



103,619

Noninterest expense



65,614



53,090



84,611

Income before income taxes



31,595



6,582



57,405

Income tax provision (benefit)



(1,072)



(5,971)



(3,050)

Net income 



32,667



12,553



60,455















Per Share Data













Diluted earnings per common share  



$          0.45



$          0.18



$          0.89

Tangible book value per share (1) 



9.74



9.12



8.66

Average diluted shares (in thousands)



73,377



70,555



68,200















Performance and Capital Ratios













Return on average assets (annualized) 



2.36%



1.08%



5.05%

Return on average equity (annualized)



19.07



8.24



41.11

Net interest margin (fully taxable equivalent) (annualized) (2)



3.95



3.72



3.74

Tangible average equity to tangible average assets (1)



12.09



12.89



12.00

Tier 1 leverage ratio (3)



12.47



11.88



10.98

Tier 1 risk-based capital (3) 



16.66



18.29



19.15

Total risk-based capital (3) 



17.72



19.21



19.75















(1)  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 2014 is estimated.



First Quarter 2014 Compared to Fourth Quarter 2013

  • Net income increased to $32.7 million, or $0.45 per diluted average share, in the first quarter 2014, compared to $12.6 million, or $0.18 per diluted average share, for the fourth quarter 2013. The $20.1 million increase in net income included the bargain purchase gain of $37.0 million resulting from our acquisition of Michigan Commerce Bank (Talmer West Bank). The bargain purchase gain was partially offset by transaction and integration related expenses during the first quarter detailed in the noninterest expense section following.



  • Net total loans increased during the first quarter 2014 by $637.1 million, or 21.6%, to $3.6 billion, which at the end of the quarter included $552.3 million of loans from our acquisition of Talmer West Bank. Excluding loans from the Talmer West Bank acquisition, net total loans grew by $84.8 million, or 11.5% annualized, in the three months ended March 31, 2014. During the first quarter 2014, Talmer Bank and Trust experienced $114.6 million of net uncovered organic loan growth, partially offset by $29.8 million of net covered loan run-off (loans covered by loss share agreements with the FDIC). The Talmer West Bank acquisition added $572.2 million of loans at the time the transaction closed on January 1, 2014, of which a net $19.9 million ran-off by the end of the quarter.



  • Total deposits increased $785.5 million, or 21.8%, to $4.4 billion as of March 31, 2014, primarily reflecting $857.8 million of deposits acquired in our acquisition of Talmer West Bank, partially offset by a decline in time deposits of $72.3 million.



  • Net interest income of $48.1 million increased $8.8 million, or 22.5%, compared to the fourth quarter 2013. The increase in net interest income was primarily the result of the addition of $9.1 million of net interest income related to our acquisition of Talmer West Bank and its inclusion into our operations beginning January 1, 2014. Our net interest margin also increased 23 basis points to 3.95% in the first quarter 2014, compared to 3.72% in the fourth quarter 2013. The increase is primarily the result of the loan composition purchased in our acquisition of Talmer West Bank, which held a higher percentage of higher yielding commercial real estate loans, partially offset by a reduction in the benefit received from discount accretion on our purchased credit impaired loan portfolio.



  • Noninterest income increased by $29.4 million, or 124.3%, to $53.0 million in the first quarter 2014 compared to fourth quarter 2013. The increase primarily relates to the $37.0 million bargain purchase gain recognized as a result of our acquisition of Talmer West Bank and its inclusion into our operations, partially offset by a decrease in mortgage banking and other loan fees and a net loss on sales of securities.



  • Noninterest expenses increased $12.5 million, or 23.6%, to $65.6 million in the first quarter 2014 compared to fourth quarter 2013. Noninterest expenses in the first quarter 2014 included the addition of Talmer West Bank's operating expenses and approximately $10.8 million of certain transaction and integration related expenses including severance expense, bank acquisition and due diligence fees, bonus payments related to our successful acquisition of Talmer West Bank, the merger of First Place Bank and Talmer Bank and Trust and the completion of our initial public offering, as well as expenses incurred related to termination of certain software contracts. Excluding transaction related expenses, Talmer West Bank added $10.5 million of operating expense in the first quarter 2014. Excluding Talmer West Bank operating expenses and transaction and integration related expenses of approximately $10.8 million, total operating expense declined by $8.8 million, or 16.5%, compared to fourth quarter 2013, primarily reflecting operating synergies achieved from the integration of First Place Bank into Talmer Bank and Trust.

Income Statement

Net Interest Income and Net Interest Margin

Net interest income for the first quarter of 2014 was $48.1 million, compared to $39.3 million in the prior quarter.  The increase in net interest income in the first quarter was primarily the result of the addition of $9.1 million of net interest income related to our acquisition of Talmer West Bank and its inclusion into our operations beginning January 1, 2014.   

Our net interest margin was 3.95% in the first quarter 2014, an increase of 23 basis points from 3.72% in the fourth quarter 2013.  The increase in our net interest margin in the first quarter was due to a combination of several factors, the largest being the acquisition of Talmer West Bank, which had a significantly higher proportion of its loan portfolio in commercial real estate loans that, on average, have a higher yield than Talmer Bank and Trust's loan portfolio which has a larger percentage of residential real estate loans.

Our net interest margin benefits from discount accretion on our purchased credit impaired loan portfolio, a component of the accretable yield.  However, given the substantial growth of our organic loan portfolio, diminished size of our covered loan portfolio and the high negative yield on the FDIC indemnification asset, the net interest margin benefit from excess accretable yield is now relatively insignificant, especially when compared to prior quarters.  The accretable yield represents the excess of the net present value of expected future cash flows over the acquisition date fair value on our purchased credit impaired loans and includes both the expected coupon of the loan and the discount accretion.  The accretable yield is recognized as interest income over the expected remaining life of the purchased credit impaired loan.  For the first quarter 2014 and the fourth quarter 2013, the yield on total loans was 5.80% and 5.91%, respectively, while the yield generated using only the expected coupon would have been 5.02% and 4.49%, respectively.  The difference between the actual yield earned on total loans and the yield generated based on the expected coupon represents excess accretable yield.  The expected coupon of the loan considers the actual coupon rate of the loan and does not include any interest income for loans in nonaccrual status.  Our net interest margin is also adversely impacted by the negative yield on the FDIC indemnification asset.  Because our quarterly cash flow re-estimations have continuously resulted in improvements in the overall expected cash flows on covered loans our expected payment from the FDIC under our loss share agreements have declined, resulting in a negative yield on the FDIC indemnification asset.  This negative yield on the FDIC indemnification asset partially offsets the benefits provided by the excess accretable yield.  This negative yield was 21.29% and 19.03% for first quarter 2014 and fourth quarter 2013, respectively.  The combination of the excess accretable yield and negative yield on the FDIC indemnification asset benefitted net interest margin by five basis points and 36 basis points in the first quarter 2014 and fourth quarter 2013, respectively.

Noninterest Income

Noninterest income increased $29.4 million to $53.0 million in the first quarter 2014, compared to $23.6 million for the fourth quarter 2013.  Noninterest income in the first quarter 2014 benefitted from the $37.0 million bargain purchase gain resulting from our acquisition of Talmer West Bank and the inclusion of $4.6 million of noninterest income related directly to Talmer West Bank.  These benefits were partially offset primarily by a decrease in mortgage banking and other loan fees of $6.5 million and the net loss on sales of securities of $2.3 million during the quarter.  The decrease in mortgage banking and other loan fees primarily reflects changes in the fair value of loan servicing rights, which was a detriment to earnings of $3.1 million during the first quarter 2014 versus a benefit of $3.1 million during the fourth quarter 2013 primarily due to movements in interest rates during those periods.  The recognition of $2.3 million of net losses on sales of securities during the first quarter 2014 resulted from management's decision to sell certain securities late in the quarter to take advantage of an opportunity to reinvest the proceeds in securities that improve the duration extension risk and forward looking yield profile of our securities profile.

Noninterest Expenses

Noninterest expenses in the first quarter 2014 totaled $65.6 million, compared to $53.1 million in the fourth quarter 2013.  The increase in total noninterest expenses was primarily due to the addition of Talmer West Bank's$10.5 million of operating costs outside of transaction related expenses in the first quarter 2014 and approximately $10.8 million of transaction and integration related expenses including severance expense, bank acquisition and due diligence fees, bonus payments related to our successful acquisition of Talmer West Bank, the merger of First Place Bank and Talmer Bank and Trust and the completion of our initial public offering, as well as expenses incurred related to termination of certain software contracts.  Outside of the Talmer West Bank and transaction and integration related expenses results for the first quarter 2014 reflect decreases of salary and employee benefits of $4.1 million, professional service fees of $1.5 million, occupancy and equipment expense of $1.1 million and insurance expense of $660 thousand.  These reductions are cost benefits we realized as we continue to rationalize staffing and services in our growing organization.  The following table illustrates certain transaction and integration related items impacting noninterest expense trends during the quarter.



















Three months ended March 31, 2014









Transaction and integration



Excluding transaction and

(Dollars in thousands)



Actual



related expenses



integration related expenses

Noninterest expenses













    Salary and employee benefits



$      35,726



$       4,935



$      30,791

    Occupancy and equipment expense



9,148



2,800



6,348

    Data processing fees  



1,740





1,740

    Professional service fees  



4,290



1,161



3,129

    FDIC loss sharing expense 



524





524

    Bank acquisition and due diligence fees 



1,711



1,711



    Marketing expense



1,091





1,091

    Other employee expense



729





729

    Insurance expense 



1,849





1,849

    Other expense 



8,806



240



8,566

       Total noninterest expenses



$      65,614



$      10,847



$      54,767

We caution that earnings can be volatile given that such a large portion of our loan portfolio is comprised of purchased credit impaired loans and because of our on-going acquisition activities.  Income can be significantly impacted by the accounting requirement to periodically re-estimate the cash flows of purchased credit impaired loans and expenses associated with technology conversion and organization integration related activities.

Credit Quality

We recorded our acquired loans at fair value at the date of acquisition with no separate allowance for loan losses.  At March 31, 2014, the allowance for loan losses on uncovered loans was $22.8 million, or 0.72% of total uncovered loans, compared to $17.7 million, or 0.72% of total uncovered loans, at December 31, 2013.  The increase in allowance for loan losses on uncovered loans for the quarter was primarily due to allowance resulting from our quarterly re-estimation of expected cash flows for our uncovered purchased credit impaired loans.  At March 31, 2014, the allowance for loan losses on covered loans was $38.0 million, or 7.63% of total covered loans, compared to $40.4 million, or 7.62% of total covered loans at December 31, 2013.  The decrease in allowance for loan losses on covered loans primarily reflects payments received on loans not previously anticipated, partially offset by the additional allowance resulting from our quarterly re-estimation of expected cash flows for our covered purchased credit impaired loans.

During the first quarter 2014, we completed re-estimations of cash flows expectation for purchased credit impaired loans in each of our acquisitions with the exception of Talmer West Bank since it was acquired during the quarter.  For the re-estimations, loans with decreased cash flow expectations resulted additional loan loss provisions of $5.1 million.  Provisions related to covered loans are partially offset by an increase in the FDIC indemnification asset.  The re-estimations also resulted in a $16.4 million improvement in the gross cash flow expectation for loans which will be recognized prospectively as an increase in the accretable yield.  The improvement in cash flows on covered loans will be partially offset by a continued reduction in the FDIC indemnification asset which will impact future earnings through negative accretion.

All of our acquired loan portfolios are continuing to perform significantly better than initially anticipated.  We believe improvements in performance are primarily due to improvements in the economy and the efforts made by our Special Assets team that manages our acquired loan portfolios.  Similar to the first quarter 2014 re-estimations, the prior re-estimations of cash flows have indicated better overall expected performance than originally anticipated at acquisition.

Balance Sheet and Capital Management

Total assets increased $869.8 million to $5.4 billion at March 31, 2014 compared to $4.5 billion at December 31, 2013.  The acquisition date fair value of assets acquired in our acquisition of Talmer West Bank increased assets by $898.3 million after the $6.5 million of cash consideration paid.  The primary drivers of the increase in assets in the quarter ended March 31, 2014 were a $637.1 million increase in net total loans and a $155.2 million increase in cash and cash equivalents.  

Net total loans at March 31, 2014 were $3.6 billion, which at the end of the quarter included $552.3 million of loans acquired in the Talmer West Bank acquisition, compared to $2.9 billion at December 31, 2013.  Excluding loans from our acquisition of Talmer West Bank, net total loans grew by $84.8 million, or 11.5% annualized, compared to December 31, 2013.  During the quarter, Talmer Bank and Trust experienced $114.6 million of net uncovered organic loan growth, partially offset by $29.8 million of net covered loan run-off.   The Talmer West Bank acquisition added $572.2 million of loans when the transaction closed on January 1, 2014, of which a net $19.9 million ran-off by the end of the quarter.  We continue to be focused on sourcing quality loan growth to overcome the run-off of higher yielding acquired loans.  A significant amount, $497.9 million, or 13.7%, of total loans, are covered by loss sharing agreement entered into with the FDIC.  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 $4.7 billion at March 31, 2014 compared to $3.9 billion at December 31, 2013.  The acquisition date fair value of liabilities assumed in our acquisition of Talmer West Bank increased liabilities by $861.3 million.  The increase in liabilities in the quarter ended March 31, 2014 was primarily due to an increase in total deposits of $785.5 million.  While we increased our total deposits by 21.8% during the period, we continued to maintain a low total cost of deposits and total costs of funds of 20 basis points and 32 basis points, respectively, in the first quarter 2014.

Total shareholders' equity increased $80.5 million, or 13.0%, to $697.5 million at March 31, 2014, compared to $617.0 million as of December 31, 2013.  The increase in shareholders' equity primarily reflects our initial public offering completed in February 2014 that raised $42.1 million of capital, after deducting underwriting discounts and commissions and offering expenses and our first quarter 2014 net income of $32.7 million.

Key Performance Goals

  • Our near-term focus continues to be on realizing significant operating synergies associated with the acquisitions of First Place Bank and Talmer West Bank.
  • Consolidation of back office processes and personnel
  • Wind-down of third-party expenses associated with regulatory compliance and systems enhancements
  • Continuing footprint rationalization including branch consolidations and evaluation of potential divestitures
    • In April 2014, we entered into an agreement to sell our 11 Wisconsin branch offices including the deposits in Wisconsin which will allow us to focus on the core banking franchise.
    • Also in April 2014, we entered into an agreement to sell our single branch in Albuquerque, New Mexico along with its deposits and loans.
  • Goal of building a sustainable 1%+ core return on assets by growing upon our foundation and infrastructure

Conference Call and Webcast

Talmer Bancorp, Inc. will host a live conference webcast to review first quarter 2014 financial results at 8:30 a.m. ET on Wednesday, May 7, 2014. The webcast and supplemental financial information can be accessed via Talmer Bancorp Inc.'s "Investor Relations" page at www.talmerbank.com where a link will be provided.  Interested parties may also access the conference call by calling (888) 317-6003 (event ID No. 5166535) or internationally at (412) 317-6061 (event ID No. 5166535). A replay of the Webcast can be accessed via Talmer Bancorp Inc.'s "Investor Relations" page at www.talmerbank.com.

About Talmer Bancorp, Inc.

Headquartered in Troy, Michigan, Talmer Bancorp, Inc. is the holding company for Talmer Bank and Trust and Talmer West Bank.  These banks, operating through branches and lending offices in Michigan, Ohio, Indiana, Wisconsin, Nevada, Illinois and New Mexico, offer 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 a 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 related to our future expectations, including all statements under the heading entitled "Key Performance Goals," statements regarding expectations related to growth opportunities in our markets, our ability to deliver sustained growth through acquisition opportunities, organic growth and the realization of operating synergies from prior acquisitions and our strategic plan.  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 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, any or all of which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements, 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.

Media Contact:







Investor Relations Contact:











Shellie Maitre







Bradley Adams











(248) 498-2858







(248) 498-2862   

 

 

 

Talmer Bancorp, Inc.















Consolidated Balance Sheets





(Unaudited )  





 March 31,  



 December 31,  



 March 31, 



(Dollars in thousands, except per share data)



2014



2013



2013



















Assets















Cash and due from banks



$             107,170



$                97,167



$                91,040



Interest-bearing deposits with other banks



318,368



206,160



431,289



Federal funds sold and other short-term investments



105,000



72,029



131,421



     Total cash and cash equivalents



530,538



375,356



653,750



Securities available-for-sale



632,047



620,083



579,320



Federal Home Loan Bank stock



12,335



16,303



15,813



Loans held for sale, at fair value



75,931



85,252



259,670



Loans:















  Residential real estate (includes $17.6 million, $16.3 million and $0

     respectively, measured at fair value) (1)



1,268,200



1,085,453



956,769



  Commercial real estate



1,147,820



755,839



742,490



  Commercial and industrial



573,268



446,644



316,966



  Real estate construction (includes $278 thousand, $1.4 million and $0

     respectively, measured at fair value) (1)



143,569



176,226



117,914



  Consumer



12,932



9,754



13,031



       Total loans, excluding covered loans



3,145,789



2,473,916



2,147,170



           Less: Allowance for loan losses - uncovered



(22,771)



(17,746)



(10,598)



              Net loans - excluding covered loans



3,123,018



2,456,170



2,136,572



  Covered loans



497,920



530,068



661,159



           Less: Allowance for loan losses - covered



(38,000)



(40,381)



(49,914)



              Net loans - covered



459,920



489,687



611,245



        Net total loans



3,582,938



2,945,857



2,747,817



Premises and equipment



56,352



51,001



58,153



FDIC indemnification asset



119,045



131,861



202,202



Other real estate owned 



57,451



29,955



42,944



Loan servicing rights



77,892



78,603



53,761



Core deposit intangible



16,102



13,205



15,199



FDIC receivable



8,130



7,783



15,090



Company-owned life insurance 



39,814



39,500



38,506



Income tax benefit



178,882



126,200



117,700



Other assets



29,744



26,402



30,844



    Total assets



$          5,417,201



$           4,547,361



$           4,830,769



Liabilities















Deposits:















  Noninterest-bearing demand deposits



950,671



779,379



743,238



  Interest-bearing demand deposits



714,043



598,281



547,233



  Money market and savings deposits



1,370,691



1,215,864



1,236,700



  Time deposits



1,270,927



927,313



1,225,664



  Other brokered funds



80,000



80,000



50,498



     Total deposits



4,386,332



3,600,837



3,803,333



FDIC clawback liability



25,593



24,887



22,252



FDIC warrants payable



4,423



4,118



4,452



Short-term borrowings



89,562



71,876



69,035



Long-term debt



177,483



199,037



259,972



Other liabilities



36,340



29,591



82,732



     Total liabilities



4,719,733



3,930,346



4,241,776



Shareholders' equity















Preferred stock - $1.00 par value















   Authorized - 20,000,000 shares at 3/31/2014, 12/31/2013 and 3/31/2013















   Issued and outstanding - 0 shares at 3/31/2014, 12/31/2013 and 3/31/2013



$                         -



$                       -



$                       -



Common stock:















    Class A Voting Common Stock - $1.00 par value















        Authorized - 198,000,000 shares at 3/31/2014, 12/31/2013 and

           3/31/2013















        Issued and outstanding - 69,962,461 shares at 3/31/2014, 66,234,397















       shares at 12/31/2013 and 66,229,397 at 3/31/2013



69,962



66,234



66,229



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















       Authorized - 2,000,000 shares at 3/31/2014, 12/31/2013 and

           3/31/2013















       Issued and outstanding - 0 shares at 3/31/2014, 12/31/2013 and

          3/31/2013



-



-



-



  Additional paid-in-capital



404,905



366,428



365,106



  Retained earnings



225,016



192,349



154,247



  Accumulated other comprehensive income (loss), net of tax



(2,415)



(7,996)



3,411



     Total shareholders' equity



697,468



617,015



588,993



Total liabilities and shareholders' equity



$          5,417,201



$           4,547,361



$           4,830,769



















 

Talmer Bancorp, Inc.









Consolidated Statements of Income



(Unaudited)













Three months ended March 31,

(Dollars in thousands, except per share data)



2014



2013











Interest income









  Interest and fees on loans



$                    53,420



$                      48,738

  Interest on investments









     Taxable



1,878



1,364

     Tax-exempt



1,952



994

          Total interest on securities



3,830



2,358

  Interest on interest earning cash balances



216



290

  Interest on federal funds and other short term investments



177



200

  Dividends on FHLB stock



185



407

  FDIC indemnification asset



(6,718)



(8,148)

     Total interest income



51,110



43,845

Interest Expense









  Interest-bearing demand deposits



224



167

  Money market and savings deposits



494



518

  Time deposits



1,491



1,661

  Other brokered funds



29



24

  Interest on short-term borrowings



175



22

  Interest on long-term debt



574



796

     Total interest expense



2,987



3,188

     Net interest income 



48,123



40,657

  Provision for loan losses - uncovered



6,424



1,176

  Provision (benefit) for loan losses - covered



(2,498)



1,084

Net interest income after provision for loan losses



44,197



38,397











Noninterest income









  Deposit fee income



3,274



4,512

  Mortgage banking and other loan fees



1,264



5,185

  Net gain on sales of loans



3,040



16,815

  Bargain purchase gain



36,994



71,702

  FDIC loss sharing income



(113)



130

  Accelerated discount on acquired loans



6,466



2,293

  Net gain (loss) on sales of securities



(2,310)



31

  Other income



4,397



2,951

       Total noninterest income



53,012



103,619











Noninterest expenses









  Salary and employee benefits



35,726



52,896

  Occupancy and equipment expense



9,148



7,022

  Data processing fees



1,740



1,647

  Professional service fees



4,290



3,887

  FDIC loss sharing expense



524



696

  Bank acquisition and due diligence fees



1,711



7,229

  Marketing expense



1,091



1,537

  Other employee expense



729



896

  Insurance expense



1,849



2,932

  Other expense



8,806



5,869

      Total noninterest expenses



65,614



84,611

  Income before income taxes



31,595



57,405

  Income tax provision (benefit)



(1,072)



(3,050)

      Net income 



$                    32,667



$                      60,455











Earnings per share:









    Basic



$                         0.48



$                          0.91

    Diluted



$                         0.45



$                          0.89

Average shares outstanding - basic



68,121



66,229

Average shares outstanding - diluted



73,377



68,200











Total comprehensive income



38,248



59,948











 

Talmer Bancorp, Inc.























Consolidated Statements of Income























(Unaudited)



























1st



4th



3rd 



2nd



1st







Quarter



Quarter



Quarter



Quarter



Quarter



(Dollars in thousands, except per share data)



2014



2013



2013



2013



2013



























Interest income























  Interest and fees on loans



$   53,420



$   45,354



$    49,475



$   51,290



$     48,738



  Interest on investments























     Taxable



1,878



1,880



1,751



1,102



1,364



     Tax-exempt



1,952



1,098



1,132



1,006



994



          Total interest on securities



3,830



2,978



2,883



2,108



2,358



  Interest on interest earning cash balances



216



188



97



201



290



  Interest on federal funds and other short term

     investments



177



204



279



247



200



  Dividends on FHLB stock



185



160



167



138



407



  FDIC indemnification asset



(6,718)



(6,952)



(6,032)



(6,908)



(8,148)



     Total interest income



51,110



41,932



46,869



47,076



43,845



Interest Expense























  Interest-bearing demand deposits



224



173



174



159



167



  Money market and savings deposits



494



430



447



494



518



  Time deposits



1,491



1,250



1,408



1,545



1,661



  Other brokered funds



29



32



38



48



24



  Interest on short-term borrowings



175



24



26



33



22



  Interest on long-term debt



574



739



775



742



796



     Total interest expense



2,987



2,648



2,868



3,021



3,188



     Net interest income 



48,123



39,284



44,001



44,055



40,657



  Provision for loan losses - uncovered



6,424



6,569



2,852



4,923



1,176



  Provision (benefit) for loan losses - covered



(2,498)



(3,319)



(727)



(7,460)



1,084



Net interest income after provision for loan

   losses



44,197



36,034



41,876



46,592



38,397



























Noninterest income























  Deposit fee income



3,274



3,179



3,547



4,648



4,512



  Mortgage banking and other loan fees



1,264



7,729



7,222



10,770



5,185



  Net gain on sales of loans



3,040



3,423



5,028



16,139



16,815



  Bargain purchase gain



36,994



-



-



-



71,702



  FDIC loss sharing income



(113)



(3,167)



(4,846)



(2,343)



130



  Accelerated discount on acquired loans



6,466



6,596



4,345



3,920



2,293



  Net gain (loss) on sales of securities



(2,310)



292



-



69



31



  Other income



4,397



5,586



2,741



2,858



2,951



       Total noninterest income



53,012



23,638



18,037



36,061



103,619



























Noninterest expenses























  Salary and employee benefits



35,726



29,837



29,766



34,110



52,896



  Occupancy and equipment expense



9,148



6,327



6,582



6,824



7,022



  Data processing fees



1,740



2,049



3,539



1,913



1,647



  Professional service fees



4,290



4,073



4,472



4,425



3,887



  FDIC loss sharing expense



524



483



106



722



696



  Bank acquisition and due diligence fees



1,711



819



171



474



7,229



  Marketing expense



1,091



659



634



654



1,537



  Other employee expense



729



793



1,018



975



896



  Insurance expense



1,849



1,851



1,911



3,280



2,932



  Other expense



8,806



6,199



5,227



6,527



5,869



      Total noninterest expenses



65,614



53,090



53,426



59,904



84,611



  Income before income taxes



31,595



6,582



6,487



22,749



57,405



  Income tax provision (benefit)



(1,072)



(5,971)



(4,057)



7,743



(3,050)



      Net income 



$   32,667



$   12,553



$    10,544



$   15,006



$     60,455



























Earnings per share:























    Basic



$        0.48



$       0.19



$        0.16



$       0.23



$         0.91



    Diluted



$        0.45



$       0.18



0.15



0.21



$         0.89



Average shares outstanding - basic



68,121



66,231



66,229



66,229



66,229



Average shares outstanding - diluted



73,377



70,555



69,853



69,853



68,200



























Total comprehensive income (loss)



38,248



9,922



10,737



6,036



59,949



















































 



Talmer Bancorp, Inc.

































Selected Financial Information

































(Unaudited)

































(Dollars in thousands, except per share data)



2014





 

2013





 

1st Qtr





4th Qtr





3rd Qtr





2nd Qtr



1st Qtr



Earnings Summary





























Interest income



$        51,110





$        41,932





$       46,869





$       47,076



$       43,845



Interest expense



2,987





2,648





2,868





3,021



3,188



Net interest income



48,123





39,284





44,001





44,055



40,657



Provision for loan losses - uncovered



6,424





6,569





2,852





4,923



1,176



Provision (benefit) for loan losses - covered



(2,498)





(3,319)





(727)





(7,460)



1,084



Bargain purchase gains



36,994





-





-





-



71,702



Noninterest income



53,012





23,638





18,037





36,061



103,619



Noninterest expense



65,614





53,090





53,426





59,904



84,611



Income before income taxes



31,595





6,582





6,487





22,749



57,405



Income tax provision (benefit)



(1,072)





(5,971)





(4,057)





7,743



(3,050)



Net income



32,667





12,553





10,544





15,006



60,455

































Per Share Data





























Basic earnings per common share



$             0.48





$            0.19





$           0.16





$           0.23



$           0.91



Diluted earnings per common share



0.45





0.18





0.15





0.21



0.89



Book value per common share



9.97





9.32





9.16





9.00



8.89



Tangible book value per share (1) 



9.74





9.12





8.95





8.78



8.66



Shares outstanding (in thousands)



69,962





66,234





66,229





66,229



66,229



Average diluted shares (in thousands)



73,377





70,555





69,853





69,853



68,200

































Selected Period End Balances





























Total assets



$   5,417,201





$   4,547,361





$  4,741,945





$  4,849,135



$  4,830,769



Securities available-for-sale



632,047





620,083





652,739





662,876



579,320



Total Loans



3,643,709





3,003,984





2,880,727





2,842,782



2,808,329



Uncovered loans



3,145,789





2,473,916





2,322,193





2,239,655



2,147,170



Covered loans



497,920





530,068





558,534





603,127



661,159



FDIC indemnification asset



119,045





131,861





148,325





171,956



202,202



Total deposits



4,386,332





3,600,837





3,662,675





3,741,765



3,803,333



Total liabilities



4,719,733





3,930,346





4,135,114





4,253,286



4,241,776



Total shareholders' equity



697,468





617,015





606,831





595,849



588,993



Tangible shareholders' equity (1)



681,366





603,810





592,963





581,318



573,794

































Performance and Capital Ratios





























Return on average assets (annualized)



2.36

%



1.08

%



0.90

%



1.26

%

5.05

%

Return on average equity (annualized)



19.07





8.24





7.09





10.12



41.11



Net interest margin (fully taxable equivalent)

   (annualized) (2) 



3.95





3.72





4.11





4.03



3.74



Tangible average equity to tangible average assets (1)



12.09





12.89





12.37





12.13



12.00



Tier 1 leverage ratio (3)



12.47





11.88





11.43





11.43



10.98



Tier 1 risk-based capital (3)



16.66





18.29





17.83





18.24



19.15



Total risk-based capital (3)



17.72





19.21





18.66





18.91



19.75







-





















-



Asset Quality Ratios:





























Net charge-offs to average loans, excluding covered

   loans (annualized)  



0.17

%



0.01

%



0.19

%



0.25

%

0.26

%

Nonperforming assets as a percentage of total assets



1.82





1.58





1.57





1.56



1.20



Nonperforming loans as a percent of total loans



1.13





1.40





1.43





1.35



0.54



Nonperforming loans as a percent of total loans,

   excluding covered loans



0.81





0.98





1.02





0.84



0.14



Allowance for loan losses as a percentage of period-

   end loans



1.67





1.93





2.02





2.12



2.15



Allowance for loan losses-uncovered as a percentage

   of period-end uncovered loans



0.72





0.72





0.67





0.62



0.49



Allowance for loan losses as a percentage of

   nonperforming loans, excluding loans accounted

   for under ASC 310-30



50.61





43.52





41.55





51.94



100.61

































(1)  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 2014 is estimated.

 

Talmer Bancorp, Inc.























Loan Data























(Unaudited)





March 31,



December 31,



September 30,



June 30,



March 31,



(Dollars in thousands)



2014



2013



2013



2013



2013



























Uncovered loans























   Residential real estate



$        1,268,200



$            1,085,453



$               998,264



$               990,267



$               956,769



   Commercial real estate























   Non-owner occupied



742,178



581,651



579,751



598,169



613,075



   Owner-occupied



377,678



148,545



135,743



124,291



112,367



   Farmland



27,964



25,643



23,931



18,545



17,048



   Total commercial real estate



1,147,820



755,839



739,425



741,005



742,490



   Commercial and industrial



573,268



446,644



384,265



354,503



316,966



   Real estate construction



143,569



176,226



190,312



141,810



117,914



   Consumer



12,932



9,754



9,927



12,070



13,031



   Total uncovered loans



3,145,789



2,473,916



2,322,193



2,239,655



2,147,170



























Covered loans























   Residential real estate



119,408



123,334



128,798



134,625



142,684



   Commercial real estate























   Non-owner occupied



143,460



154,951



161,671



144,536



159,372



   Owner-occupied



108,630



115,435



119,470



157,937



170,553



   Farmland



27,059



29,015



29,253



28,950



32,261



   Total commercial real estate



279,149



299,401



310,394



331,423



362,186



   Commercial and industrial



71,155



78,437



88,749



101,669



119,381



   Real estate construction



16,895



17,218



18,312



22,589



23,082



   Consumer



11,313



11,678



12,281



12,821



13,826



      Total covered loans



497,920



530,068



558,534



603,127



661,159



























      Total loans



$        3,643,709



$            3,003,984



$            2,880,727



$            2,842,782



$            2,808,329



























 

 

Talmer Bancorp, Inc.





















Impaired Loans





















(Unaudited)

























2014



2013

(Dollars in thousands)



1st Qtr



4th Qtr



3rd Qtr



2nd Qtr



1st Qtr

Uncovered 





















   Nonperforming troubled debt restructurings





















   Residential real estate



$      2,189



$     2,469



$       1,170



$      205



$      132

   Commercial real estate



2,664



3,581



1,946



2,126



271

   Commercial and industrial



526



415



434



3



-

   Consumer



2



3



3



21



-

   Total nonperforming troubled debt restructurings



5,381



6,468



3,553



2,355



403

Nonaccrual loans other than nonperforming troubled debt

      restructurings





















   Residential real estate



11,633



12,946



11,939



12,691



502

   Commercial real estate



6,174



2,010



4,841



2,657



1,012

   Commercial and industrial



1,723



2,266



854



956



917

   Real estate construction



582



510



2,357



70



-

   Consumer



100



97



103



4



70

      Total nonaccrual loans other than nonperforming

      troubled debt restructurings



20,212



17,829



20,094



16,378



2,501

      Total nonaccrual loans



25,593



24,297



23,647



18,733



2,904

   Other real estate



47,286



18,384



16,512



15,906



19,031

   Total nonperforming assets



72,879



42,681



40,159



34,639



21,935























   Performing troubled debt restructurings





















   Residential real estate



828



328



4



300



46

   Commercial real estate



3,003



1,637



2,899



45



50

   Commercial and industrial



1,365



1,367



554



1,193



1,263

   Real estate construction



96



90



-



-



-

   Consumer



30



30



30



-



3

   Total performing troubled debt restructurings



5,322



3,452



3,487



1,538



1,362

   Total uncovered impaired assets



$   78,201



$   46,133



$     43,646



$ 36,177



$ 23,297























   Loans 90 days or more past due and still accruing,

      excluding loans accounted for under ASC 310-30



$              3



$        539



$              -



$        66



$          3























Covered 





















   Nonperforming troubled debt restructurings





















   Residential real estate



$         962



$        900



$          914



$   1,082



$      132

   Commercial real estate



6,235



6,561



5,340



6,330



5,106

   Commercial and industrial



2,780



3,052



3,019



3,858



2,713

   Real estate construction



1,023



926



884



835



206

   Consumer



25



25



26



18



-

   Total nonperforming troubled debt restructurings



11,025



11,464



10,183



12,123



8,157

   Nonaccrual loans other than nonperforming troubled debt

      restructurings





















   Residential real estate



368



88



88



71



-

   Commercial real estate



1,563



1,563



1,575



1,025



1,343

   Commercial and industrial



2,124



4,149



5,154



5,985



2,249

   Real estate construction



442



446



457



465



474

   Consumer



-



6



6



10



-

   Total nonaccrual loans other than nonperforming

      troubled debt restructurings



4,497



6,252



7,280



7,556



4,066

   Total nonaccrual loans



15,522



17,716



17,463



19,679



12,223

   Other real estate



10,165



11,571



16,861



21,374



23,913

   Total nonperforming assets



25,687



29,287



34,324



41,053



36,136























   Performing troubled debt restructurings





















   Residential real estate



2,582



2,691



2,544



2,405



2,457

   Commercial real estate



15,056



14,391



16,733



16,450



15,567

   Commercial and industrial



3,030



3,802



4,304



4,921



4,518

   Real estate construction



111



163



166



168



115

   Total performing troubled debt restructurings



20,779



21,047



23,747



23,944



22,657

   Total covered impaired assets



$   46,466



$   50,334



$     58,071



$ 64,997



$ 58,793























   Loans 90 days or more past due and still accruing,

      excluding loans accounted for under ASC 310-30



$              7



$             -



$              -



$   3,539



$   1,171























 

 

 



Talmer Bancorp, Inc.





























Net Interest Income and Net Interest Margin





























(Unaudited)





Three months ended









March 31, 2014



December 31, 2013



March 31, 2013



(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





$    400,854

$            216

0.22

%

$      278,114

$             188

0.27

%

$      469,326

$             290

0.25

%

   Federal funds sold & other short-term

      investments





70,688

177

1.02



103,011

204

0.79



98,286

200

0.82



   Investment securities (3):





























       Taxable





477,801

1,878

1.59



451,467

1,880

1.65



411,861

1,364

1.34



       Tax-exempt





183,986

1,952

5.81



187,911

1,098

3.13



162,292

994

3.35



   FHLB stock





22,426

185

3.34



16,303

160

3.90



15,813

407

10.43



   Gross uncovered loans (4)





3,219,185

39,610

4.99



2,512,137

29,615

4.68



2,357,561

28,212

4.85



   Gross covered loans (4)





513,608

13,810

10.90



534,666

15,739

11.68



704,294

20,526

11.82



   FDIC indemnification asset





127,983

(6,718)

(21.29)



144,949

(6,952)

(19.03)



219,322

(8,148)

(15.07)



          Total earning assets





5,016,531

51,110

4.19

%

4,228,558

41,932

3.97

%

4,438,755

43,845

4.04

%

Non-earning assets:





























   Cash and due from banks





119,222







108,896







101,022







   Allowance for loan losses





(61,913)







(57,114)







(58,835)







   Premises and equipment





55,350







52,870







60,645







   Core deposit intangible





16,794







13,527







15,538







   Other real estate owned 





59,541







29,650







43,552







   Loan servicing rights





80,065







73,680







49,893







   FDIC receivable





7,067







10,392







14,874







   Company-owned life insurance





40,963







39,337







38,344







   Other non-earning assets





211,141







135,511







85,276







          Total assets





$5,544,761







$   4,635,307







$   4,789,064





































Interest-bearing liabilities:





























   Deposits:





























        Interest-bearing DDA





$    709,274

224

0.13



$      595,362

173

0.12



$      552,251

167

0.12



        Money market and savings deposits





1,396,282

494

0.14



1,225,280

430

0.14



1,212,348

518

0.17



        Time deposits





1,327,397

1,491

0.46



943,778

1,250

0.53



1,251,093

1,661

0.54



        Other brokered funds





80,000

29

0.15



80,000

32

0.16



39,907

24

0.24



        Short-term borrowings





102,633

175

0.69



40,219

24

0.24



41,208

22

0.22



        Long-term debt





211,735

574

1.10



252,173

739

1.16



264,252

796

1.22



          Total interest-bearing liabilities





3,827,321

2,987

0.32

%

3,136,812

2,648

0.33

%

3,361,059

3,188

0.38

%

Noninterest-bearing liabilities

   and stockholders' equity:





























   Noninterest-bearing DDA





968,029







819,992







732,395







   FDIC clawback liability





25,075







24,485







22,339







   Other liabilities





39,112







44,673







85,046







   Stockholders' equity





685,224







609,345







588,225







          Total liabilities and stockholders' equity





$5,544,761







$   4,635,307







$   4,789,064





































Net interest income







$      48,123







$        39,284







$        40,657



































Interest spread









3.87

%



3.64

%





3.66

%

Net interest margin as a percentage of    interest-earning assets









3.89







3.68







3.71



Tax equivalent effect









0.06







0.04







0.03



Net interest margin as a percentage of

   interest-earning assets (FTE)









3.95

%



3.72

%





3.74

%































(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 includes a taxable equivalent adjustment to interest income on tax exempt securities of $683 thousand, $384 thousand and $348 thousand for the three months ended March 31, 2014, December 31, 2013, and March 31, 2013, 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)









































































2014



2013





(Dollars in thousands, except per shara date)

1st Quarter



4th Quarter



3rd Quarter



2nd Quarter



1st Quarter





























Total Shareholders' equity

$    697,468



$       617,015



$      606,831



$      595,849



$     588,993





Less: 























Core deposit intangibles

16,102



13,205



13,868



14,531



15,199





Tangible shareholders' equity

$    681,366



$       603,810



$      592,963



$      581,318



$     573,794





























Shares outstanding 

69,962



66,234



66,229



66,229



66,229





Tangible book value per share 

$           9.74



$             9.12



$            8.95



$            8.78



$           8.66





























Average Assets

$ 5,544,761



$    4,635,307



$   4,706,431



$   4,781,267



$  4,789,064





Average Equity

685,224



609,345



594,508



593,028



588,225





Average Core Deposit intangibles

16,794



13,527



14,193



14,863



15,538





Tangible average equity to tangible average assets

12.09

%

12.89

%

12.37

%

12.13

%

12.00

%



























(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. 



Logo - http://photos.prnewswire.com/prnh/20120227/CL59542LOGO

 

SOURCE Talmer Bancorp, Inc.



This article appears in: News Headlines

Referenced Stocks: TLMR


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