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

Attached files

file	filename
8-K - INDEPENDENT BANK CORPORATION 8-K 1-30-2013 - 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,
	2012			2011
	(Dollars in thousands)
Non-accrual loans	$	32,929		$	59,309
Loans 90 days or more past due and still accruing interest		7			574
Total non-performing loans		32,936			59,883
Other real estate and repossessed assets		26,133			34,042
Total non-performing assets	$	59,069		$	93,925
As a percent of Portfolio Loans
Non-performing loans		2.32	%		3.80	%
Allowance for loan losses		3.12			3.73
Non-performing assets to total assets		2.92			4.07
Allowance for loan losses as a percent of non-performing loans		134.43			98.33

(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, 2012
	Commercial		Retail			Total
	(In thousands)
Performing TDR’s	$	40,753	$	85,977		$	126,730
Non-performing TDR’s (1)		7,756		9,177	(2)		16,933
Total	$	48,509	$	95,154		$	143,663

	December 31, 2011
	Commercial		Retail			Total
	(In thousands)
Performing TDR’s	$	29,799	$	86,770		$	116,569
Non-performing TDR’s (1)		14,567		14,081	(2)		28,648
Total	$	44,366	$	100,851		$	145,217

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

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

Allowance for loan losses	Twelve months ended
	December 31,
	2012						2011
				Unfunded						Unfunded
	Loans			Commitments			Loans			Commitments
	(Dollars in thousands)
Balance at beginning of period	$	58,884		$	1,286		$	67,915		$	1,322
Additions (deduction)
Provision for loan losses		6,887			-			27,946			-
Recoveries credited to allowance		6,522			-			4,747			-
Loans charged against the allowance		(27,408	)		-			(41,724	)		-
Reclassification to loans held for sale		(610	)		-			-			-
Additions (deductions) included in non-interest expense		-			(688	)		-			(36	)
Balance at end of period	$	44,275		$	598		$	58,884		$	1,286

Net loans charged against the allowance to average Portfolio Loans		1.46	%					2.20	%

Alternative Sources of Funds

	December 31,
	2012						2011
			Average						Average
	Amount		Maturity	Rate			Amount		Maturity	Rate
	(Dollars in thousands)
Brokered CDs(1)	$	14,591	0.6 years		1.70	%	$	13,771	1.2 years		3.15	%
Fixed-rate FHLB advances		17,622	4.5 years		6.38			30,384	3.3 years		3.99
Variable-rate FHLB advances(1)		-						3,000	2.3 years		0.51
Total	$	32,213	2.7 years		4.26	%	$	47,155	2.6 years		3.52	%

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

Capitalization
	December 31,
	2012			2011
	(In thousands)
Subordinated debentures	$	50,175		$	50,175
Amount not qualifying as regulatory capital		(1,507	)		(1,507	)
Amount qualifying as regulatory capital		48,668			48,668
Shareholders’ equity
Convertible preferred stock		84,204			79,857
Common stock		251,237			248,950
Accumulated deficit		(192,408	)		(214,259	)
Accumulated other comprehensive loss		(8,058	)		(11,921	)
Total shareholders’ equity		134,975			102,627
Total capitalization	$	183,643		$	151,295

Non-Interest Income
		Three months ended									Twelve months ended
		December 31,			September 30,			December 31,			December 31,
		2012			2012			2011			2012			2011
		(In thousands)
Service charges on deposit accounts	$	4,395		$	4,739		$	4,617		$	17,887		$	18,306
Interchange income		2,135			2,324			2,259			9,188			9,091
Net gains (losses) on assets
Mortgage loans		5,282			4,602			3,509			17,323			9,262
Securities		72			301			(22	)		1,226			249
Other than temporary impairment loss on securities
Total impairment loss		(7	)		(70	)		(614	)		(339	)		(760	)
Loss recognized in other comprehensive income		-			-			-			-			-
Net impairment loss recognized in earnings		(7	)		(70	)		(614	)		(339	)		(760	)
Mortgage loan servicing		882			(364	)		(126	)		166			(2,011	)
Investment and insurance commissions		560			491			437			2,146			2,050
Bank owned life insurance		401			398			493			1,622			1,878
Title insurance fees		484			482			375			1,963			1,465
(Increase) decrease in fair value of U.S.Treasury warrant		(74	)		(32	)		112			(285	)		1,137
Net gain on branch sale		5,402			-			-			5,402			-
Other		1,865			1,671			1,451			7,266			6,246
Total non-interest income	$	21,397		$	14,542		$	12,491		$	63,565		$	46,913

Capitalized Mortgage Loan Servicing Rights
	Three months ended December 31,						Twelve months ended December 31,
	2012			2011			2012			2011
	(In thousands)
Balance at beginning of period	$	10,205		$	11,549		$	11,229		$	14,661
Originated servicing rights capitalized		1,058			899			4,006			2,967
Amortization		(1,328	)		(1,054	)		(4,679	)		(3,065	)
Change in valuation allowance		1,078			(165	)		457			(3,334	)
Balance at end of period	$	11,013		$	11,229		$	11,013		$	11,229

Valuation allowance at end of period	$	6,087		$	6,544		$	6,087		$	6,544

Mortgage Loan Activity

	Three months ended												Twelve months ended
	December 31,				September 30,				December 31,				December 31,
	2012				2012				2011				2012				2011
	(Dollars in thousands)
Mortgage loans originated		$	153,821			$	135,263			$	139,351			$	538,717			$	399,062
Mortgage loans sold			143,138				128,196				117,643				510,488				383,493
Mortgage loans sold with servicing rights released			23,459				21,942				21,017				83,296				81,196
Net gains on the sale of mortgage loans			5,282				4,602				3,509				17,323				9,262
Net gains as a percent of mortgage loans sold (“Loan Sales Margin”)			3.69	%			3.59	%			2.98	%			3.39	%			2.42	%
Fair value adjustments included in the Loan Sales Margin			(0.15	)			0.29				0.29				0.28				(0.01	)

Non-Interest Expense
	Three months ended									Twelve months ended
	December 31,			September 30,			December 31,			December 31,
	2012			2012			2011			2012				2011
	(In thousands)
Compensation	$	9,804		$	9,702		$	9,845			$	39,002		$	39,835
Performance-based compensation		2,140			1,712			677				5,672			1,449
Payroll taxes and employee benefits		2,441			2,196			1,930				9,309			9,200
Compensation and employee benefits		14,385			13,610			12,452				53,983			50,484
Occupancy, net		2,416			2,482			2,768				10,104			11,183
Loan and collection		1,836			2,832			2,309				9,965			12,414
Data processing		2,049			2,024			2,113				8,009			8,208
Furniture, fixtures and equipment		1,248			1,194			1,307				5,043			5,535
Legal and professional fees		1,058			952			1,611				4,175			3,941
FDIC deposit insurance		817			816			735				3,306			3,507
Communications		783			785			852				3,269			3,552
Net losses on other real estate and repossessed assets		943			291			1,710				2,854			5,824
Advertising		652			647			539				2,494			2,503
Credit card and bank service fees		383			433			727				2,091			3,656
Interchange expense		478			468			411				1,799			1,543
Vehicle service contract counterparty contingencies		551			281			6,046				1,629			11,048
Supplies		248			299			401				1,281			1,571
Provision for loss reimbursement on sold loans		361			193			973				1,112			1,993
Amortization of intangible assets		249			272			342				1,065			1,371
Write-down of property and equipment held for sale		-			860			-				860			-
Recoveries related to unfunded lending commitments		(91	)		(538	)		(48	)			(688	)		(36	)
Other		1,541			1,395			1,465				4,384			5,651
Total non-interest expense	$	29,907		$	29,296		$	36,713			$	116,735		$	133,948

Average Balances and Rates
	Three Months Ended
	December 31,
	2012							2011
	Average							Average
	Balance		Interest		Rate(3)			Balance		Interest		Rate(3)
	(Dollars in thousands)
Assets (1)
Taxable loans	$	1,503,104	$	22,285		5.90	%	$	1,632,445	$	25,688		6.26	%
Tax-exempt loans (2)		6,432		68		4.21			7,378		78		4.19
Taxable securities		201,790		688		1.36			95,859		314		1.30
Tax-exempt securities (2)		24,766		243		3.90			28,214		288		4.05
Cash – interest bearing		345,904		220		0.25			292,658		187		0.25
Other investments		20,696		210		4.04			20,893		175		3.32
Interest Earning Assets		2,102,692		23,714		4.50			2,077,447		26,730		5.12
Cash and due from banks		51,863							54,944
Other assets, net		150,592							180,769
Total Assets	$	2,305,147						$	2,313,160

Liabilities
Savings and interest-bearing checking	$	1,030,245		378		0.15		$	1,008,884		458		0.18
Time deposits		514,696		1,583		1.22			567,629		2,113		1.48
Other borrowings		67,850		879		5.15			85,586		1,198		5.55
Interest Bearing Liabilities		1,612,791		2,840		0.70			1,662,099		3,769		0.90
Non-interest bearing deposits		521,874							499,325
Other liabilities		43,363							41,254
Shareholders’ equity		127,119							110,482
Total liabilities and shareholders’ equity	$	2,305,147						$	2,313,160
Net Interest Income			$	20,874						$	22,961

Net Interest Income as a Percent of Average Interest Earning Assets						3.96	%						4.40	%

(1)	All domestic.

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

(3)	Annualized.

Average Balances and Rates
	Twelve Months Ended
	December 31,
	2012							2011
	Average							Average
	Balance		Interest		Rate			Balance		Interest		Rate(3)
	(Dollars in thousands)
Assets (1)
Taxable loans	$	1,543,592	$	93,494		6.06	%	$	1,704,057	$	110,242		6.47	%
Tax-exempt loans (2)		6,864		286		4.17			7,891		332		4.21
Taxable securities		216,355		2,934		1.36			62,315		1,422		2.28
Tax-exempt securities (2)		26,111		1,044		4.00			29,615		1,219		4.12
Cash – interest bearing		337,311		858		0.25			312,576		792		0.25
Other investments		20,645		782		3.79			22,084		755		3.42
Interest Earning Assets		2,150,878		99,398		4.62			2,138,538		114,762		5.36
Cash and due from banks		53,926							53,098
Other assets, net		159,925							188,583
Total Assets	$	2,364,729						$	2,380,219

Liabilities
Savings and interest-bearing checking	$	1,060,882		1,830		0.17		$	1,006,305		2,263		0.22
Time deposits		552,903		7,083		1.28			656,944		12,994		1.98
Other borrowings		72,240		4,230		5.86			92,879		4,936		5.31
Interest Bearing Liabilities		1,686,025		13,143		0.78			1,756,128		20,193		1.15
Non-interest bearing deposits		523,926							467,305
Other liabilities		40,719							43,378
Shareholders’ equity		114,059							113,408
Total liabilities and shareholders’ equity	$	2,364,729						$	2,380,219
Net Interest Income			$	86,255						$	94,569

Net Interest Income as a Percent of Average Interest Earning Assets						4.01	%						4.42	%

(1)	All domestic.

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

Commercial Loan Portfolio Analysis as of December 31, 2012
			Total Commercial Loans
			Watch Credits						Percent of Loan
Loan Category	All Loans		Performing		Non- performing		Total		Category in Watch Credit
	(Dollars in thousands)
Land	$	13,515	$	1,524	$	2,448	$	3,972		29.4	%
Land Development		14,301		4,075		1,453		5,528		38.7
Construction		15,339		798		160		958		6.2
Income Producing		222,200		33,532		5,611		39,143		17.6
Owner Occupied		215,549		26,617		4,554		31,171		14.5
Total Commercial Real Estate Loans (1)	$	480,904	$	66,546		14,226	$	80,772		16.8

Other Commercial Loans(1)	$	136,413	$	13,496		526	$	14,022		10.3
Total non-performing commercial loans					$	14,752

(1)	The total of these two categories is different than the December 31, 2012, Consolidated Statement of Financial Condition due primarily to loans in process.

INDEPENDENT BANK CORP /MI/ - FORM 8-K - EX-99.2 - EXHIBIT 99.2 - January 30, 2013

Attached files

INDEPENDENT BANK CORP /MI/ Reports