INDEPENDENT BANK CORP /MI/ - FORM 8-K - EX-99.2 - EXHIBIT 99.2

Attached files

file	filename
8-K - INDEPENDENT BANK CORPORATION 8-K 2-2-2012 - INDEPENDENT BANK CORP /MI/	form8k.htm
EX-99.1 - EXHIBIT 99.1 - INDEPENDENT BANK CORP /MI/	ex99_1.htm

Exhibit 99.2

INDEPENDENT BANK CORPORATION AND SUBSIDIARIES

Supplemental Data

Non-performing assets(1)
	December 31,
	2011			2010
	(Dollars in thousands)

Non-accrual loans	$	59,309		$	66,652
Loans 90 days or more past due and still accruing interest		574			928
Total non-performing loans		59,883			67,580
Other real estate and repossessed assets		34,042			39,413
Total non-performing assets	$	93,925		$	106,993
As a percent of Portfolio Loans
Non-performing loans		3.80	%		3.73	%
Allowance for loan losses		3.73			3.75
Non-performing assets to total assets		4.07			4.22
Allowance for loan losses as a percent of non-performing loans		98.33			100.50

(1) Excludes loans classified as “troubled debt restructured” that are not past due and vehicle service contract counterparty receivables, net.

Troubled debt restructurings (“TDR”)

	December 31, 2011
	Commercial		Retail			Total
	(In thousands)
Performing TDR’s	$	19,889	$	86,770		$	106,659
Non-performing TDR’s (1)		5,730		14,081	(2)		19,811
Total	$	25,619	$	100,851		$	126,470

	December 31, 2010
	Commercial		Retail			Total
	(In thousands)
Performing TDR’s	$	16,957	$	96,855		$	113,812
Non-performing TDR’s (1)		7,814		16,616	(2)		24,430
Total	$	24,771	$	113,471		$	138,242

(1) Included in non-performing loans table above.

(2) Also includes loans on non-accrual at the time of modification until six payments are receive on a timely basis.

Allowance for loan losses

	Twelve months ended
	December 31,
		2011						2010
					Unfunded						Unfunded
		Loans			Commitments			Loans			Commitments
	(Dollars in thousands)
Balance at beginning of period	$	67,915		$	1,322		$	81,717		$	1,858
Additions (deduction)
Provision for loan losses		27,946			-			46,765			-
Recoveries credited to allowance		4,747			-			3,612			-
Loans charged against the allowance		(41,724	)		-			(64,179	)		-
Additions (deductions) included in non-interest expense		-			(36	)		-			(536	)
Balance at end of period	$	58,884		$	1,286		$	67,915		$	1,322

Net loans charged against the allowance to average Portfolio Loans		2.20	%					2.97	%

Alternative Sources of Funds

			December 31,
			2011						2010
			Average						Average
	Amount		Maturity	Rate			Amount		Maturity	Rate
	(Dollars in thousands)
Brokered CDs	$	42,279	1.0 years		1.59	%	$	273,546	2.4 years		2.89	%
Fixed rate FHLB advances		30,384	3.3 years		3.99			21,022	5.9 years		6.34
Variable rate FHLB advances(1)		3,000	2.3 years		0.51			50,000	0.8 years		0.41
Total	$	75,663	2.0 years		2.51	%	$	344,568	2.4 years		2.74	%

(1)

Certain of these items have had their average maturity and rate altered through the use of derivative instruments, including pay-fixed interest rate swaps.

Capitalization

	December 31,
	2011			2010
	(In thousands)
Subordinated debentures	$	50,175		$	50,175
Amount not qualifying as regulatory capital		(1,507	)		(1,507	)
Amount qualifying as regulatory capital		48,668			48,668
Shareholders’ equity
Preferred stock		79,857			75,700
Common stock		248,950			246,407
Accumulated deficit		(214,259	)		(189,902	)
Accumulated other comprehensive loss		(11,921	)		(13,120	)
Total shareholders’ equity		102,627			119,085
Total capitalization	$	151,295		$	167,753

Non-Interest Income

		Three months ended									Twelve months ended
		December 31,			September 30,			December 31,			December 31,
		2011			2011			2010			2011			2010
		(In thousands)

Service charges on deposit accounts	$	4,617		$	4,623		$	4,887		$	18,306		$	21,511
Interchange income		2,259			2,356			2,160			9,091			8,257
Net gains (losses) on assets
Mortgage loans		3,509			2,025			4,286			9,262			12,330
Securities		(22	)		(57	)		14			249			1,639
Other than temporary loss on securities available for sale
Total impairment loss		(614	)		(4	)		(28	)		(760	)		(462	)
Loss recognized in other comprehensive income		-			-			-			-			-
Net impairment loss recognized in earnings		(614	)		(4	)		(28	)		(760	)		(462	)
Mortgage loan servicing		(126	)		(2,655	)		2,465			(2,011	)		(523	)
Investment and insurance commissions		437			534			585			2,050			1,889
Bank owned life insurance		493			496			464			1,878			1,917
Title insurance fees		375			299			644			1,465			2,037
Decrease in fair value of U.S. Treasury warrant		112			29			393			1,137			393
Gain on extinguishment of debt		-			-			-			-			18,066
Other		1,451			1,609			1,339			6,246			4,759
Total non-interest income	$	12,491		$	9,255		$	17,209		$	46,913		$	71,813

Capitalized Mortgage Loan Servicing Rights

	Three months ended December 31,						Twelve months ended December 31,
	2011			2010			2011			2010
	(In thousands)
Balance at beginning of period	$	11,549		$	11,667		$	14,661		$	15,273
Originated servicing rights capitalized		899			1,619			2,967			4,158
Amortization		(1,054	)		(1,367	)		(3,065	)		(3,862	)
Change in valuation allowance		(165	)		2,742			(3,334	)		(908	)
Balance at end of period	$	11,229		$	14,661		$	11,229		$	14,661

Valuation allowance at end of period	$	6,544		$	3,210		$	6,544		$	3,210

Mortgage Loan Activity

	Three months ended									Twelve months ended
	December 31			September 31			December 31			December 31
	2011			2011			2010			2011			2010
	(Dollars in thousands)
Mortgage loans originated	$	139,351		$	89,526		$	178,508		$	399,062		$	516,335
Mortgage loans sold		117,643			80,993			180,892			383,493			480,566
Mortgage loans sold with servicing rights released		21,017			25,179			24,058			81,196			77,080
Net gains on the sale of mortgage loans		3,509			2,025			4,286			9,262			12,330
Net gains as a percent of mortgage loans sold (“Loan Sales Margin”)		2.98	%		2.50	%		2.37	%		2.42	%		2.57	%
Fair value adjustments included in the Loan Sales Margin		0.29			0.15			(0.49	)		(0.01	)		0.10

Non-Interest Expense

	Three months ended									Twelve months ended
	December 31,			September 30,			December 31,			December 31,
	2011			2011			2010			2011			2010
	(In thousands)
Compensation	$	9,845		$	10,158		$	10,073		$	39,835		$	40,827
Performance-based compensation		677			281			147			1,449			1,803
Payroll taxes and employee benefits		1,930			2,215			2,042			9,200			9,081
Compensation and employee benefits		12,452			12,654			12,262			50,484			51,711
Loan and collection		2,309			2,658			3,947			12,414			15,323
Occupancy, net		2,768			2,651			2,791			11,183			11,016
Vehicle service contract counterparty contingencies		6,046			1,345			4,386			11,048			18,633
Data processing		2,524			2,502			2,367			9,751			9,554
Net losses on other real estate and repossessed assets		1,710			1,931			4,843			5,824			9,722
Furniture, fixtures and equipment		1,307			1,308			1,582			5,535			6,540
Legal and professional fees		1,611			751			1,239			3,941			4,100
Credit card and bank service fees		727			869			1,237			3,656			5,790
Communications		852			863			996			3,552			4,138
FDIC deposit insurance		735			885			1,589			3,507			6,805
Advertising		539			740			567			2,503			2,712
Provision for loss reimbursement on sold loans		973			251			55			1,993			215
Supplies		401			376			393			1,571			1,630
Amortization of intangible assets		342			343			315			1,371			1,280
Recoveries related to unfunded lending commitments		(48	)		(172	)		(65	)		(36	)		(536	)
Other		1,465			1,507			1,893			5,651			6,367
Total non-interest expense	$	36,713		$	31,462		$	40,397		$	133,948		$	155,000

Average Balances and Rates

	Three Months Ended December 31,
	2011							2010
	Average Balance		Interest		Rate(3)			Average Balance		Interest		Rate(3)
Assets (1)	(Dollars in thousands)
Taxable loans	$	1,632,445	$	25,688		6.26	%	$	1,911,195	$	32,116		6.68	%
Tax-exempt loans (2)		7,378		78		4.19			8,750		94		4.26
Taxable securities		95,859		314		1.30			68,171		481		2.80
Tax-exempt securities (2)		28,214		288		4.05			32,483		338		4.13
Cash – interest bearing		292,658		187		0.25			337,468		215		0.25
Other investments		20,893		175		3.32			24,839		184		2.94
Interest Earning Assets		2,077,447		26,730		5.12			2,382,906		33,428		5.58
Cash and due from banks		54,944							49,989
Other assets, net		180,769							188,395
Total Assets	$	2,313,160						$	2,621,290

Liabilities
Savings and interest-bearing checking	$	1,008,884		458		0.18		$	1,094,605		648		0.23
Time deposits		567,629		2,113		1.48			829,668		5,052		2.42
Other borrowings		85,586		1,198		5.55			153,898		1,662		4.28
Interest Bearing Liabilities		1,662,099		3,769		.90			2,078,171		7,362		1.41
Non-interest bearing deposits		499,325							375,448
Other liabilities		41,254							49,532
Shareholders’ equity		110,482							118,139
Total liabilities and shareholders’ equity	$	2,313,160						$	2,621,290

Net Interest Income			$	22,961						$	26,066

Net Interest Income as a Percent of Earning Assets						4.40	%						4.35	%

(1)	All domestic, except for $0.1 million for the three months ended December 31, 2010, of average payment plan receivables included in taxable loans for customers domiciled in Canada.

(2)	Interest on tax-exempt loans and securities is not presented on a fully tax equivalent basis due to the current net operating loss carryforward position and the deferred tax asset valuation allowance.

(3)	Annualized.

Average Balances and Rates

	Twelve Months Ended December 31,
	2011							2010
	Average Balance		Interest		Rate			Average Balance		Interest		Rate
Assets (1)	(Dollars in thousands)
Taxable loans	$	1,704,057	$	110,242		6.47	%	$	2,072,586	$	141,876		6.85	%
Tax-exempt loans (2)		7,891		332		4.21			9,531		406		4.26
Taxable securities		62,315		1,422		2.28			82,127		3,052		3.72
Tax-exempt securities (2)		29,615		1,219		4.12			45,223		1,932		4.27
Cash – interest bearing		312,576		792		0.25			324,065		824		0.25
Other investments		22,084		755		3.42			26,526		761		2.87
Interest Earning Assets		2,138,538		114,762		5.36			2,560,058		148,851		5.81
Cash and due from banks		53,098							50,739
Other assets, net		188,583							167,873
Total Assets	$	2,380,219						$	2,778,670

Liabilities
Savings and interest-bearing checking	$	1,006,305		2,263		0.22		$	1,089,992		2,829		0.26
Time deposits		656,944		12,994		1.98			978,098		25,335		2.59
Other borrowings		92,879		4,936		5.31			198,030		9,034		4.56
Interest Bearing Liabilities		1,756,128		20,193		1.15			2,266,120		37,198		1.64
Non-interest bearing deposits		467,305							349,376
Other liabilities		43,378							54,183
Shareholders’ equity		113,408							108,991
Total liabilities and shareholders’ equity	$	2,380,219						$	2,778,670

Net Interest Income			$	94,569						$	111,653

Net Interest Income as a Percent of Earning Assets						4.42	%						4.36	%

(1)	All domestic, except for $0.01 million and $0.4 million for the years ended December 31, 2011 and 2010, respectively, of average payment plan receivables included in taxable loans for customers domiciled in Canada.

(2)	Interest on tax-exempt loans and securities is not presented on a fully tax equivalent basis due to the current net operating loss carryforward position and the deferred tax asset valuation allowance.

Commercial Loan Portfolio Analysis as of December 31, 2011

			Total Commercial Loans
			Watch Credits						Percent of Loan
Loan Category	All Loans		Performing		Non- performing		Total		Category in Watch Credit
	(Dollars in thousands)
Land	$	18,371	$	1,157	$	4,882	$	6,039		32.9	%
Land Development		18,600		9,528		1,757		11,285		60.7
Construction		17,597		3,451		392		3,843		21.8
Income Producing		272,769		57,501		14,267		71,768		26.3
Owner Occupied		180,197		24,773		5,758		30,531		16.9
Total Commercial Real Estate Loans (1)	$	507,534	$	96,410		27,056	$	123,466		24.3
Other Commercial Loans(1)	$	144,306	$	16,725		2,226	$	18,951		13.1
Total non-performing commercial loans					$	29,282

(1) The total of these two categories is different than the December 31, 2011, Consolidated Statement of Financial Condition due primarily to loans in process.

INDEPENDENT BANK CORP /MI/ - FORM 8-K - EX-99.2 - EXHIBIT 99.2 - February 2, 2012

Attached files

INDEPENDENT BANK CORP /MI/ Reports