Talmer Bancorp Reports Net Income of $20 Million

TROY, Mich. – Talmer Bancorp Inc., holding company of Talmer Bank and Trust, Wednesday reported third-quarter net income of $20.04 million, or 27 cents per diluted common share.

Talmer has 16 offices in Mahoning and Trumbull counties, Ohio, eight in each.

The $20.04 million is higher than the $17.55 million net income, or 23 cents a share, reported for the second quarter, and $19.52 million, or 26 cents a share, the third quarter of 2014.

The board of directors declared a cash dividend of a penny on its Class A common stock payable Nov. 20 to shareholders of record Nov. 9.

In a prepared statement, the president and CEO, David Provost, said, “We are pleased with the underlying trends this quarter including strong core deposit growth, declines in operating expenses and solid revenue trends. Core deposit growth benefited from the continued focus of our retail sales force to drive key markets to fund our lending pipelines.

“Our reported earnings were impacted by two key noncore items: a $3.8 million detriment to earnings, or an after-tax amount equal to approximately 3.4 cents per diluted share, due to the change in our fair value of our loan servicing rights, and an approximate 3.2-cent benefit to diluted earnings per share of approximately $2.3 million in lower than normal income tax expense for the quarter.

“We also accomplished significant strategic initiatives during the quarter including the charter consolidation of Talmer West Bank into Talmer Bank and Trust, the repurchase of $75 million of our Class A common stock and the final divestiture of our former lead investor, WL Ross and Co.

“Going forward, we continue to be keenly focused on driving organic franchise growth and being well prepared for potential acquisition opportunities.”

Key performance ratios for the quarters ended Sept. 30, June 30, and Sept. 30, 2014:

• Return on average assets (annualized), 1.23%, 1.11%, 1.36%.
• Return on average equity (annualized), 10.96%, 9.26%, 10.56%.
• Net interest margin, 3.76%, 3.50%, 4.05%.
• Core efficiency ratio, 58.54%, 68.54%, 70.81%.

Talmer noted, “Our net interest margin benefits from discount accretion on our purchased credit-impaired loan portfolio, a component of accretable yield.” The company has grown in large part by working with the Federal Deposit Insurance Corp. to acquire distressed assets and impaired loans of troubled banks.

Asset quality ratios for the same periods:

• Net charge-offs to average loans excluding covered loans (annualized), (0.12)%, (0.10)% 0.26%.
• Nonperforming assets as a percent of total assets, 1.33%, 1.64%, 1.73%.
• Nonperforming loans as a percent of total loans, 1.14%, 1.32%, 1.38%.
• Nonperforming loans as a percent of total loans excluding covered loans, 1.02%, 0.94%, 1.19%.

Net interest income for the third quarter was $55.65 million, up from $49.61 million the previous quarter and $52.22 million the year-ago quarter.

Noninterest income (includes fees, service charges, mortgage servicing rights, commissions) was $19.34 million, down from $22.10 million the second quarter and $29.95 million the year-ago quarter.

Noninterest expense (includes salaries and employee benefits, rents, data processing, marketing and FDIC premiums) was $47.83 million, less than the $53.29 million reported for the preceding quarter and below the $51.26 million in the year-ago quarter.

Salaries and employee benefits were more than $2 million less the third quarter than the same quarter a year ago.

Total loans have grown steadily over the last five quarters, from $4.035 billion the period ended Sept. 30, 2014, to $4.702 billion at the end of the third quarter. The figure was $4.525 billion at June 30.

Total uncovered loans (those not subject to some degree of reimbursement from the FDIC) stood at $4.515 billion at Sept. 30, up from $4.244 billion three months earlier and $3.631 billion a year earlier.

Talmer noted, “The FDIC indemnification asset balance was $30.6 million at Sept. 30. Of this amount, we expect approximately $16.5 million to be collected and the remaining $14.1 million to be amortized prior to the end of the associated loss-sharing agreements, as a result of expected improvements in cash flow expectations on covered loans.”

Total assets were $6.492 billion at Sept. 30, up from $6.297 billion at June 30, and $5.747 billion at Sept. 30, 2014.

Total nonperforming assets were $73.37 million at Sept. 30, $77.34 million at June 30, and $75.33 million at Sept. 30, 2014.

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