Talmer Bancorp, Inc. reports third quarter 2014 net income of $19.5 million, representing $0.26 of earnings per diluted average common share
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Talmer Bancorp, Inc. declares cash dividend for common stock of $0.01 per share
TROY, Mich., Nov. 4, 2014 /PRNewswire/ -- Talmer Bancorp, Inc. (NASDAQ: TLMR) ("Talmer") today reported third quarter 2014 net income of $19.5 million, compared to $20.6 million for the second quarter of 2014 and $10.5 million for the third quarter of 2013. Earnings per diluted common share were $0.26 for the third quarter of 2014, compared to $0.27 for the second quarter of 2014 and $0.15 for the third 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 November 28, 2014, to our Class A common shareholders of record as of November 17, 2014.
Talmer Bancorp President and CEO David Provost commented, "The third quarter was a busy quarter for Talmer as we completed the sales of our Wisconsin and New Mexico branches, completed the consolidation of our four Las Vegas branches, and continued to execute on our plan of improving our overall operating efficiency. I am particularly pleased with our robust organic loan growth, which was driven in large part by commercial and industrial lending. While loan growth should moderate some in the fourth quarter, our pipeline remains strong and I believe that we will be able to continue our organic loan growth for the foreseeable future. In addition, we made key hires during the quarter to bolster our asset-based lending team, which is particularly well suited to be responsive to the growing commercial lending opportunities within our footprint, and enhance our ability to drive earning asset and fee income growth. On the merger and acquisition front, the First of Huron acquisition we announced in August is on schedule to close in the first quarter of 2015, and we continue to be very active in looking at additional acquisition opportunities."
Quarterly Results
Summary
(Dollars in thousands,
except per share data) 3rd Qtr 2014 2nd Qtr 2014 3rd Qtr 2013
------------------------ ------------ ------------ ------------
Earnings Summary
Net interest income $ 52,196 $ 52,531 $ 44,001
Total provision
(benefit) for loan
losses 1,509 (4,102) 2,125
Noninterest income 29,995 13,799 17,984
Noninterest expense 51,263 54,072 53,373
Income before income
taxes 29,419 16,360 6,487
Income tax provision
(benefit) 9,904 (4,246) (4,057)
------------ ------------ ------------
Net income 19,515 20,606 10,544
Per Share Data
Diluted earnings per
common share $ 0.26 $ 0.27 $ 0.15
Tangible book value per
share (1) 10.40 10.11 8.95
Average diluted common
shares (in thousands) 75,752 75,659 69,853
Performance and Capital
Ratios
Return on average assets
(annualized) 1.36% 1.51% 0.90%
Return on average equity
(annualized) 10.56 11.61 7.37
Net interest margin
(fully taxable
equivalent)
(annualized) (2) 4.04 4.35 4.11
Tangible average equity
to tangible average
assets (1) 12.64 12.79 11.90
Tier 1 leverage ratio
(3) 11.45 11.71 11.78
Tier 1 risk-based
capital (3) 15.56 16.16 17.83
Total risk-based capital
(3) 16.76 17.31 18.66
(1) See section entitled "Reconciliation of Non-GAAP
Financial Measures."
(2) Presented on a tax equivalented basis using a 35% tax
rate for all periods presented.
(3) Third quarter 2014
is estimated.
In addition to the quarterly results presented above, first quarter 2014 has been revised to reflect the impact to the financial statements from adjustments to the acquisition date fair value of deferred income tax benefits in the Talmer West Bank acquisition within the measurement period. These adjustments increased first quarter net income and period end equity by $1.8 million, compared to previously reported levels.
Third Quarter 2014 Compared to Second Quarter 2014
-- Net income was $19.5 million, or $0.26 per diluted average common share,
in the third quarter of 2014, compared to $20.6 million, or $0.27 per
diluted average common share, for the second quarter of 2014. Significant
items in the third quarter included $14.4 million in gain on sales of
branches, $1.4 million of various operating expenses associated with
acquisition and integration activities, and $176 thousand detriment to
earnings due to a fair value adjustment to our loan servicing rights
(compared to a $4.2 million detriment in the second quarter). Also
negatively impacting earnings in the third quarter was a significant
increase in provision expense on uncovered loans as a result of strong
loan growth and the accounting impact of cash flow re-estimations for
uncovered acquired loans.
-- Net total loans increased during the third quarter of 2014 by $281.1
million. During the third quarter of 2014, Talmer Bank and Trust's net
total loans grew by $304.1 million as a result of $352.6 million of net
uncovered loan growth and $48.5 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 $23.0 million in the third quarter of
2014.
-- Total deposits increased $189.1 million, to $4.5 billion as of September
30, 2014, compared to June 30, 2014. Deposit growth in the third quarter
of 2014 more than offset the $389.9 million of deposits sold in
conjunction with our branch office sales in Wisconsin and New Mexico and
the continued, anticipated decline in higher-cost deposits obtained from
our acquisition of Talmer West Bank. Total deposit growth excluding the
Wisconsin and New Mexico branch sales included other brokered funds of
$349.7 million, time deposits of $144.3 million, interest-bearing demand
deposits of $63.3 million and noninterest-bearing demand deposits of
$35.5 million, partially offset by a $14.3 million decline in money
market and savings deposits.
-- Net interest income decreased slightly to $52.2 million in the third
quarter of 2014, compared to $52.5 million in the second quarter of 2014.
The $335 thousand decrease in net interest income was primarily the
result of increases of $1.2 million in negative accretion of the FDIC
indemnification asset and $564 thousand in interest expense, partially
offset by increases of $1.2 million in interest and fees on loans and
$349 thousand in interest earned on our securities portfolio. Our net
interest margin declined 31 basis points to 4.04% in the third quarter of
2014, compared to 4.35% in the second quarter of 2014.
-- Noninterest income increased by $16.2 million to $30.0 million in the
third quarter of 2014, compared to the second quarter of 2014. The
increase is primarily the result of $14.4 million in gain on sales of
branches from the sales of our Wisconsin branches and our single branch
located in New Mexico in the third quarter of 2014 and an increase in
mortgage banking and other loan fees of $3.2 million, partially offset by
a decline in net gain on sales of loans of $1.6 million. The increase 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 $176 thousand during the third quarter of 2014, compared to a
detriment of $4.2 million during the second quarter of 2014 due mainly to
movements in interest rates during those periods.
-- Noninterest expenses decreased $2.8 million, or 5.2%, to $51.3 million in
the third quarter of 2014 compared to the second quarter of 2014. The
decline in noninterest expenses primarily reflects our continued efforts
to improve operating efficiencies as we move to fully integrate and
rationalize the operations of our acquired banks.
Income Statement
Net Interest Income and Net Interest Margin
Net interest income for the third quarter of 2014 was $52.2 million, compared to $52.5 million in the prior quarter. The $335 thousand decrease in net interest income in the third quarter was primarily the result of increases of $1.2 million in negative accretion of the FDIC indemnification asset and $564 thousand in interest expense, partially offset by increases of $1.2 million in interest and fees on loans and $349 thousand in interest earned on our securities portfolio.
Our net interest margin was 4.04% in the third quarter of 2014, a decrease of 31 basis points from 4.35% in the second quarter of 2014. The decline in our net interest margin in the third quarter was due to a combination of several factors. The largest factor affecting the change in our net interest margin was the increase in negative accretion of the FDIC indemnification asset as we continue to experience increases in cash flow expectations on covered loans as a result of our quarterly re-estimations and because we are nearing the end of our loss share agreements with the FDIC related to non-single family loans. Another factor affecting our net interest margin was the run-off of certain purchased credit impaired loans that had significantly benefitted the second quarter of 2014 net interest margin.
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