EX-99.2 3 k47339exv99w2.htm EX-99.2 EX-99.2
Exhibit 99.2
INDEPENDENT BANK CORPORATION AND SUBSIDIARIES
Supplemental Data
Non-performing assets
                 
    December 31,     December 31,  
    2008     2007  
    (dollars in thousands)  
Non-accrual loans
  $ 126,639     $ 72,682  
Loans 90 days or more past due and still accruing interest
    2,626       4,394  
Restructured loans
            173  
 
           
Total non-performing loans
    129,265       77,249  
Other real estate
    20,498       9,723  
 
           
Total non-performing assets
  $ 149,763     $ 86,972  
 
           
As a percent of Portfolio Loans
               
Non-performing loans
    5.25 %     3.07 %
Allowance for loan losses
    2.35       1.80  
Non-performing assets to total assets
    5.06       2.68  
Allowance for loan losses as a percent of non-performing loans
    45       59  
Allowance for loan losses
                                 
    Twelve months ended  
    December 31,  
    2008     2007  
            Unfunded             Unfunded  
    Loans     Commitments     Loans     Commitments  
    (in thousands)  
Balance at beginning of period
  $ 45,294     $ 1,936     $ 26,879     $ 1,881  
Additions (deduction)
                               
Provision charged to operating expense
    68,079       208       43,105       55  
Recoveries credited to allowance
    3,489               2,346          
Loans charged against the allowance
    (58,962 )             (27,036 )        
 
                       
Balance at end of period
  $ 57,900     $ 2,144     $ 45,294     $ 1,936  
 
                       
 
Net loans charged against the allowance to average Portfolio Loans
    2.18 %             0.98 %        


 

Alternative Sources of Funds
                                                 
    December 31,   December 31,
    2008   2007
            Average                   Average    
    Amount   Maturity   Rate   Amount   Maturity   Rate
    (dollars in thousands)
Brokered CDs(1)
  $ 182,283     1.1 years     3.63 %   $ 516,077     1.9 years     4.72 %
Fixed rate FHLB advances(1)
    314,214     2.3 years     3.49       240,509     1.3 years     4.81  
Variable rate FHLB advances(1)
                            20,000     .3 years     4.35  
Securities sold under agreements to Repurchase(1)
    35,000     1.9 years     4.42       35,000     2.9 years     4.42  
FRB — Discount borrowing
    189,500     .1 years     0.54                          
Federal funds purchased
    750     1 day     0.25       54,452     1 day     4.00  
        
Total
  $ 721,747     1.4 years     2.80 %   $ 866,038     1.6 years     4.68 %
        
 
(1)   Certain of these items have had their average maturity and rate altered through the use of derivative instruments, including pay-fixed and pay-variable interest rate swaps.
Capitalization
                 
    December 31,     December 31,  
    2008     2007  
    (in thousands)  
Unsecured debt
          $ 3,000  
 
           
 
Subordinated debentures
  $ 92,888       92,888  
Amount not qualifying as regulatory capital
    (2,788 )     (2,788 )
 
           
Amount qualifying as regulatory capital
    90,100       90,100  
 
           
Shareholders’ Equity
               
Preferred stock, Series A, no par value
    68,456          
Common stock, par value $1.00 per share
    22,791       22,601  
Capital surplus
    200,687       195,302  
Retained earnings (accumulated deficit)
    (70,149 )     22,770  
Accumulated other comprehensive loss
    (23,208 )     (171 )
 
           
Total shareholders’ equity
    198,577       240,502  
 
           
Total capitalization
  $ 288,677     $ 333,602  
 
           

2


 

Non-Interest Income
                                         
    Three months ended     Twelve months ended  
    December 31,     September 30,     December 31,     December 31,  
    2008     2008     2007     2008     2007  
    (in thousands)  
Service charges on deposit accounts
  $ 5,996     $ 6,416     $ 6,418     $ 24,223     $ 24,251  
Net gains (losses) on assets
                                       
Mortgage loans
    1,204       969       904       5,181       4,317  
Securities
    (6,924 )     (6,711 )     (964 )     (14,961 )     (705 )
VISA check card interchange income
    1,394       1,468       1,376       5,728       4,905  
Mortgage loan servicing
    (3,616 )     340       364       (2,071 )     2,236  
Mutual fund and annuity commissions
    459       680       609       2,207       2,072  
Bank owned life insurance
    492       506       462       1,960       1,830  
Title insurance fees
    280       307       344       1,388       1,551  
Manufactured home loan origination fees and commissions
                                    239  
Other
    1,359       1,473       1,660       6,066       6,449  
 
                             
Total non-interest income
  $ 644     $ 5,448     $ 11,173     $ 29,721     $ 47,145  
 
                             
Mortgage Loan Activity
                                         
    Three months ended   Twelve months ended
    December 31,   September 30,   December 31,   December 31,
    2008   2008   2007   2008   2007
    (in thousands)
Mortgage loans originated
  $ 64,453     $ 74,506     $ 147,220     $ 368,517     $ 507,211  
Mortgage loans sold
    49,692       52,837       64,547       267,216       288,826  
Mortgage loans sold with servicing rights released
    15,573       16,760       9,379       51,875       47,783  
Net gains on the sale of mortgage loans
    1,204       969       904       5,181       4,317  
Net gains as a percent of mortgage loans sold (“Loan Sale Margin”)
    2.42 %     1.83 %     1.40 %     1.94 %     1.49 %
SFAS #133/#159 adjustments included in the Loan Sale Margin
    0.74       (0.03 )     (0.18 )     0.36       (0.06 )
Capitalized Real Estate Mortgage Loan Servicing Rights
                                 
    Three months ended     Twelve months ended  
    December 31,     December 31,  
    2008     2007     2008     2007  
    (in thousands)  
Balance at beginning of period
  $ 16,260     $ 15,830     $ 15,780     $ 14,782  
Originated servicing rights capitalized
    370       651       2,405       2,873  
Amortization
    (409 )     (404 )     (1,887 )     (1,624 )
(Increase)/decrease in impairment reserve
    (4,255 )     (297 )     (4,332 )     (251 )
 
                       
Balance at end of period
  $ 11,966     $ 15,780     $ 11,966     $ 15,780  
 
                       
 
                               
Impairment reserve at end of period
  $ 4,651     $ 319     $ 4,651     $ 319  
 
                       

3


 

Non-Interest Expense
                                         
    Three months ended     Twelve months ended  
    December 31,     September 30,     December 31,     December 31,  
    2008     2008     2007     2008     2007  
    (in thousands)  
Salaries
  $ 10,188     $ 10,110     $ 9,825     $ 40,181     $ 40,373  
Performance-based compensation and benefits
    778       1,336       1,218       4,861       4,979  
Other benefits
    2,198       2,577       2,395       10,137       10,459  
 
                             
Compensation and employee benefits
    13,164       14,023       13,438       55,179       55,811  
Occupancy, net
    3,054       2,871       2,754       11,852       10,624  
Loan and collection
    3,536       2,008       1,437       9,431       4,949  
Furniture, fixtures and equipment
    1,770       1,662       1,944       7,074       7,633  
Data processing
    1,951       1,760       1,854       7,148       6,957  
Loss on other real estate and repossessed assets
    1,758       425       104       3,849       276  
Advertising
    1,691       1,575       1,549       5,534       5,514  
Credit card and bank service fees
    1,325       1,273       1,037       4,818       3,913  
Communications
    1,014       968       1,003       4,018       3,809  
Deposit insurance
    462       275       268       1,988       628  
Amortization of intangible assets
    758       760       934       3,072       3,373  
Supplies
    496       519       633       2,030       2,411  
Legal and professional
    624       527       511       2,032       1,978  
Branch acquisition and conversion costs
                                    330  
Goodwill impairment
    50,020                       50,020       343  
Other
    1,963       2,010       2,119       7,639       7,175  
 
                             
Total non-interest expense
  $ 83,586     $ 30,656     $ 29,585     $ 175,684     $ 115,724  
 
                             

4


 

Average Balances and Tax Equivalent Rates
                                                 
    Three Months Ended  
    December 31,  
    2008     2007  
    Average                     Average              
    Balance     Interest     Rate     Balance     Interest     Rate  
    (dollars in thousands)  
Assets
                                               
Taxable loans (1)
  $ 2,507,518     $ 45,334       7.20 %   $ 2,564,579     $ 50,772       7.87 %
Tax-exempt loans (1,2)
    10,084       169       6.67       9,919       183       7.32  
Taxable securities
    118,815       1,909       6.39       162,585       2,258       5.51  
Tax-exempt securities (2)
    109,220       1,972       7.18       209,882       3,686       6.97  
Other investments
    28,063       99       1.40       26,863       328       4.84  
 
                                       
Interest Earning Assets — Continuing Operations
    2,773,700       49,483       7.11       2,973,828       57,227       7.65  
 
                                       
Cash and due from banks
    55,424                       56,470                  
Taxable loans — discontinued operations
                            476                  
Other assets, net
    232,692                       224,519                  
 
                                           
Total Assets
  $ 3,061,816                     $ 3,255,293                  
 
                                           
 
Liabilities
                                               
Savings and NOW
  $ 915,288       1,981       0.86     $ 992,317       4,849       1.94  
Time deposits
    884,938       7,736       3.48       1,298,269       15,835       4.84  
Long-term debt
                            1,495       18       4.78  
Other borrowings
    663,788       6,379       3.82       332,151       5,004       5.98  
 
                                       
Interest Bearing Liabilities— Continuing Operations
    2,464,014       16,096       2.60       2,624,232       25,706       3.89  
 
                                           
Demand deposits
    303,221                       299,112                  
Time deposits — discontinued operations
                            339                  
Other liabilities
    57,334                       86,183                  
Shareholders’ equity
    237,247                       245,427                  
 
                                           
Total liabilities and shareholders’ equity
  $ 3,061,816                     $ 3,255,293                  
 
                                           
 
Tax Equivalent Net Interest Income
          $ 33,387                     $ 31,521          
 
                                           
 
Tax Equivalent Net Interest Income as a Percent of Earning Assets
                    4.80 %                     4.22 %
 
                                           
 
(1)   All domestic
 
(2)   Interest on tax-exempt loans and securities is presented on a fully tax equivalent basis assuming a marginal tax rate of 35%

5


 

Average Balances and Tax Equivalent Rates
                                                 
    Twelve Months Ended  
    December 31,  
    2008     2007  
    Average                     Average              
    Balance     Interest     Rate     Balance     Interest     Rate  
    (dollars in thousands)  
Assets
                                               
Taxable loans (1)
  $ 2,558,621     $ 186,259       7.28 %   $ 2,531,737     $ 201,924       7.98 %
Tax-exempt loans (1,2)
    10,747       751       6.99       9,568       672       7.02  
Taxable securities
    144,265       8,467       5.87       179,878       9,635       5.36  
Tax-exempt securities (2)
    162,144       11,534       7.11       225,676       15,773       6.99  
Other investments
    31,425       1,284       4.09       26,017       1,338       5.14  
 
                                       
Interest Earning Assets — Continuing Operations
    2,907,202       208,295       7.16       2,972,876       229,342       7.71  
 
                                           
Cash and due from banks
    53,873                       57,174                  
Taxable loans — discontinued operations
                            8,542                  
Other assets, net
    227,969                       218,553                  
 
                                           
Total Assets
  $ 3,189,044                     $ 3,257,145                  
 
                                           
 
                                               
Liabilities
                                               
Savings and NOW
  $ 968,180       10,262       1.06     $ 971,807       18,768       1.93  
Time deposits
    917,403       36,435       3.97       1,439,177       70,292       4.88  
Long-term debt
    247       12       4.86       2,240       104       4.64  
Other borrowings
    682,884       26,878       3.94       205,811       13,499       6.56  
 
                                       
Interest Bearing Liabilities — Continuing Operations
    2,568,714       73,587       2.86       2,619,035       102,663       3.92  
 
                                           
Demand deposits
    301,117                       300,886                  
Time deposits — discontinued operations
                            6,166                  
Other liabilities
    79,929                       79,750                  
Shareholders’ equity
    239,284                       251,308                  
 
                                           
Total liabilities and shareholders’ equity
  $ 3,189,044                     $ 3,257,145                  
 
                                           
 
                                               
Tax Equivalent Net Interest Income
          $ 134,708                     $ 126,679          
 
                                           
 
                                               
Tax Equivalent Net Interest Income as a Percent of Earning Assets
                    4.63 %                     4.26 %
 
                                           
 
(1)   All domestic
 
(2)   Interest on tax-exempt loans and securities is presented on a fully tax equivalent basis assuming a marginal tax rate of 35%

6


 

Commercial Loan Portfolio Analysis as of December 31, 2008
                                         
    Total Commercial Loans
                                    Percent of
            Watch Credits   Loan
                    Non-           Category in
Loan Category   All Loans   Performing   performing   Total   Watch Credit
    (dollars in thousands)
Land
  $ 36,382     $ 5,785     $ 11,935     $ 17,720       48.7 %
Land Development
    61,607       8,233       27,359       35,592       57.8 %
Construction
    47,338       3,791       7,954       11,745       24.8 %
Income Producing
    415,329       61,171       26,735       87,906       21.2 %
Owner Occupied
    218,527       25,678       4,892       30,570       14.0 %
             
Total Commercial Real Estate Loans (1)
  $ 779,183     $ 104,658     $ 78,875     $ 183,533       23.6 %
                         
 
Other Commercial Loans(1)
  $ 199,177     $ 22,899       3,180     $ 26,079       13.1 %
                         
Total non-performing commercial loans
                  $ 82,055                  
 
                                     
 
(1)   The total of these two categories is different than the December 31, 2008, Consolidated Statement of Financial Condition due primarily to loans in process.

7