Talmer Reports Second-Quarter Profit of $17.55M

TROY, Mich. – Talmer Bancorp Inc., holding company of Talmer Bank and Trust, Thursday reported second-quarter net income of $17.55 million, or 23 cents per diluted share.

This compares to first-quarter net income of $9.43 million, or 12 cents per diluted share, and $20.61 million, or 27 cents per dilutes share, the quarter ended June 30, 2014.

The directors declared a cash dividend of a penny a share Wednesday on Class A common stock payable Aug. 21 to shareholders of record Aug. 10.

Said the president and CEO, David Provost, in a written statement, “We are pleased with underlying trends this quarter including strong core deposit growth, improved operating expense trends, quality loan growth and solid revenue trends from our fee businesses. Core deposit trends benefited from the continued focus of our retail sales force to drive growth in key markets to fund our strong lending pipeline. Second-quarter loan growth trends were somewhat mitigated by the strategic sale of $49.9 million of long-term residential mortgages out of our held-for-investment portfolio. Also, overall balances of commercial real estate loans declined as we focus on increasing our proportionate exposure to commercial and industrial lending. Net interest income trends were negatively impacted by higher levels of prepayments, excess liquidity and the negative yield of the Federal Deposit Insurance Corp. indemnification asset. …”

Key performance ratios for the quarters ended June 30, March 31 and June 30, 2014:

• Return on average assets (annualized), 1.11%, 0.62%, 1.51%.
• Return on average equity (annualized), 9.26%, 4.97%, 11.61%.
• Net interest margin (fully taxable equivalent), 3.50%. 3.80%, 4.34%.
• Core efficiency ratio, 68.54%, 68.61%, 71.97%.

Net interest income was $49.61 million, down from $51.03 million the first quarter and $52.38 million the year-ago quarter.

Noninterest income (include fees and administrative service charges) was $22.10 million, $21.43 million and $13.95 million respectively.

Noninterest or operating expense (includes wages and benefits, rents, data processing, marketing, FDIC premiums) was $53.29 million, down a little more than $3 million from the $56.60 million reported for the first quarter and from the $54.07 million the year-ago quarter. Salaries and employee benefit were nearly $2 million less than a year ago as were data processing expense and marketing expense, but rents and professional services expense were higher.

Credit quality improved with Talmer reporting “a total net benefit for losses of $7.3 million compared to a net provision of $2.0 million in the first quarter.” It attributed the improvement to “unanticipated payments received on loans previously charged off.”

At June 30, the allowance for loan losses on uncovered loans was $36.6 million, or 0.86% of total uncovered loans compared to $34.5 million, or 0.83% of total uncovered loans at March 31.” Talmer attributed the increase to “impairment resulting from our quarterly re-estimation of cash flows for our uncovered purchased credit-impaired loans and the impact of organic loan growth.”

Total assets at June 30 were $6.418 billion, up from $6.280 billion at March 31, while total deposits were $4.908 billion, up 10.84% annualized, the company pointed out, from $4.779 billion at the end of the first quarter.

Looking ahead, Provost wrote, “Margin and revenue trends should benefit from the July 1 expiration of the first and largest of our four non-single family FDIC loss-sharing agreements. … We expect to see an incremental improvement in our core operating efficiency reflecting the impact of continuing expense management, improving net interest income trends and the additional savings related to the charter consolidation of Talmer West Bank, which will be completed in August. Our team remains optimistic about substantial growth opportunities in our existing markets and continues to be well-prepared to pursue additional acquisitions.”

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