Talmer Bancorp, Inc. reports second quarter 2014 net income of $20.6 million, representing $0.27 of earnings per diluted average common share - KNOE 8 News; KNOE-TV; KNOE.com |

Talmer Bancorp, Inc. reports second quarter 2014 net income of $20.6 million, representing $0.27 of earnings per diluted average common share

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SOURCE Talmer Bancorp, Inc.

Talmer Bancorp, Inc. has reached a definitive agreement to acquire First of Huron Corporation

Talmer Bancorp, Inc. declares cash dividend for common stock of $0.01 per share

TROY, Mich., Aug. 6, 2014 /PRNewswire/ -- Talmer Bancorp, Inc. (NASDAQ: TLMR) ("Talmer") today reported second quarter 2014 net income of $20.6 million, compared to $36.4 million for the first quarter of 2014 and $15.0 million for the second quarter of 2013.  Earnings per diluted common share were $0.27 for the second quarter 2014, compared to $0.50 for the first quarter of 2014 and $0.21 for the second quarter of 2013. In addition, the Board of Directors of Talmer today declared a cash dividend on its Class A common stock of $0.01 per share.  The dividend will be paid on August 29, 2014, to our Class A common shareholders of record as of August 18, 2014.

Talmer Bancorp, Inc. logo.

Talmer Bancorp President and CEO David Provost commented, "We are pleased with our core operating trends in the second quarter, including strong organic loan growth and incremental improvement in our operating efficiency. Overall, our net total loans grew by an annualized rate of 12.9% in the second quarter of 2014 compared to the first quarter of 2014.  Importantly, our loan pipeline has strengthened over the past couple of months, which supports our expectation of continued strong organic loan growth during the second half of the year.  Additionally, we are pleased to announce an additional acquisition opportunity consistent with our strategic focus of strengthening our concentration in our existing markets and creating more opportunities for improving our operating efficiency.  This cash transaction helps us better leverage our existing capital and strengthens our core funding for lending opportunities throughout our footprint.

"Second quarter results feature strong overall profit and growth trends and the further realization of value for our shareholders from previous acquisitions.  Our focus in the coming periods continues to be strengthening our core earnings and building our book value per share by increasing operating leverage through the combination of strong organic loan growth and the further realization of synergies from acquisitions."   

Pending acquisition of First of Huron Corporation

Talmer announced today that it has entered into a definitive agreement to acquire First of Huron Corporation, the holding company for Signature Bank headquartered in Bad Axe, Michigan, for aggregate cash consideration of $13.4 million.  Signature Bank had total assets of $228.0 million as of June 30, 2014, including $172.3 million of net total loans.  The consideration represents approximately 117% of First of Huron's tangible book value as of June 30, 2014. Talmer will acquire and simultaneously retire $3.5 million of outstanding subordinated debentures of First of Huron Corporation and assume its $5.2 million of trust preferred securities.  Talmer expects the acquisition to be immediately accretive to earnings per share exclusive of transaction and integration related expenses, and to yield a tangible book value earn back of less than 2.5 years.  The boards of Talmer and First of Huron Corporation unanimously approved the transaction which is subject to regulatory approval and customary closing conditions, including the approval by the shareholders of First of Huron Corporation, and is expected to close in the fourth quarter of 2014 or the first quarter of 2015.

Quarterly Results Summary

(Dollars in thousands, except per share data)

2nd Qtr 2014


1st Qtr 2014
(Revised) (1)


2nd Qtr 2013


Earnings Summary







Net interest income

$      52,531


$         48,116


$        44,055


Total provision (benefit) for loan losses

(4,102)


3,926


(2,537)


Noninterest income

13,896


56,175


36,061


Noninterest expense

54,169


65,614


59,904


Income before income taxes

16,360


34,751


22,749


Income tax provision (benefit)

(4,246)


(1,656)


7,743


Net income

20,606


36,407


15,006









Per Share Data







Diluted earnings per common share

$           0.27


$             0.50


$            0.21


Tangible book value per share (2) 

10.09


9.79


8.78


Average diluted common shares (in thousands)

75,659


73,377


69,852
















Performance and Capital Ratios







Return on average assets (annualized)

1.51

%

2.90

%

1.26

%

Return on average equity (annualized)

11.64


21.15


10.12


Net interest margin (fully taxable equivalent) (annualized) (3) 

4.35


3.95


4.03


Tangible average equity to tangible average assets (2)

12.76


13.43


12.13


Tier 1 leverage ratio (4)

11.71


11.13


11.43


Tier 1 risk-based capital (4)

16.16


16.54


18.24


Total risk-based capital (4)

17.31


17.60


18.91





-











(1) First quarter 2014 information is revised to reflect the impact to the financial statements from adjustments to the acquisition date fair value of certain assets and liabilities in the Talmer West Bank acquisition within the measurement period.  These adjustments increased first quarter 2014 net income and period end equity by $3.7 million compared to previously reported levels.

(2)  See section entitled "Reconciliation of Non-GAAP Financial Measures."




(3) Presented on a tax equivalented basis using a 35% tax rate for all periods presented.



(4) First and second quarter 2014 are estimated.













Second Quarter 2014 Compared to First Quarter 2014

  • Net income was $20.6 million, or $0.27 per diluted average common share, in the second quarter of 2014, compared to $36.4 million, or $0.50 per diluted average common share, for the first quarter of 2014. The $15.8 million decrease in net income was primarily due to the first quarter bargain purchase gain of $40.2 million resulting from our acquisition of Talmer West Bank, partially offset by a decrease in salary and employee benefits expense of $5.3 million and an increase to net interest income of $4.4 million.
  • Net total loans increased during the second quarter of 2014 by $116.0 million compared to the first quarter of 2014, to $3.7 billion, resulting in annualized growth of 12.9%. At June 30, 2014 net total loans included $499.8 million of loans from our acquisition of Talmer West Bank. Excluding loans from our acquisition of Talmer West Bank, net total loans grew by $168.0 million, resulting in annualized growth of 22.2%, in the three months ended June 30, 2014. During the second quarter of 2014, Talmer Bank and Trust experienced $201.3 million of net uncovered loan growth, partially offset by $33.3 million of net covered loan run-off (loans covered by loss share agreements with the FDIC). Talmer West Bank experienced net loan run-off of $52.0 million in the second quarter of 2014, of which $22.3 million is due to transferring portfolio loans to loans held for sale as a result of the pending sale of the Albuquerque branch, which subsequently closed July 18, 2014.
  • Total deposits decreased $89.8 million, to $4.3 billion as of June 30, 2014, compared to March 31, 2014, primarily reflecting expected run-off of deposits acquired in our acquisition of Talmer West Bank.
  • Net interest income increased $4.4 million to $52.5 million in the second quarter of 2014, compared to the first quarter of 2014. The increase in net interest income was primarily the result of a $3.5 million increase in interest and fees on loans and a $1.2 million decline in the negative accretion of the FDIC indemnification asset. Our net interest margin also increased 40 basis points to 4.35% in the second quarter of 2014, compared to 3.95% in the first quarter of 2014.
  • Noninterest income decreased by $42.3 million to $13.9 million in the second quarter of 2014 compared to the first quarter of 2014. The decrease is primarily the result of the $40.2 million bargain purchase gain recognized in the first quarter of 2014 as a result of our acquisition of Talmer West Bank. The bargain purchase gain increased $3.7 million from the previously recorded level due to adjustments of the acquisition date fair value of certain assets and liabilities in the Talmer West Bank acquisition within the measurement period. In the second quarter of 2014, noninterest income was also negatively impacted by $4.2 million due to adjustments to fair valuation assumptions of loan servicing rights primarily as a result of declining residential mortgage interest rates.
  • Noninterest expenses decreased $11.4 million, or 17.4%, to $54.2 million in the second quarter of 2014 compared to the first quarter of 2014. The decline in noninterest expenses primarily reflected a reduction in transaction and integration related expenses.
  • The income tax benefit in the second quarter of 2014 was primarily driven by the elimination of a $9.7 million valuation allowance on the deferred tax assets acquired in our acquisition of First Place Bank on January 1, 2013, resulting from a conclusion reached with the assistance of legal and tax accounting experts, regarding the calculation of the annual Section 382 of the Internal Revenue Code limitation related to the ownership change of First Place Bank. Without the benefit from the reversal of the $9.7 million valuation allowance, our tax expense would have been $5.5 million, or an effective tax rate of 33.6%

Income Statement

Net Interest Income and Net Interest Margin

Net interest income for the second quarter of 2014 was $52.5 million, compared to $48.1 million in the prior quarter.  The $4.4 million increase in net interest income in the second quarter was primarily the result of a $3.5 million increase in interest and fees on loans and a $1.2 million decline in the negative accretion of the FDIC indemnification asset. 

Our net interest margin was 4.35% in the second quarter of 2014, an increase of 40 basis points from 3.95% in the first quarter of 2014.  The increase in our net interest margin in the second quarter was due to a combination of several factors, the largest being an increase in the benefit received from discount accretion on our purchased credit impaired loan portfolios resulting from an increase in expected cash flows and payment speeds noted in our quarterly re-estimation of cash flows, the decline in negative accretion of the FDIC indemnification asset as the balance of the asset continues to decline and a substantial reduction in low yielding cash equivalent interest earning balances due to improved deployment of our liquidity.

Our net interest margin benefits from discount accretion on our purchased credit impaired loan portfolio, a component of the accretable yield.  The accretable yield represents the excess of the current 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 portfolios.  For the second and first quarters of 2014, the yield on total loans was 6.12% and 5.80%, respectively, while the yield generated using only the expected coupon would have been 4.69% and 5.02%, respectively.  The difference in the yield generated using only the expected coupon was primarily due to the continued run-off of covered loans acquired with higher coupon rates.  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 has 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 19.11% for the second quarter of 2014 and 21.29% for the first quarter of 2014.  The combination of the excess accretable yield and negative yield on the FDIC indemnification asset benefitted net interest margin by 63 basis points and five basis points in the second and first quarters or 2014, respectively.

Noninterest Income

Noninterest income decreased $42.3 million to $13.9 million in the second quarter of 2014, compared to $56.2 million for the first quarter of 2014.  The decrease was primarily due to the $40.2 million bargain purchase gain recognized in the first quarter of 2014 as a result of our acquisition of Talmer West Bank.  Activity in the second quarter of 2014 included a $2.6 million increase in net gain on sales of loans and decreases of $3.3 million in FDIC loss sharing income, $2.3 million in mortgage banking and other loan fees and $2.1 million in accelerated discount on acquired loans.  The increase in gain on sale of loans primarily reflects an increase in residential mortgage originations in the second quarter of 2014.  The decrease in FDIC loss sharing income primarily reflects a decrease in expected FDIC loss share claims given the $7.3 million provision release on covered loans during the quarter that resulted from cash flow expectation improvements and recoveries.  The decrease in mortgage banking and other loan fees was primarily due to the change in the fair value of loan servicing rights, which was a detriment to earnings of $4.2 million during the second quarter of 2014, compared to a detriment of $2.2 million during the first quarter of 2014 and due mainly to movements in interest rates during those periods. Loan servicing rights totaled $74.1 million as of June 30, 2014, compared to $77.9 million as of March 31, 2014.  The decrease in accelerated discount on acquired loans was primarily due to the write-off of a portion of the FDIC indemnification asset balance reflecting loan payments and payoffs on covered loans that were not previously expected.

Noninterest Expenses

Noninterest expenses in the second quarter of 2014 totaled $54.2 million, compared to $65.6 million in the first quarter of 2014.  The $11.4 million decrease in total noninterest expenses was primarily due to a decrease in transaction and integration related expenses of $10.0 million compared to the first quarter.  Net transaction and integration related expenses declined substantially to $837 thousand for the second quarter of 2014 compared to $10.8 million in the first quarter.  Outside of the decline in transaction and integration related expenses, we realized cost reduction improvements in other expenses (included within noninterest expense), salary and employee benefits due to a continued effort to rationalize staff that was muted by an increase in commission and incentives related to the increase in residential mortgage origination activity of $1.7 million and insurance expense, partially offset by an increase in occupancy and equipment expense due to improvements made to certain facilities.

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, in accordance with United States generally accepted accounting principles.  At June 30, 2014, the allowance for loan losses on uncovered loans was $24.4 million, or 0.74% of total uncovered loans, compared to $22.8 million, or 0.72% of total uncovered loans, at March 31, 2014.  The increase in allowance for loan losses on uncovered loans for the quarter was primarily due to impairment resulting from our quarterly re-estimation of expected cash flows for our uncovered purchased credit impaired loans, partially offset by improvements in historical loss factors.  At June 30, 2014, the allowance for loan losses on covered loans was $32.7 million, or 7.13% of total covered loans, compared to $38.0 million, or 7.63% of total covered loans at March 31, 2014.  The decrease in allowance for loan losses on covered loans primarily reflects the relief of allowance resulting from payments received on loans not previously anticipated, improvements in historical loss factors and certain individually evaluated loans where changes in discounted cash flow projections and/or collateral values increased, 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 second quarter of 2014, we completed re-estimations of cash flow expectations for purchased credit impaired loans acquired in each of our acquisitions.  For the re-estimations, loans with decreased cash flow expectations resulted in additional loan loss provisions of $5.3 million ($4.2 million uncovered and $1.1 million covered).  Provisions related to covered loans are partially offset by an increase in the FDIC indemnification asset.  The re-estimations also resulted in a $24.5 million improvement in the gross cash flow expectations for purchased credit impaired 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 second 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 $186.2 million to $5.6 billion at June 30, 2014 compared to $5.4 billion at March 31, 2014.  The primary drivers of the increase in assets in the quarter ended June 30, 2014 were increases in net total loans of $116.0 million, securities available-for-sale of $99.7 million, loans held for sale of $60.2 million and Company-owned life insurance of $55.8 million, partially offset by a $127.9 million decrease in cash and cash equivalents.   The increases in securities available-for-sale and Company-owned life insurance reflect management's plan to more fully deploy excess liquidity.  Loans held for sale increased in the second quarter of 2014 due to increases in residential mortgage loan originations and our transfer of $22.3 million of portfolio loans to loans held for sale as a result of the planned sale of the Albuquerque branch.

Net total loans at June 30, 2014 were $3.7 billion, which included $499.8 million of loans acquired in the Talmer West Bank acquisition, compared to $3.6 billion at March 31, 2014.  Excluding loans from our acquisition of Talmer West Bank, net total loans grew by $168.0 million, or 22.2% annualized, compared to March 31, 2014.  During the quarter, Talmer Bank and Trust experienced $201.3 million of net uncovered loan growth, partially offset by $33.3 million of net covered loan run-off.   Talmer West Bank experienced net loan run-off of $52.0 million in the second quarter of 2014, of which $22.3 million was due to transferring portfolio loans to loans held for sale as a result of the planned sale of the Albuquerque branch.  We continue to be focused on sourcing quality loan growth to overcome the run-off of higher yielding acquired loans.  A significant amount, $459.3 million, or 12.2%, 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 $4.9 billion at June 30, 2014 compared to $4.7 billion at March 31, 2014.  The $161.3 million increase in liabilities in the quarter ended June 30, 2014 was primarily due to increases in short-term borrowings of $149.3 million and long-term debt of $88.9 million, partially offset by a decrease in total deposits of $89.8 million.  The increases in short-term borrowings and long-term debt primarily reflect Federal Home Loan Bank advances and additional securities sold under agreements to repurchase added during the second quarter of 2014.  The decrease in total deposits primarily reflects run-off of Talmer West Bank's acquired deposit portfolio.

Total shareholders' equity increased $24.9 million, or 3.6%, to $726.1 million at June 30, 2014, compared to $701.2 million as of March 31, 2014.  The increase in shareholders' equity primarily reflects our second quarter 2014 net income of $20.6 million.

Key Performance Goals

Our near-term focus continues to be on driving quality loan growth and realizing significant operating synergies associated with the acquisitions of First Place Bank and Talmer West Bank.  This includes the consolidation of back office processes, personnel and facilities and the wind-down of third party expenses associated with meeting regulatory compliance and system enhancements.  Recent increases in the level of merger activity in our market area offer the potential for additional opportunities to further leverage our capital position; however, we strive to remain disciplined in our evaluation of the risks and challenges in each and every deal.  The effective integration of operations and culture from previous acquisitions and the ongoing investment in core growth provide momentum in our pursuit of delivering a sustainable 1%+ core return on assets.

Conference Call and Webcast

Talmer Bancorp, Inc. will host a live conference webcast to review second quarter 2014 financial results at 10:00 a.m. ET on Thursday, August 7, 2014. The webcast may be accessed through Talmer'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. 4734521) or internationally at (412) 317-6061.  A replay of the webcast will be available for approximately 90 days after the event on Talmer'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 and Illinois, 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 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, strong organic loan growth and the realization of operating synergies from current and prior acquisitions, statements regarding our proposed acquisition of First of Huron Corporation, including our expectation that the acquisition will be immediately accretive to earnings, its anticipated yield on tangible book value and  its expected internal rate of return, 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, excessive loan losses, and, with respect to the proposed acquisition, the inability to obtain the requisite regulatory and shareholder approvals and meet other closing terms and conditions, 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.

 

Talmer Bancorp, Inc.








Consolidated Balance Sheets

(Unaudited )  









 June 30, 


 March 31, 


 December 31,  


 June 30, 

(Dollars in thousands, except per share data)

2014


2014


2013


2013









Assets








Cash and due from banks

$        107,292


$           107,170


$             97,167


$             99,590

Interest-bearing deposits with other banks

218,309


318,368


206,160


264,117

Federal funds sold and other short-term investments

77,000


105,000


72,029


115,000

     Total cash and cash equivalents

402,601


530,538


375,356


478,707

Securities available-for-sale

731,700


632,047


620,083


662,876

Federal Home Loan Bank stock

16,541


12,335


16,303


16,303

Loans held for sale,  (includes $113.8 million, $75.9 million,  $85.3 million and $342.2 million, respectively, measured at fair value)

136,089


75,931


85,252


342,224

Loans:








Residential real estate (includes $18.5 million, $17.6 million, $16.3 million and $0, respectively, measured at fair value)

1,362,869


1,267,714


1,085,453


990,267

  Commercial real estate

1,131,348


1,147,793


755,839


741,005

  Commercial and industrial

647,090


573,268


446,644


354,503

Real estate construction (includes $0, $278 thousand, $1.4 million and $0, respectively, measured at fair value)

112,866


143,569


176,226


141,810

  Consumer

42,034


12,932


9,754


12,070

       Total loans, excluding covered loans

3,296,207


3,145,276


2,473,916


2,239,655

           Less: Allowance for loan losses - uncovered

(24,360)


(22,771)


(17,746)


(13,974)

              Net loans - excluding covered loans

3,271,847


3,122,505


2,456,170


2,225,681

  Covered loans

459,280


497,920


530,068


603,127

           Less: Allowance for loan losses - covered

(32,743)


(38,000)


(40,381)


(46,312)

              Net loans - covered

426,537


459,920


489,687


556,815

        Net total loans

3,698,384


3,582,425


2,945,857


2,782,496

Premises and equipment

56,642


56,352


51,001


57,282

FDIC indemnification asset

102,694


119,045


131,861


171,956

Other real estate owned 

52,273


57,451


29,955


37,280

Loan servicing rights

74,104


77,892


78,603


65,187

Core deposit intangible

15,378


16,102


13,205


14,531

FDIC receivable

7,198


8,130


7,783


17,573

Company-owned life insurance 

95,580


39,814


39,500


38,837

Income tax benefit

187,847


183,635


126,200


114,835

Other assets

30,642


29,744


26,402


49,048

    Total assets

$     5,607,673


$        5,421,441


$        4,547,361


$        4,849,135

Liabilities








Deposits:








  Noninterest-bearing demand deposits

$        958,278


$           950,671


$           779,379


$           743,077

  Interest-bearing demand deposits

697,031


714,043


598,281


535,801

  Money market and savings deposits

1,330,036


1,370,691


1,215,864


1,246,384

  Time deposits

1,187,661


1,270,927


927,313


1,083,071

  Other brokered funds

123,528


80,000


80,000


100,000

     Total deposits

4,296,534


4,386,332


3,600,837


3,708,333

FDIC clawback liability

26,309


25,593


24,887


23,986

FDIC warrants payable

4,493


4,423


4,118


4,518

Short-term borrowings

238,826


89,562


71,876


175,047

Long-term debt

266,407


177,483


199,037


268,204

Other liabilities

48,979


36,840


29,591


73,198

     Total liabilities

4,881,548


4,720,233


3,930,346


4,253,286

Shareholders' equity








Preferred stock - $1.00 par value








  Authorized - 20,000,000 shares at 6/30/2014, 3/31/2014, 12/31/2013 and 6/30/2013








  Issued and outstanding - 0 shares at 6/30/2014, 3/31/2014, 12/31/2013 and 6/30/2013

-


-


-


-

Common stock:








   Class A Voting Common Stock - $1.00 par value
















       Authorized - 198,000,000 shares at 6/30/2014, 3/31/2014, 12/31/2013 and 6/30/2013








       Issued and outstanding - 70,451,057 shares at 6/30/2014, 69,962,461 shares








  at 3/31/2014, 66,234,397 shares at 12/31/2013 and 66,229,397 at 6/30/2013

70,451


69,962


66,234


66,229

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








       Authorized - 2,000,000 shares at 6/30/2014, 3/31/2014, 12/21/2013 and 6/30/2013








       Issued and outstanding - 0 shares at 6/30/2014, 3/31/2014, 12/21/2013 and 6/30/2013

-


-


-


-

  Additional paid-in-capital

404,079


404,905


366,428


365,926

  Retained earnings

249,362


228,756


192,349


169,252

  Accumulated other comprehensive income (loss), net of tax

2,233


(2,415)


(7,996)


(5,558)

     Total shareholders' equity

726,125


701,208


617,015


595,849

Total liabilities and shareholders' equity

$     5,607,673


$        5,421,441


$        4,547,361


$        4,849,135









 

 

Talmer Bancorp, Inc.








Consolidated Statements of Income





(Unaudited)









Three months ended June 30,


Six months ended June 30,

(Dollars in thousands, except per share data)

2014


2013


2014


2013









Interest income








  Interest and fees on loans

$      56,925


$        51,290


$    110,338


$      100,028

  Interest on investments








     Taxable

2,198


1,102


4,076


2,466

     Tax-exempt

1,139


1,006


3,091


2,000

          Total interest on securities

3,337


2,108


7,167


4,466

  Interest on interest earning cash balances

172


201


388


491

  Interest on federal funds and other short term investments

278


247


455


447

  Dividends on FHLB stock

160


138


345


545

  FDIC indemnification asset

(5,506)


(6,908)


(12,224)


(15,056)

     Total interest income

55,366


47,076


106,469


90,921

Interest Expense








  Interest-bearing demand deposits

216


159


440


326

  Money market and savings deposits

492


494


986


1,012

  Time deposits

1,432


1,545


2,923


3,206

  Other brokered funds

35


48


64


72

  Interest on short-term borrowings

33


33


208


55

  Interest on long-term debt

627


742


1,201


1,538

     Total interest expense

2,835


3,021


5,822


6,209

     Net interest income 

52,531


44,055


100,647


84,712

  Provision for loan losses - uncovered

3,219


4,923


9,643


6,099

  Benefit for loan losses - covered

(7,321)


(7,460)


(9,819)


(6,376)

Net interest income after provision for loan losses

56,633


46,592


100,823


84,989









Noninterest income








  Deposit fee income

3,163


4,648


6,437


9,160

  Mortgage banking and other loan fees

(1,025)


10,770


239


15,955

  Net gain on sales of loans

5,681


16,139


8,713


32,954

  Bargain purchase gain

-


-


40,157


71,702

  FDIC loss sharing income

(3,434)


(2,343)


(3,547)


(2,213)

  Accelerated discount on acquired loans

4,326


3,920


10,792


6,213

  Net gain (loss) on sales of securities

-


69


(2,310)


100

  Other income

5,185


2,858


9,590


5,790

       Total noninterest income

13,896


36,061


70,071


139,661









Noninterest expenses








  Salary and employee benefits

30,391


34,110


66,120


87,005

  Occupancy and equipment expense

7,937


6,824


17,085


13,827

  Data processing fees

2,260


1,913


4,000


3,560

  Professional service fees

2,814


4,425


7,104


8,312

  FDIC loss sharing expense

983


722


1,507


1,418

  Bank acquisition and due diligence fees

268


474


1,979


7,703

  Marketing expense

1,607


654


2,698


2,191

  Other employee expense

804


958


1,500


1,705

  Insurance expense

803


3,280


2,652


6,212

  Other expense

6,302


6,544


15,138


12,563

      Total noninterest expenses

54,169


59,904


119,783


144,496

  Income before income taxes

16,360


22,749


51,111


80,154

  Income tax provision (benefit)

(4,246)


7,743


(5,902)


4,693

      Net income 

$       20,606


$        15,006


$       57,013


$       75,461









Earnings per common share:








    Basic

$           0.29


$            0.23


$           0.82


$            1.14

    Diluted

$           0.27


$            0.21


$           0.76


$            1.08

Average common shares outstanding - basic

70,021


66,229


69,071


66,229

Average common shares outstanding - diluted

75,659


69,852


74,531


69,764









Total comprehensive income

25,254


6,036


67,242


65,985









 

 

Talmer Bancorp, Inc.










Consolidated Statements of Income










(Unaudited)











2nd


1st


4th


3rd 


2nd


Quarter


Quarter


Quarter


Quarter


Quarter

(Dollars in thousands, except per share data)

2014


2014


2013


2013


2013











Interest income










  Interest and fees on loans

$      56,925


$        53,413


$        45,354


$        49,475


$        51,290

  Interest on investments










     Taxable

2,198


1,878


1,880


1,751


1,102

     Tax-exempt

1,139


1,952


1,098


1,132


1,006

          Total interest on securities

3,337


3,830


2,978


2,883


2,108

  Interest on interest earning cash balances

172


216


188


97


201

  Interest on federal funds and other short-term investments

278


177


204


279


247

  Dividends on FHLB stock

160


185


160


167


138

  FDIC indemnification asset

(5,506)


(6,718)


(6,952)


(6,032)


(6,908)

     Total interest income

55,366


51,103


41,932


46,869


47,076

Interest Expense










  Interest-bearing demand deposits

216


224


173


174


159

  Money market and savings deposits

492


494


430


447


494

  Time deposits

1,432


1,491


1,250


1,408


1,545

  Other brokered funds

35


29


32


38


48

  Interest on short-term borrowings

33


175


24


26


33

  Interest on long-term debt

627


574


739


775


742

     Total interest expense

2,835


2,987


2,648


2,868


3,021

     Net interest income 

52,531


48,116


39,284


44,001


44,055

  Provision for loan losses - uncovered

3,219


6,424


6,569


2,852


4,923

  Benefit for loan losses - covered

(7,321)


(2,498)


(3,319)


(727)


(7,460)

Net interest income after provision for loan losses

56,633


44,190


36,034


41,876


46,592











Noninterest income










  Deposit fee income

3,163


3,274


3,179


3,547


4,648

  Mortgage banking and other loan fees

(1,025)


1,264


7,729


7,222


10,770

  Net gain on sales of loans

5,681


3,032


3,423


5,028


16,139

  Bargain purchase gain

-


40,157


-


-


-

  FDIC loss sharing income

(3,434)


(113)


(3,167)


(4,846)


(2,343)

  Accelerated discount on acquired loans

4,326


6,466


6,596


4,345


3,920

  Net gain (loss) on sales of securities

-


(2,310)


292


-


69

  Other income

5,185


4,405


5,605


2,741


2,858

       Total noninterest income

13,896


56,175


23,657


18,037


36,061











Noninterest expenses










  Salary and employee benefits

30,391


35,729


29,839


29,765


34,110

  Occupancy and equipment expense

7,937


9,148


6,346


6,582


6,824

  Data processing fees

2,260


1,740


2,049


3,539


1,913

  Professional service fees

2,814


4,290


4,073


4,472


4,425

  FDIC loss sharing expense

983


524


483


106


722

  Bank acquisition and due diligence fees

268


1,711


819


171


474

  Marketing expense

1,607


1,091


659


634


654

  Other employee expense

804


696


672


943


958

  Insurance expense

803


1,849


1,851


1,911


3,280

  Other expense

6,302


8,836


6,318


5,303


6,544

      Total noninterest expenses

54,169


65,614


53,109


53,426


59,904

  Income before income taxes

16,360


34,751


6,582


6,487


22,749

  Income tax provision (benefit)

(4,246)


(1,656)


(5,971)


(4,057)


7,743

      Net income 

$       20,606


$        36,407


$        12,553


$        10,544


$        15,006











Earnings per common share:










    Basic

$           0.29


$            0.53


$            0.19


$            0.16


$            0.23

    Diluted

$           0.27


$            0.50


$            0.18


0.15


0.21

Average common shares outstanding - basic

70,021


68,121


66,231


66,229


66,229

Average common shares outstanding - diluted

75,659


73,377


70,555


69,853


69,853











Total comprehensive income (loss)

25,254


25,254


9,922


10,737


6,036











 

 

Talmer Bancorp, Inc.











Selected Financial Information

(Unaudited)











(Dollars in thousands, except per share data)

2014


2013

2nd Qtr


1st Qtr


4th Qtr


3rd Qtr


2nd Qtr


Earnings Summary











Interest income

$                 55,366


$          51,103


$         41,932


$         46,869


$         47,076


Interest expense

2,835


2,987


2,648


2,868


3,021


Net interest income

52,531


48,116


39,284


44,001


44,055


Provision for loan losses - uncovered

3,219


6,424


6,569


2,852


4,923


Provision (benefit) for loan losses - covered

(7,321)


(2,498)


(3,319)


(727)


(7,460)


Bargain purchase gains

-


40,157


-


-


-


Noninterest income

13,896


56,175


23,657


18,037


36,061


Noninterest expense

54,169


65,614


53,109


53,426


59,904


Income before income taxes

16,360


34,751


6,582


6,487


22,749


Income tax provision (benefit)

(4,246)


(1,656)


(5,971)


(4,057)


7,743


Net income

20,606


36,407


12,553


10,544


15,006













Per Share Data











Basic earnings per common share

$                     0.29


$              0.53


$             0.19


$             0.16


$             0.23


Diluted earnings per common share

0.27


0.50


0.18


0.15


0.21


Book value per common share

10.31


10.02


9.32


9.16


9.00


Tangible book value per share (1) 

10.09


9.79


9.12


8.95


8.78


Shares outstanding (in thousands)

70,451


69,962


66,234


66,229


66,229


Average common diluted shares (in thousands)

75,659


73,377


70,555


69,853


69,852













Selected Period End Balances











Total assets

$           5,607,673


$     5,421,441


$    4,547,361


$    4,741,945


$    4,849,135


Securities available-for-sale

731,700


632,047


620,083


652,739


662,876


Total Loans

3,755,487


3,643,196


3,003,984


2,880,727


2,842,782


Uncovered loans

3,296,207


3,145,276


2,473,916


2,322,193


2,239,655


Covered loans

459,280


497,920


530,068


558,534


603,127


FDIC indemnification asset

102,694


119,045


131,861


148,325


171,956


Total deposits

4,296,534


4,386,332


3,600,837


3,662,675


3,708,333


Total liabilities

4,881,548


4,720,233


3,930,346


4,135,114


4,253,286


Total shareholders' equity

726,125


701,208


617,015


606,831


595,849


Tangible shareholders' equity (1)

710,747


685,106


603,810


592,963


581,318













Performance and Capital Ratios











Return on average assets (annualized)

1.51

%

2.90

%

1.08

%

0.89

%

1.26

%

Return on average equity (annualized)

11.64


21.15


8.24


7.09


10.12


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

4.35


3.95


3.72


4.11


4.03


Tangible average equity to tangible average assets (1)

12.76


13.43


12.89


12.34


12.13


Tier 1 leverage ratio (3)

11.71


11.13


11.88


11.43


11.43


Tier 1 risk-based capital (3)

16.16


16.54


18.29


17.83


18.24


Total risk-based capital (3)

17.31


17.60


19.21


18.66


18.91





-








Asset Quality Ratios:











Net charge-offs to average loans, excluding covered loans (annualized)  

0.20

%

0.17

%

0.01

%

0.19

%

0.25

%

Nonperforming assets as a percentage of total assets

1.60


1.79


1.55


1.53


1.53


Nonperforming loans as a percent of total loans

1.04


1.13


1.40


1.43


1.35


Nonperforming loans as a percent of total loans, excluding covered loans

0.79


0.81


0.98


1.02


0.84


Allowance for loan losses as a percentage of period-end loans

1.52


1.67


1.93


2.02


2.12













Allowance for loan losses-uncovered as a percentage of period-end uncovered loans

0.74


0.72


0.72


0.67


0.62


Allowance for loan losses as a percentage of nonperforming loans, excluding loans accounted for under ASC 310-30

42.07


50.61


43.52


41.55


51.94













(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 and second quarter 2014 are estimated.












 

 

Talmer Bancorp, Inc.










Loan Data










(Unaudited)











June 30,


March 31,


December 31,


September 30,


June 30,

(Dollars in thousands)

2014


2014


2013


2013


2013











Uncovered loans










Residential real estate

$        1,362,869


$           1,267,714


$            1,085,453


$               998,264


$               990,267

Commercial real estate










Non-owner occupied

731,743


742,151


581,651


579,751


598,169

Owner-occupied

371,406


377,678


148,545


135,743


124,291

Farmland

28,199


27,964


25,643


23,931


18,545

Total commercial real estate

1,131,348


1,147,793


755,839


739,425


741,005

Commercial and industrial

647,090


573,268


446,644


384,265


354,503

Real estate construction

112,866


143,569


176,226


190,312


141,810

Consumer

42,034


12,932


9,754


9,927


12,070

Total uncovered loans

3,296,207


3,145,276


2,473,916


2,322,193


2,239,655











Covered loans










Residential real estate

117,507


119,408


123,334


128,798


134,625

Commercial real estate










Non-owner occupied

142,846


143,460


154,951


161,671


144,536

Owner-occupied

91,829


108,630


115,435


119,470


157,937

Farmland

21,541


27,059


29,015


29,253


28,950

Total commercial real estate

256,216


279,149


299,401


310,394


331,423

Commercial and industrial

60,497


71,155


78,437


88,749


101,669

Real estate construction

14,391


16,895


17,218


18,312


22,589

Consumer

10,669


11,313


11,678


12,281


12,821

Total covered loans

459,280


497,920


530,068


558,534


603,127











Total loans

$        3,755,487


$           3,643,196


$            3,003,984


$            2,880,727


$            2,842,782











 

 

Talmer Bancorp, Inc.










Impaired Loans










(Unaudited)











2014


2013

(Dollars in thousands)

2nd Qtr


1st Qtr


4th Qtr


3rd Qtr


2nd Qtr

Uncovered 










Nonperforming troubled debt restructurings










Residential real estate

$      1,920


$        2,189


$        2,469


$        1,170


$           205

Commercial real estate

2,842


2,664


3,581


1,946


2,126

Commercial and industrial

541


526


415


434


3

Consumer

90


2


3


3


21

Total nonperforming troubled debt restructurings

5,393


5,381


6,468


3,553


2,355

Nonaccrual loans other than nonperforming troubled debt restructurings










Residential real estate

11,708


11,633


12,946


11,939


12,691

Commercial real estate

6,590


6,174


2,010


4,841


2,657

Commercial and industrial

2,074


1,723


2,266


854


956

Real estate construction

158


582


510


2,357


70

Consumer

76


100


97


103


4

Total nonaccrual loans other than nonperforming troubled debt restructurings

20,606


20,212


17,829


20,094


16,378

Total nonaccrual loans

25,999


25,593


24,297


23,647


18,733

Other real estate owned (1)

39,806


45,674


17,046


14,728


14,199

Total nonperforming assets

65,805


71,267


41,343


38,375


32,932











Performing troubled debt restructurings










Residential real estate

1,628


828


328


4


300

Commercial real estate

2,588


3,003


1,637


2,899


45

Commercial and industrial

995


1,365


1,367


554


1,193

Real estate construction

94


96


90


-


-

Consumer

29


30


30


30


-

Total performing troubled debt restructurings

5,334


5,322


3,452


3,487


1,538

Total uncovered impaired assets

$    71,139


$      76,589


$      44,795


$      41,862


$      34,470











Loans 90 days or more past due and still accruing, excluding loans accounted for under ASC 310-30

$         305


$               3


$           539


$               -


$             66











Covered 










Nonperforming troubled debt restructurings










Residential real estate

$      1,408


$           962


$           900


$           914


$        1,082

Commercial real estate

4,861


6,235


6,561


5,340


6,330

Commercial and industrial

2,089


2,780


3,052


3,019


3,858

Real estate construction

595


1,023


926


884


835

Consumer

15


25


25


26


18

Total nonperforming troubled debt restructurings

8,968


11,025


11,464


10,183


12,123

Nonaccrual loans other than nonperforming troubled debt restructurings










Residential real estate

426


368


88


88


71

Commercial real estate

1,489


1,563


1,563


1,575


1,025

Commercial and industrial

1,751


2,124


4,149


5,154


5,985

Real estate construction

439


442


446


457


465

Consumer

1


-


6


6


10

Total nonaccrual loans other than nonperforming troubled debt restructurings

4,106


4,497


6,252


7,280


7,556

Total nonaccrual loans

13,074


15,522


17,716


17,463


19,679

Other real estate owned

10,926


10,165


11,571


16,861


21,374

Total nonperforming assets

24,000


25,687


29,287


34,324


41,053











Performing troubled debt restructurings










Residential real estate

2,821


2,582


2,691


2,544


2,405

Commercial real estate

16,102


15,056


14,391


16,733


16,450

Commercial and industrial

2,962


3,030


3,802


4,304


4,921

Real estate construction

109


111


163


166


168

Total performing troubled debt restructurings

21,994


20,779


21,047


23,747


23,944

Total covered impaired assets

$    45,994


$      46,466


$      50,334


$      58,071


$      64,997











Loans 90 days or more past due and still accruing, excluding loans accounted for under ASC 310-30

$            49


$               7


$               -


$               -


$        3,539











(1) Excludes closed branches and operating facilities.




















 

 

Talmer Bancorp, Inc.













Net Interest Income and Net Interest Margin













(Unaudited)

Three months ended



June 30, 2014


March 31, 2014


June 30, 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

$      249,780

$            172

0.28

%

$       400,854

$             216

0.22

%

$        302,516

$             201

0.27

%

   Federal funds sold and other short-term
    investments

76,474

278

1.46


70,688

177

1.02


115,903

247

0.86


   Investment securities (3):













       Taxable

525,158

2,198

1.68


477,801

1,878

1.59


465,407

1,102

0.95


       Tax-exempt

163,636

1,139

3.77


183,986

1,952

5.81


176,094

1,006

3.09


   Federal Home Loan Bank stock

12,980

160

4.95


22,426

185

3.34


16,224

138

3.42


   Gross uncovered loans (4)

3,254,119

41,350

5.10


3,218,680

39,604

4.99


2,493,787

29,849

4.80


   Gross covered loans (4)

477,238

15,575

13.09


513,608

13,810

10.90


650,284

21,441

13.22


   FDIC indemnification asset

115,566

(5,506)

(19.11)


127,983

(6,718)

(21.29)


196,676

(6,908)

(14.09)


          Total earning assets

4,874,951

55,366

4.59


5,016,026

51,104

4.19


4,416,891

47,076

4.31


Non-earning assets:













   Cash and due from banks

111,834




119,222




100,466




   Allowance for loan losses

(58,562)




(61,913)




(62,691)




   Premises and equipment

57,084




55,350




57,558




   Core deposit intangible

15,740




16,794




14,863




   Other real estate owned 

56,095




59,541




40,407




   Loan servicing rights

76,431




80,065




54,685




   FDIC receivable

6,380




7,067




15,222




   Company-owned life insurance

90,228




40,963




38,674




   Other non-earning assets

213,884




215,317




105,192




          Total assets

$   5,444,065




$    5,548,432




$     4,781,267

















Interest-bearing liabilities:













   Deposits:













        Interest-bearing DDA

$      714,231

$            216

0.12

%

$       709,274

$             224

0.13

%

$        552,027

$             159

0.12

%

        Money market and savings deposits

1,352,163

492

0.15


1,396,282

494

0.14


1,246,472

494

0.16


        Time deposits

1,215,585

1,432

0.47


1,327,397

1,491

0.46


1,162,123

1,545

0.53


        Other brokered funds

80,478

35

0.17


80,000

29

0.15


90,960

48

0.21


        Short-term borrowings

126,382

33

0.11


102,633

175

0.69


57,086

33

0.23


        Long-term debt

209,721

627

1.20


211,735

574

1.10


266,578

742

1.12


          Total interest-bearing liabilities

3,698,560

2,835

0.31


3,827,321

2,987

0.32


3,375,246

3,021

0.36


Noninterest-bearing liabilities
and stockholders' equity:













   Noninterest-bearing DDA

965,979




968,029




703,013




   FDIC clawback liability

25,787




25,075




22,434




   Other liabilities

45,573




39,613




87,546




   Stockholders' equity

708,166




688,394




593,028




          Total liabilities and stockholders' equity

$   5,444,065




$    5,548,432




$     4,781,267

















Net interest income


$      52,531




$        48,117




$        44,055
















Interest spread



4.28

%


3.87

%



3.95

%

Net interest margin as a percentage of interest-earning assets



4.32




3.89




4.00


Tax equivalent effect



0.03




0.06




0.03


Net interest margin as a percentage of
 interest-earning assets (FTE)



4.35

%


3.95

%



4.03

%














(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 $399 thousand, $683 thousand and $352 thousand for the three months ended June 30, 2014, March 31, 2013, and June 30, 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.









Net Interest Income and Net Interest Margin









(Unaudited)

Six months ended



June 30, 2014


June 30, 2013


(Dollars in thousands)

Average Balance

Interest (1)

Average Rate (2)


Average Balance

Interest (1)

Average Rate (2)


Earning assets:









   Interest-earning balances

$      324,900

$            388

0.24

%

$        385,460

$             491

0.26

%

   Federal funds sold and other short-term
    investments

73,597

455

1.25


107,143

447

0.84


   Investment securities (3):









       Taxable

501,083

4,076

1.64


437,870

2,466

1.14


       Tax-exempt

173,664

3,091

4.85


168,607

2,000

3.23


   Federal Home Loan Bank stock

17,677

345

3.94


16,020

545

6.86


   Gross uncovered loans (4)

3,236,360

80,953

5.04


2,425,608

58,061

4.83


   Gross covered loans (4)

495,323

29,385

11.96


677,586

41,967

12.49


   FDIC indemnification asset

121,740

(12,224)

(20.25)


207,936

(15,056)

(14.60)


          Total earning assets

4,944,344

106,469

4.39


4,426,230

90,921

4.17


Non-earning assets:









   Cash and due from banks

100,634




100,743




   Allowance for loan losses

(58,027)




(60,774)




   Premises and equipment

56,222




59,093




   Core deposit intangible

16,264




15,198




   Other real estate owned 

57,809




41,971




   Loan servicing rights

78,238




52,302




   FDIC receivable

6,722




15,049




   Company-owned life insurance

65,731




38,510




   Other non-earning assets

215,171




96,825




          Total assets

$   5,483,108




$     4,785,147













Interest-bearing liabilities:









   Deposits:









        Interest-bearing DDA

$      711,766

$            440

0.12

%

$        552,138

$             326

0.12

%

        Money market and savings deposits

1,374,101

986

0.14


1,229,504

1,012

0.17


        Time deposits

1,268,122

2,923

0.46


1,206,362

3,206

0.54


        Other brokered funds

80,240

64

0.16


65,574

72

0.22


        Short-term borrowings

114,577

208

0.37


49,191

55

0.23


        Long-term debt

210,722

1,201

1.15


265,422

1,538

1.17


          Total interest-bearing liabilities

3,759,528

5,822

0.31


3,368,191

6,209

0.37


Noninterest-bearing liabilities
and stockholders' equity:









   Noninterest-bearing DDA

951,432




717,623




   FDIC clawback liability

25,433




22,387




   Other liabilities

42,605




86,303




   Stockholders' equity

704,110




590,643




          Total liabilities and stockholders' equity

$   5,483,108




$     4,785,147













Net interest income


$    100,647




$        84,712












Interest spread



4.08

%

3.80

%

Net interest margin as a percentage of interest-earning assets



4.10




3.86


Tax equivalent effect



0.04




0.03


Net interest margin as a percentage of
 interest-earning assets (FTE)



4.14

%

3.89

%










(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 $1.1 million and $700 thousand for the six months ended June 30, 2014 and 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)

2nd Quarter


1st Quarter


4th Quarter


3rd Quarter


2nd Quarter













Tangible Shareholders' equity:











Total Shareholders' equity

$         726,125


$       701,208


$       617,015


$       606,831


$       595,849


Less: 











Core deposit intangibles

15,378


16,102


13,205


13,868


14,531


Tangible shareholders' equity

$         710,747


$       685,106


$       603,810


$       592,963


$       581,318













Tangible book value per share:











Shares outstanding 

70,451


69,962


66,234


66,229


66,229


Tangible book value per share 

$              10.09


$             9.79


$             9.12


$             8.95


$             8.78













Tangible Average equity to tangible average assets:











Average Assets

$      5,444,065


$    5,016,026


$    4,635,307


$    4,715,095


$    4,781,267


Average Equity

708,166


688,394


609,345


594,508


593,028


Average Core Deposit intangibles

15,740


16,794


13,527


14,193


14,863


Tangible average equity to tangible average assets

12.76

%

13.43

%

12.89

%

12.34

%

12.13

%












(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. 

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