EXHIBIT 99
MB Financial, Inc.
800 West Madison Street
Chicago, Illinois 60607
(888) 422-6562
NASDAQ: MBFI
PRESS RELEASE
For Information at MB Financial, Inc. contact:
Jill York - Vice President and Chief Financial Officer
E-Mail: jyork@mbfinancial.com
FOR IMMEDIATE RELEASE
MB FINANCIAL, INC. REPORTS STRONG CAPITAL AND LIQUIDITY POSITION, STRONG CORE PRE-TAX, PRE-PROVISION EARNINGS
CHICAGO, October 22, 2010 – MB Financial, Inc. (NASDAQ: MBFI), the holding company for MB Financial Bank, N.A (“the Bank” or “MB Financial Bank”), announced today third quarter results for 2010. The words “MB Financial,” “the Company,” “we,” “our” and “us” refer to MB Financial, Inc. and its consolidated subsidiaries, unless indicated otherwise. We had a net loss of $2.8 million and a net loss available to common shareholders of $5.4 million for the third quarter of 2010 compared to net income of $7.4 million and net income available to common shareholders of $4.9 million for the third quarter of 2009, and net income of $19.2 million and net income available to common shareholders of $16.6 million for the second quarter of 20 10. The results for the second quarter of 2010 reflect $62.6 million of bargain purchase gain from the Broadway and New Century Bank FDIC-assisted transactions completed in that quarter, including additional gains of approximately $11.6 million retrospectively recorded for that quarter.
Key items for the quarter were as follows:
Continued Growth in Core Pre-Tax, Pre-Provision Earnings:
| · | Core pre-tax, pre-provision earnings increased 93.3% to $51.1 million, compared to $26.4 million for the third quarter of 2009. Core pre-tax, pre-provision earnings increased $2.6 million, or 5.4%, compared to the second quarter of 2010. |
| · | Net interest income on a fully tax equivalent basis increased to $90.2 million, or by 42.5%, compared to $63.3 million for the third quarter of 2009. Net interest income on a fully tax equivalent basis increased $900 thousand, or 1.0%, compared to the second quarter of 2010. See discussion below for more information on net interest income for the quarter. |
| · | The net interest margin on a fully tax equivalent basis increased to 3.92% from 2.85% in the third quarter of 2009 and from 3.91% in the second quarter of 2010. |
| · | Core other income increased 48.4% to $30.1 million, compared to $20.3 million for the third quarter of 2009. Core other income increased $2.1 million, or 7.5%, compared to the second quarter of 2010. |
Credit Quality – Increased Non-Performing Loans:
| Our provision for loan losses was $65.0 million for the third quarter of 2010, while our net charge-offs were $66.7 million. For the second quarter of 2010, our provision for loan losses and net charge-offs were $85.0 million and $67.2 million, respectively. For the third quarter of 2009, our provision for loan losses and net charge-offs were $45.0 million and $37.1 million, respectively. Our provision for loan losses reflects deterioration in our loan portfolio primarily due to continued weakness in real estate market conditions, which has resulted in increases in our non-performing loans in the commercial real estate category. |
| Our non-performing loans were $392.6 million or 5.73% of total loans as of September 30, 2010, compared to $343.8 million or 4.90% as of June 30, 2010 and $271.3 million or 4.16% as of December 31, 2009. The percentage of the allowance for loan losses to non-performing loans was 49.40% as of September 30, 2010, 56.89% as of June 30, 2010 and 65.26% as of December 31, 2009. |
| Our non-performing assets were $452.0 or 4.26% of total assets as of September 30, 2010, compared to $388.0 million or 3.65% as of June 30, 2010, and $308.4 million or 2.84% as of December 31, 2009. |
| Potential problem loans decreased from $319.8 million to $306.1 million from the second quarter of 2010 to the third quarter of 2010. Potential problem loans at December 31, 2009 were $233.4 million. |
| Our allowance for loan losses to total loans was 2.83% as of September 30, 2010, compared to 2.79% as of June 30, 2010 and 2.71% as of December 31, 2009. |
For purposes of the second and third bullet points above, non-performing loans exclude loans held for sale and certain purchased credit-impaired loans that MB Financial Bank acquired in FDIC-assisted transactions, a majority of which are subject to loss share arrangements with the FDIC. These purchased credit-impaired loans are accounted for on a pool basis, and the pools are considered to be performing. Additionally, non-performing assets exclude other real estate owned related to assets acquired in FDIC-assisted transactions.
Strong Capital Position:
| MB Financial Bank continues to significantly exceed the “Well-Capitalized” threshold established under the regulations of the Office of the Comptroller of the Currency. At September 30, 2010, MB Financial, Inc.’s total risk-based capital ratio was 17.14%, Tier 1 capital to risk-weighted assets ratio was 15.15%, Tier 1 capital to average asset ratio was 10.38% and Tier 1 common capital to risk-weighted assets was 10.17%, compared with 16.78%, 14.82%, 10.48% and 9.97%, respectively, as of June 30, 2010 and 15.45%, 13.51%, 8.71% and 8.76%, respectively, as of December 31, 2009. As of September 30, 2010, total capital was approximately $497.0 million in excess of the “Well-Capitalized” threshold, compared with $486.3 million as of June 30, 2010. |
| Our tangible common equity to tangible assets ratio was 7.17% at September 30, 2010, compared to 7.25% at June 30, 2010, and 6.18% at December 31, 2009. Our tangible common equity to risk-weighted assets ratio was 10.49% at September 30, 2010, compared to 10.34% at June 30, 2010 and 8.83% at December 31, 2009. |
Strong Liquidity Position and Improved Deposit Mix:
| Our loan to deposit ratio was 82% as of September 30, 2010, a decrease from 84% as of June 30, 2010 and an increase from 75% as of December 31, 2009. At December 31, 2009, deposit balances included certificates of deposits related to Corus that had not yet been redeemed or repriced. |
| Our ratio of core funding to total funding was 89% at September 30, 2010 and June 30, 2010, compared to 87% at December 31, 2009. |
| Our ratio of CDs to total deposits was 39% at September 30, 2010, an improvement from 41% at June 30, 2010 and 43% at December 31, 2009. |
Transactions Update
| Broadway Bank and New Century Bank FDIC-assisted transactions - During the third quarter of 2010, we updated our initial purchasing accounting estimates of covered loan and indemnification asset fair values as well as the core deposit intangible and goodwill estimates and other related balance sheet accounts. In accordance with Topic 805, previously reported second quarter 2010 results have been adjusted to reflect these changes in estimates. The revisions resulted in an additional $11.6 million pre-tax bargain purchase gain recognized in the quarter ended June 30, 2010. This additional gain was primarily the result of changes to the original estimates related to payment/disposition of assets acquired as we received updated appraisals and learned more about e ach banks credit quality. Additionally, on the income statement there was a reclassification between interest income on covered loans and accretion of the indemnification asset. The financial statement information as of and for the quarter ended June 30, 2010 presented in these consolidated financial statements reflects these measurement period adjustments. The overall impact to the second quarter of 2010 was an increase in after-tax earnings of $7.1 million, or $0.13 per share. |
| Corus and InBank FDIC-assisted transactions - Purchase accounting was finalized on our InBank and Corus FDIC-assisted transactions during the third quarter of 2010. |
RESULTS OF OPERATIONS
Third Quarter Results
Net Interest Income
Net interest income on a tax equivalent basis increased $26.9 million from the third quarter of 2009, and $900 thousand from the second quarter of 2010 to the third quarter of 2010. Our net interest margin, on fully tax equivalent basis, was 3.92% for the third quarter of 2010 compared to 3.91% in the second quarter of 2010 and 2.85% in the third quarter of 2009. The margin increase from the third quarter of 2009 was primarily due to a decrease in our average cost of funds caused by downward repricing of certificates of deposit, improved deposit mix and improved credit spreads on renewed loans. Additionally, the increase in the margin from the third quarter of 2009 was impacted by the change in the mix of average assets from other interest bearing deposits to higher yielding loans.
Our non-performing loans negatively impacted our net interest margin during the third quarter of 2010, the second quarter of 2010 and the third quarter of 2009 by approximately 22 basis points, 21 basis points and 17 basis points, respectively.
See the supplemental net interest margin table for further detail.
Other Income (in thousands):
| | | | Three Months Ended | Nine Months Ended |
| | | | September 30, | June 30, | March 31, | December 31, | September 30, | September 30, | September 30, |
| | | | 2010 | 2010 | 2010 | 2009 | 2009 | 2010 | 2009 |
| Core other income: | | | | | | | |
| | Loan service fees | $ 1,659 | $ 2,042 | $ 1,284 | $ 1,723 | $ 1,565 | $ 4,985 | $ 5,190 |
| | Deposit service fees | 10,705 | 9,461 | 8,848 | 9,311 | 7,912 | 29,014 | 21,289 |
| | Lease financing, net | 5,022 | 5,026 | 4,620 | 5,799 | 3,937 | 14,668 | 12,729 |
| | Brokerage fees | 1,407 | 1,129 | 1,245 | 1,272 | 1,004 | 3,781 | 3,334 |
| | Trust and asset management fees | 3,918 | 3,536 | 3,335 | 3,347 | 3,169 | 10,789 | 9,246 |
| | Increase in cash surrender value of life insurance | 1,209 | 706 | 671 | 669 | 664 | 2,586 | 1,790 |
| | Accretion of indemnification asset | 3,602 | 3,067 | - | - | - | 6,669 | - |
| | Other operating income | 2,604 | 3,066 | 3,130 | 2,663 | 2,053 | 8,800 | 5,949 |
| Total core other income | 30,126 | 28,033 | 23,133 | 24,784 | 20,304 | 81,292 | 59,527 |
| | | | | | | | | | |
Non-core other income(1) | | | | | | | |
| | Net gain on sale of investment securities | 9,482 | 2,304 | 6,866 | 239 | 3 | 18,652 | 13,790 |
| | Net gain (loss) on sale of other assets | 299 | (99) | 11 | 12 | 12 | 211 | (25) |
| | Net gain (loss) recognized on other real estate owned(A) | (3,608) | 52 | (3,299) | (733) | 25 | (6,855) | 303 |
| | Net loss recognized on InBank other real estate owned(A) | (305) | - | - | - | - | (305) | - |
| | Acquisition related gains | - | 62,649 | - | 18,325 | 10,222 | 62,649 | 10,222 |
| | Increase (decrease) in market value of assets held in | | | | | | | |
| | | trust for deferred compensation(A) | (3) | (39) | 7 | 300 | 334 | (35) | 410 |
| Total non-core other income | 5,865 | 64,867 | 3,585 | 18,143 | 10,596 | 74,317 | 24,700 |
| | | | | | | | | | |
| Total other income | $ 35,991 | $ 92,900 | $ 26,718 | $ 42,927 | $ 30,900 | $ 155,609 | $ 84,227 |
| (1) | Letters denote the corresponding line items where these non-core other income items reside in the consolidated statements of income as follows: A – Other operating income. |
Core other income increased by $2.1 million from the second quarter of 2010 to the third quarter of 2010. Core deposit service fees increased primarily due to increases in NSF and overdraft fees. The increase in the cash surrender value of life insurance was a result of a death benefit on a bank owned life insurance policy that we recognized during the third quarter of 2010. Accretion of indemnification asset increased as the asset was outstanding for the entire third quarter of 2010, compared to approximately two months in the second quarter of 2010. Non-core other income was primarily impacted by gains recorded on our Broadway Bank and New Century Bank FDIC-assisted transactions in the second quarter of 2010. Additional gains of approximately $11.6 million were retrospectively recorded on the Br oadway Bank and New Century Bank FDIC-assisted transactions in the second quarter of 2010. These gains were in addition to gains of $51.0 million originally booked during the second quarter of 2010 based on preliminary estimates. Non-core other income was also impacted by a net gain on sale of investment securities of $9.5 million in the third quarter of 2010 compared to a net gain on sale of investment securities of $2.3 million in the second quarter of 2010. Gains were taken on securities to lock in those gains and shorten the overall duration of our securities portfolio. A net loss was recognized on other real estate owned (“OREO”) of $3.9 million in the third quarter of 2010 compared with a small net gain in the second quarter of 2010. The loss in the third quarter related primarily to one OREO property located in the southwest suburbs of Chicago where lower values on comparable sales in the area and an extended marketing period prompted a reapprais al and subsequent write-down in value. It is our practice to reappraise all OREO at least annually and whenever we think there might be a material change in value.
Core other income increased by $21.8 million for the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009. Core deposit service fees increased primarily due to an increase in commercial deposit fees related to the treasury management business acquired in the Corus FDIC-assisted transaction during the second half of 2009, and an increase in NSF and overdraft fees related to the FDIC-assisted transactions completed in 2009 and 2010. Net lease financing increased primarily due to an increase in the sales of third party equipment maintenance to customers. Core trust and asset management fees increased primarily due to an increase in assets under management, as a result of organic growth and an increase in the market value of assets under management. The Broadw ay Bank and New Century Bank FDIC-assisted transactions resulted in accretion on the corresponding indemnification asset. Prior year accretion related to the Heritage Bank transaction was not significant. Other income increased primarily due to treasury management income related to our FDIC-assisted transactions completed during the second half of 2009, and due to rental income on OREO properties. As noted above, non-core other income was primarily impacted by gains recorded on the Broadway and New Century FDIC-assisted transactions, based on preliminary estimates. Additionally, non-core other income was impacted to a lesser extent by a net gain on sale of investment securities of $18.7 million for the nine months ended September 30, 2010, compared with a net gain on sale of investment securities of $13.8 million for the nine months ended September 30, 2009, and a net loss recognized on other real estate owned of $7.2 million for the nine months ended Septemb er 30, 2010, compared with a net gain recognized on other real estate owned of $303 thousand for the nine months ended September 30, 2009.
Other Expense (in thousands):
| | | | Three Months Ended | Nine Months Ended |
| | | | September 30, | June 30, | March 31, | December 31, | September 30, | September 30, | September 30, |
| | | | 2010 | 2010 | 2010 | 2009 | 2009 | 2010 | 2009 |
| Core other expense: | | | | | | | |
| | Salaries and employee benefits | $ 37,427 | $ 37,143 | $ 33,415 | $ 33,091 | $ 30,862 | $ 107,985 | $ 86,853 |
| | Occupancy and equipment expense | 8,800 | 8,928 | 9,179 | 8,885 | 7,803 | 26,907 | 22,636 |
| | Computer services expense | 2,654 | 3,322 | 2,528 | 2,882 | 2,829 | 8,504 | 7,129 |
| | Advertising and marketing expense | 1,620 | 1,639 | 1,633 | 683 | 1,296 | 4,892 | 3,502 |
| | Professional and legal expense | 1,638 | 1,370 | 1,078 | 1,465 | 1,126 | 4,086 | 3,215 |
| | Brokerage fee expense | 596 | 420 | 462 | 553 | 478 | 1,478 | 1,446 |
| | Telecommunication expense | 975 | 964 | 908 | 1,127 | 812 | 2,847 | 2,306 |
| | Other intangibles amortization expense | 1,567 | 1,505 | 1,510 | 1,650 | 966 | 4,582 | 2,841 |
| | FDIC insurance premiums | 3,873 | 3,833 | 3,964 | 4,099 | 3,206 | 11,670 | 8,813 |
| | Other operating expenses | 7,524 | 7,141 | 7,228 | 6,337 | 5,446 | 21,893 | 15,677 |
| Total core other expense | 66,674 | 66,265 | 61,905 | 60,772 | 54,824 | 194,844 | 154,418 |
| | | | | | | | | | |
| | | | | | | | | | |
Non-core other expense (1) | | | | | | | |
| | FDIC special assessment(A) | - | - | - | - | - | - | 3,850 |
| | Impairment charges | - | - | - | - | 4,000 | - | 4,000 |
| | Increase (decrease) in market value of assets held in | | | | | | |
| | | trust for deferred compensation(B) | (3) | (39) | 7 | 300 | 334 | (35) | 410 |
| Total non-core other expense | (3) | (39) | 7 | 300 | 4,334 | (35) | 8,260 |
| | | | | | | | | | |
| Total other expense | $ 66,671 | $ 66,226 | $ 61,912 | $ 61,072 | $ 59,158 | $ 194,809 | $ 162,678 |
| (1) | Letters denote the corresponding line items where these non-core other expense items reside in the consolidated statements of income as follows: A – FDIC insurance premiums, B – Salaries and employee benefits. |
Core other expense remained relatively unchanged from the second quarter of 2010 to the third quarter of 2010.
Core other expense increased $40.4 million for the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009. The FDIC-assisted transactions completed in 2009 and 2010 increased total core other expense from the nine months ended September 30, 2009 to the nine months ended September 30, 2010 by approximately $24.0 million. Salaries and employee benefits expense also increased due to an increase in healthcare expense and additional problem loan remediation staff added from September 30, 2009 to September 30, 2010. Core other operating expenses increased due to an increase of approximately $1.9 million in OREO expense.
LOAN PORTFOLIO
The following table sets forth the composition of the loan portfolio, excluding loans held for sale, as of the dates indicated (dollars in thousands):
| | | | September 30, | June 30, | March 31, | December 31, | September 30, |
| | | | 2010 | 2010 | 2010 | 2009 | 2009 |
| | | | Amount | % of Total | Amount | % of Total | Amount | % of Total | Amount | % of Total | Amount | % of Total |
| Commercial related credits: | | | | | | | | | | |
| | Commercial loans | $ 1,291,115 | 19% | $ 1,315,899 | 19% | $ 1,378,873 | 21% | $ 1,387,476 | 21% | $ 1,422,989 | 22% |
| | Commercial loans collateralized by assign- | | | | | | | | | | |
| | | ment of lease payments (lease loans) | 1,019,083 | 15% | 992,301 | 14% | 960,470 | 15% | 953,452 | 15% | 881,963 | 13% |
| | Commercial real estate | 2,259,708 | 33% | 2,378,272 | 34% | 2,409,078 | 38% | 2,472,520 | 38% | 2,446,909 | 38% |
| | Construction real estate | 445,881 | 6% | 496,732 | 7% | 558,615 | 9% | 594,482 | 9% | 697,232 | 11% |
| Total commercial related credits | 5,015,787 | 73% | 5,183,204 | 74% | 5,307,036 | 83% | 5,407,930 | 83% | 5,449,093 | 84% |
| Other loans: | | | | | | | | | | |
| | Residential real estate | 328,985 | 5% | 321,665 | 5% | 302,308 | 5% | 291,022 | 4% | 291,889 | 4% |
| | Indirect motorcycle | 166,163 | 2% | 164,269 | 2% | 158,207 | 2% | 156,853 | 2% | 159,273 | 2% |
| | Indirect automobile | 15,928 | 0% | 17,914 | 0% | 20,437 | 1% | 23,414 | 1% | 26,226 | 1% |
| | Home equity | 386,866 | 6% | 389,298 | 6% | 401,570 | 6% | 405,439 | 6% | 408,184 | 7% |
| | Consumer loans | 76,219 | 1% | 73,436 | 1% | 70,247 | 1% | 66,293 | 1% | 66,600 | 1% |
| Total other loans | 974,161 | 14% | 966,582 | 14% | 952,769 | 15% | 943,021 | 14% | 952,172 | 15% |
| Gross loans excluding covered loans | 5,989,948 | 87% | 6,149,786 | 88% | 6,259,805 | 98% | 6,350,951 | 97% | 6,401,265 | 99% |
| | Covered loans (1) | 859,038 | 13% | 861,706 | 12% | 155,051 | 2% | 173,596 | 3% | 91,230 | 1% |
| Gross loans | 6,848,986 | 100% | 7,011,492 | 100% | 6,414,856 | 100% | 6,524,547 | 100% | 6,492,495 | 100% |
| | Allowance for loan losses | (193,926) | | (195,612) | | (177,787) | | (177,072) | | (189,232) | |
| Net loans | $ 6,655,060 | | $ 6,815,880 | | $ 6,237,069 | | $ 6,347,475 | | $ 6,303,263 | |
| (1) | Covered loans refer to loans we acquired in FDIC-assisted transactions that are subject to loss-sharing agreements with the FDIC. |
The increase in covered loans from March 31, 2010 to June 30, 2010 was due to the Broadway Bank and New Century Bank FDIC-assisted transactions.
ASSET QUALITY
The following table presents a summary of non-performing assets, excluding loans held for sale, credit-impaired loans that were acquired as part of our FDIC-assisted transactions (see definition of “purchased credit-impaired loans” below), and OREO that is related to FDIC-assisted transactions, as of the dates indicated (dollar amounts in thousands):
| | | September 30, | June 30, | March 31, | December 31, | September 30, |
| | | 2010 | 2010 | 2010 | 2009 | 2009 |
| Non-performing loans: | | | | | |
| | Non-accrual loans(1) | $ 392,477 | $ 343,838 | $ 323,017 | $ 270,839 | $ 286,623 |
| | Loans 90 days or more past due, still accruing interest | 115 | - | 150 | 477 | - |
| Total non-performing loans | 392,592 | 343,838 | 323,167 | 271,316 | 286,623 |
| | | | | | | |
| OREO | 59,114 | 43,988 | 41,589 | 36,711 | 22,612 |
| Repossessed vehicles | 321 | 191 | 250 | 333 | 271 |
| Total non-performing assets | $ 452,027 | $ 388,017 | $ 365,006 | $ 308,360 | $ 309,506 |
| | | | | | | |
| | Total allowance for loan losses | 193,926 | 195,612 | 177,787 | 177,072 | 189,232 |
| Partial charge-offs taken on non-performing loans | 171,549 | 142,872 | 95,960 | 69,359 | 46,258 |
| | Allowance for loan losses, including partial charge-offs | $ 365,475 | $ 338,484 | $ 273,747 | $ 246,431 | $ 235,490 |
| | | | | | | |
| Accruing restructured loans | $ 12,226 | $ 10,940 | $ - | $ - | $ - |
| | | | | | | |
| Total non-performing loans to total loans | 5.73% | 4.90% | 5.04% | 4.16% | 4.41% |
| Total non-performing assets to total assets | 4.26% | 3.65% | 3.58% | 2.84% | 2.19% |
| Allowance for loan losses to non-performing loans | 49.40% | 56.89% | 55.01% | 65.26% | 66.02% |
| Allowance for loan losses to non-performing loans, | | | | | |
| | including partial charge-offs taken | 64.78% | 69.55% | 65.31% | 72.34% | 70.74% |
| (1) | Includes restructured loans on non-accrual status of approximately $16.9 million at September 30, 2010 and $6.0 million at June 30, 2010. |
At September 30, 2010, the composition of other real estate owned was primarily improved lots and single family construction projects.
The following table presents a summary of total performing loans greater than 30 days and less than 90 days past due, excluding loans held for sale and credit-impaired loans that were acquired as part of our FDIC-assisted transactions (see definition of “purchased credit-impaired loans” below), as of the dates indicated (dollar amounts in thousands):
| | | September 30, | June 30, | March 31, | December 31, | September 30, |
| | | 2010 | 2010 | 2010 | 2009 | 2009 |
| | | | | | | |
| 30 - 59 Days Past Due | | $ 19,302 | $ 26,491 | $ 17,239 | $ 25,331 | $ 35,943 |
| 60 - 89 Days Past Due | | 6,011 | 3,746 | 1,653 | 5,523 | 15,109 |
| | | $ 25,313 | $ 30,237 | $ 18,892 | $ 30,854 | $ 51,052 |
Approximately $6.3 million of performing loans past due are classified as potential problem loans (defined below) as of September 30, 2010, compared to $13.6 million as of June 30, 2010.
The following table represents a summary of OREO in thousands:
| | | September 30, |
| | | 2010 |
| | | |
| Balance at the beginning of quarter | | $ 43,988 |
| Transfers in at fair value less estimated costs to sell | | 21,383 |
| Fair value adjustments | | (3,429) |
| Net losses on sales of OREO | | (179) |
| Cash received upon disposition | | (2,649) |
| Balance at the end of quarter | | $ 59,114 |
The following table presents data related to non-performing loans, by dollar amount and category at September 30, 2010 (dollar amounts in thousands):
| | Commercial and Lease Loans | Construction Real Estate Loans | Commercial Real Estate Loans | Consumer Loans | Total Loans |
| | Number of Borrowers | Amount | Number of Borrowers | Amount | Number of Borrowers | Amount | Amount | Amount |
| $10.0 million or more | - | $ - | 1 | $ 14,539 | 4 | $ 63,807 | $ - | $ 78,346 |
| $5.0 million to $9.9 million | 3 | 23,179 | 6 | 41,727 | 2 | 12,412 | - | 77,318 |
| $1.5 million to $4.9 million | 9 | 19,297 | 17 | 53,736 | 20 | 52,540 | 1,575 | 127,148 |
| Under $1.5 million | 51 | 14,543 | 31 | 20,420 | 130 | 51,366 | 23,451 | 109,780 |
| | 63 | $ 57,019 | 55 | $ 130,422 | 156 | $ 180,125 | $ 25,026 | $ 392,592 |
| | | | | | | | | |
| Percentage of individual loan category | 2.47% | | 29.25% | | 7.97% | 2.57% | 5.73% |
| | | | | | | | | |
| Specific reserves and partial charge-offs as a | | | | | | | |
| percentage of non-performing loans | 48% | | 48% | | 27% | | |
The following table presents data related to non-performing loans, by dollar amount and category at June 30, 2010 (dollar amounts in thousands):
| | Commercial and Lease Loans | Construction Real Estate Loans | Commercial Real Estate Loans | Consumer Loans | Total Loans |
| | Number of Borrowers | Amount | Number of Borrowers | Amount | Number of Borrowers | Amount | Amount | Amount |
| $10.0 million or more | 1 | $ 11,292 | 3 | $ 37,697 | - | $ - | $ - | $ 48,989 |
| $5.0 million to $9.9 million | 1 | 8,254 | 10 | 68,469 | 3 | 17,168 | - | 93,891 |
| $1.5 million to $4.9 million | 6 | 12,707 | 14 | 49,717 | 14 | 36,152 | 1,575 | 100,151 |
| Under $1.5 million | 46 | 11,732 | 30 | 20,648 | 113 | 48,668 | 19,759 | 100,807 |
| | 54 | $ 43,985 | 57 | $ 176,531 | 130 | $ 101,988 | $ 21,334 | $ 343,838 |
| | | | | | | | | |
| Percentage of individual loan category | 1.91% | | 35.54% | | 4.29% | 2.21% | 4.90% |
We define potential problem loans as performing loans rated substandard that do not meet the definition of a non-performing loan (See “Asset Quality” section above for non-performing loans). We recognize potential problem loans carry a higher probability of default and require additional attention by management. The aggregate principal amount of potential problem loans was $306.1 million, or 4.47% of total loans, as of September 30, 2010, compared to $319.8 million, or 4.56% of total loans, as of June 30, 2010 and $233.4 million or 3.58% of total loans, as of December 31, 2009.
“Purchased credit-impaired loans” refer to certain loans acquired in the FDIC-assisted transactions, for which deterioration in credit quality occurred before the Company’s acquisition date. Upon acquisition, these loans were recorded at fair value with interest income to be accreted over the estimated life of the loan when cash flows are reasonably estimable, even if the underlying loans are contractually past due. Acquisition fair value incorporates the Company’s estimate, as of the acquisition date, of credit losses over the remaining life of the portfolio. No allowance for loan losses has been recorded for these loans.
The following table sets forth information on commercial real estate loans by risk category and type, excluding covered loans and loans held for sale (dollars in thousands):
| | | Risk Category | | |
| | | | | | | | | | |
| | | | | Potential Problem and | | | | |
| | | Non-Performing | and Other Watch | | | | |
| | | Loans (NPLs) | List Loans | Pass Loans | Total |
| | | Amount | % of Loan Balance Reserved(1) | Amount | % of Loan Balance Reserved | Amount | % of Loan Balance Reserved | Amount | % of Loan Balance Reserved(1) |
| | | | | | | | | | |
| | Church and school | $ 785 | 7% | $ 7,204 | 18% | $ 54,264 | 1% | $ 62,253 | 3% |
| | Healthcare | - | 0% | 4,915 | 13% | 194,521 | 2% | 199,436 | 2% |
| | Industrial | 29,242 | 19% | 86,034 | 16% | 440,625 | 2% | 555,901 | 5% |
| | Multifamily | 38,669 | 28% | 66,221 | 13% | 373,394 | 1% | 478,284 | 6% |
| | Office | 15,933 | 38% | 41,374 | 16% | 165,720 | 1% | 223,027 | 8% |
| | Other | 34,504 | 13% | 33,982 | 12% | 177,652 | 1% | 246,138 | 5% |
| | Retail | 60,992 | 32% | 51,004 | 14% | 382,673 | 2% | 494,669 | 8% |
| | | $ 180,125 | 27% | $ 290,734 | 14% | $ 1,788,849 | 2% | $ 2,259,708 | 6% |
The following table sets forth trend information for construction real estate loans by risk category, excluding covered loans and loans held for sale, for the past five quarters (dollars in thousands):
| | | Risk Category | | |
| | | | | | | | | | |
| | | | | Potential Problem and | | | | |
| | | Non-Performing | and Other Watch | | | | |
| | | Loans (NPLs) | List Loans | Pass Loans | Total |
| | | Amount | % of Loan Balance Reserved(1) | Amount | % of Loan Balance Reserved | Amount | % of Loan Balance Reserved | Amount | % of Loan Balance Reserved(1) |
| | | | | | | | | | |
| | Total construction loans as of September 30, 2009 | $ 203,344 | 29% | $ 145,211 | 6% | $ 348,677 | 1% | $ 697,232 | 11% |
| | | | | | | | | | |
| | Total construction loans as of December 31, 2009 | $ 180,991 | 35% | $ 126,493 | 16% | $ 286,998 | 5% | $ 594,482 | 19% |
| | | | | | | | | | |
| | Total construction loans as of March 31, 2010 | $ 177,292 | 39% | $ 121,743 | 17% | $ 259,580 | 4% | $ 558,615 | 20% |
| | | | | | | | | | |
| | Total construction loans as of June 30, 2010 | $ 176,531 | 44% | $ 97,162 | 17% | $ 223,039 | 3% | $ 496,732 | 24% |
| | | | | | | | | | |
| | Total construction loans as of September 30, 2010 | $ 130,422 | 48% | $ 95,256 | 16% | $ 220,203 | 3% | $ 445,881 | 23% |
| (1) | To calculate the percentage of loan balances reserved, partial charge-offs taken on loans with balances outstanding have been added back to both reserves and outstanding balance. |
Below is a reconciliation of the activity in our allowance for loan losses for the periods indicated (dollar amounts in thousands):
| | | | Three Months Ended | Nine Months Ended |
| | | | September 30, | June 30, | March 31, | December 31, | September 30, | September 30, | September 30, |
| | | | 2010 | 2010 | 2010 | 2009 | 2009 | 2010 | 2009 |
| Balance at the beginning of period | $ 195,612 | $ 177,787 | $ 177,072 | $ 189,232 | $ 181,356 | $ 177,072 | $ 144,001 |
| Provision for loan losses | 65,000 | 85,000 | 47,200 | 70,000 | 45,000 | 197,200 | 161,800 |
| Charge-offs: | | | | | | | |
| | Commercial loans | (11,362) | (30,211) | (7,363) | (8,892) | (20,037) | (48,936) | (37,221) |
| | Commercial loans collateralized by assignment | | | | | | | |
| | | of lease payments (lease loans) | (418) | (917) | (333) | (333) | (269) | (1,668) | (5,074) |
| | Commercial real estate loans | (25,265) | (15,002) | (12,201) | (11,829) | (2,006) | (52,468) | (27,013) |
| | Construction real estate | (29,120) | (22,992) | (25,285) | (59,435) | (14,914) | (77,397) | (44,354) |
| | Residential real estate | (1,500) | (4) | (459) | (650) | (290) | (1,963) | (826) |
| | Indirect vehicle | (503) | (611) | (1,117) | (1,324) | (937) | (2,231) | (2,761) |
| | Home equity | (1,369) | (1,271) | (628) | (1,236) | (650) | (3,268) | (2,207) |
| | Consumer loans | (600) | (202) | (525) | (479) | (358) | (1,327) | (645) |
| | | Total charge-offs | (70,137) | (71,210) | (47,911) | (84,178) | (39,461) | (189,258) | (120,101) |
| Recoveries: | | | | | | | |
| | Commercial loans | 1,900 | 2,322 | 724 | 1,344 | 71 | 4,946 | 147 |
| | Commercial loans collateralized by assignment | | | | | | | |
| | | of lease payments (lease loans) | 62 | 96 | - | - | - | 158 | - |
| | Commercial real estate loans | 907 | 177 | 186 | 12 | 5 | 1,270 | 28 |
| | Construction real estate | 330 | 1,055 | 113 | 154 | 2,042 | 1,498 | 2,803 |
| | Residential real estate | 7 | 9 | 41 | 4 | 9 | 57 | 40 |
| | Indirect vehicle | 232 | 344 | 301 | 301 | 194 | 877 | 456 |
| | Home equity | 11 | 31 | 59 | 9 | 13 | 101 | 44 |
| | Consumer loans | 2 | 1 | 2 | 194 | 3 | 5 | 14 |
| | | Total recoveries | 3,451 | 4,035 | 1,426 | 2,018 | 2,337 | 8,912 | 3,532 |
| | | | | | | | | | |
| Total net charge-offs | (66,686) | (67,175) | (46,485) | (82,160) | (37,124) | (180,346) | (116,569) |
| | | | | | | | | | |
| Balance | $ 193,926 | $ 195,612 | $ 177,787 | $ 177,072 | $ 189,232 | $ 193,926 | $ 189,232 |
| | | | | | | | | | |
| Total loans, excluding loans held for sale | $ 6,848,986 | $ 7,011,492 | $ 6,414,856 | $ 6,524,547 | $ 6,492,495 | $ 6,848,986 | $ 6,492,495 |
| Average loans, excluding loans held for sale | $ 6,939,415 | $ 6,925,140 | $ 6,441,625 | $ 6,460,195 | $ 6,452,094 | $ 6,770,550 | $ 6,398,119 |
| | | | | | | | | | |
| Ratio of allowance for loan losses to total loans, | | | | | | | |
| | excluding loans held for sale | 2.83% | 2.79% | 2.77% | 2.71% | 2.91% | 2.83% | 2.91% |
| Ratio of allowance for loan losses to total loans, | | | | | | | |
| | including partial charge-offs, and excluding loans | | | | | | | |
| | held for sale | 5.21% | 4.73% | 4.20% | 3.74% | 3.60% | 5.21% | 3.60% |
| Net loan charge-offs to average loans, excluding loans | | | | | | |
| | held for sale (annualized) | 3.81% | 3.89% | 2.93% | 5.05% | 2.28% | 3.56% | 2.44% |
Although management believes that adequate specific and general loan loss allowances have been established, actual losses are dependent upon future events and, as such, further additions to the level of specific and general loan loss allowances may become necessary.
INVESTMENT SECURITIES AVAILABLE FOR SALE
The following table sets forth the fair value, amortized cost, and total unrealized gain (loss) of our investment securities available for sale, by type (in thousands):
| | | At September 30, | At June 30, | At March 31, | At December 31, | At September 30, |
| | | 2010 | 2010 | 2010 | 2009 | 2009 |
| Fair Value | | | | | |
| Government sponsored agencies and enterprises | 24,698 | 49,142 | 55,716 | 70,239 | 323,969 |
Bank notes issued through the TLGP(1) | - | - | - | - | 1,578,174 |
| States and political subdivisions | 379,675 | 377,105 | 375,523 | 380,234 | 396,124 |
| Mortgage-backed securities | 898,837 | 1,326,432 | 1,708,512 | 2,377,051 | 1,636,275 |
| Corporate bonds | 6,140 | 6,356 | 6,356 | 11,395 | 56,599 |
| Equity securities | 10,315 | 10,172 | 4,384 | 4,314 | 3,839 |
| Debt securities issued by foreign governments | - | - | - | - | - |
| | Total fair value | $ 1,319,665 | $ 1,769,207 | $ 2,150,491 | $ 2,843,233 | $ 3,994,980 |
| | | | | | | |
| Amortized cost | | | | | |
| Government sponsored agencies and enterprises | 23,826 | 48,138 | 54,672 | 69,120 | 322,620 |
Bank notes issued through the TLGP(1) | - | - | - | - | 1,578,203 |
| States and political subdivisions | 355,121 | 359,556 | 362,453 | 366,845 | 372,772 |
| Mortgage-backed securities | 887,422 | 1,301,301 | 1,696,669 | 2,382,495 | 1,625,378 |
| Corporate bonds | 6,140 | 6,356 | 6,356 | 11,400 | 56,655 |
| Equity securities | 10,016 | 9,949 | 4,318 | 4,280 | 3,742 |
| Debt securities issued by foreign governments | - | - | - | - | - |
| | Total amortized cost | $ 1,282,525 | $ 1,725,300 | $ 2,124,468 | $ 2,834,140 | $ 3,959,370 |
| | | | | | | |
| Unrealized gain (loss) | | | | | |
| Government sponsored agencies and enterprises | 872 | 1,004 | 1,044 | 1,119 | 1,349 |
Bank notes issued through the TLGP(1) | - | - | - | - | (29) |
| States and political subdivisions | 24,554 | 17,549 | 13,070 | 13,389 | 23,352 |
| Mortgage-backed securities | 11,415 | 25,131 | 11,843 | (5,444) | 10,897 |
| Corporate bonds | - | - | - | (5) | (56) |
| Equity securities | 299 | 223 | 66 | 34 | 97 |
| Debt securities issued by foreign governments | - | - | - | - | - |
| | Total unrealized gain | $ 37,140 | $ 43,907 | $ 26,023 | $ 9,093 | $ 35,610 |
| (1) | Represents bank notes that are guaranteed by the FDIC under the Temporary Liquidity Guarantee Program (TLGP). |
We do not have any meaningful direct or indirect holdings of subprime residential mortgage loans, home equity lines of credit, or any Fannie Mae or Freddie Mac preferred or common equity securities in our investment portfolio. Additionally, more than 99% of our mortgage-backed securities are agency guaranteed.
FUNDING MIX AND LIQUIDITY
The following table shows the composition of our core and wholesale funding resources as of the dates indicated (dollars in thousands):
| | | | September 30, | June 30, | March 31, | December 31, | September 30, |
| | | | 2010 | 2010 | 2010 | 2009 | 2009 |
| | | | | % of | | % of | | % of | | % of | | % of |
| | | | Amount | Total | Amount | Total | Amount | Total | Amount | Total | Amount | Total |
| Core funding: | | | | | | | | | | |
| | Non-interest bearing deposits | $ 1,704,142 | 19% | $ 1,604,482 | 18% | $ 1,424,746 | 16% | $ 1,552,185 | 16% | $ 2,925,714 | 24% |
| | Money market and NOW accounts | 2,819,731 | 31% | 2,773,306 | 30% | 2,716,339 | 31% | 2,775,468 | 29% | 3,269,505 | 26% |
| | Savings accounts | 633,975 | 7% | 618,199 | 7% | 589,485 | 7% | 583,783 | 6% | 570,974 | 5% |
| | Certificates of deposit | 2,649,759 | 29% | 2,824,075 | 31% | 2,737,779 | 31% | 3,153,310 | 33% | 3,968,177 | 32% |
| | Customer repurchase agreements | 277,900 | 3% | 298,816 | 3% | 263,663 | 3% | 223,917 | 3% | 236,164 | 2% |
| Total core funding | 8,085,507 | 89% | 8,118,878 | 89% | 7,732,012 | 88% | 8,288,663 | 87% | 10,970,534 | 89% |
| | | | | | | | | | | | | |
| Wholesale funding: | | | | | | | | | | |
| | Public funds - certificates of deposit | 90,754 | 1% | 76,863 | 1% | 94,084 | 1% | 90,219 | 1% | 112,554 | 1% |
| | Brokered deposit accounts | 498,264 | 5% | 500,342 | 5% | 492,746 | 5% | 528,311 | 6% | 583,143 | 5% |
| | Other short-term borrowings | 4,464 | - | 3,271 | - | - | - | 100,000 | 1% | 200,842 | 2% |
| | Long-term borrowings | 244,529 | 2% | 256,569 | 2% | 270,090 | 3% | 281,349 | 2% | 291,315 | 2% |
| | Subordinated debt | 50,000 | 1% | 50,000 | 1% | 50,000 | 1% | 50,000 | 1% | 50,000 | 0% |
| | Junior subordinated notes issued | | | | | | | | | | |
| | | to capital trusts | 158,579 | 2% | 158,605 | 2% | 158,641 | 2% | 158,677 | 2% | 158,712 | 1% |
| Total wholesale funding | 1,046,590 | 11% | 1,045,650 | 11% | 1,065,561 | 12% | 1,208,556 | 13% | 1,396,566 | 11% |
| | | | | | | | | | | | | |
| | | Total funding | $ 9,132,097 | 100% | $ 9,164,528 | 100% | $ 8,797,573 | 100% | $ 9,497,219 | 100% | $ 12,367,100 | 100% |
Core funding as a percentage of total funding remained consistent with prior quarters. Non-interest bearing deposits increased during the quarter primarily due to the benefit of seasonal deposits of government entities. This was offset by a decrease in certificates of deposit, as certificates of deposits for a majority of rate sensitive customers were not renewed. Core funding decreased from September 30, 2009 as at that time we were in the process of redeeming out-of-market certificates of deposit assumed in the Corus FDIC-assisted transaction.
FORWARD-LOOKING STATEMENTS
When used in this press release and in reports filed with or furnished to the Securities and Exchange Commission, in press releases or other public stockholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases “believe,” “will,” “should,” “will likely result,” “are expected to,” “will continue” “is anticipated,” “estimate,” “project,” “plans,” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date made. These s tatements may relate to our future financial performance, strategic plans or objectives, revenues or earnings projections, or other financial items. By their nature, these statements are subject to numerous uncertainties that could cause actual results to differ materially from those anticipated in the statements.
Important factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to, the following: (1) expected cost savings, synergies and other benefits from our merger and acquisition activities might not be realized within the anticipated time frames or at all, and costs or difficulties relating to integration matters, including but not limited to customer and employee retention, might be greater than expected; (2) the possibility that the expected benefits of the Broadway Bank, New Century Bank and other FDIC-assisted transactions we previously completed will not be realized, and the possibility that the amount of the gains, if any, we ultimately realize on these transactions will differ materially from any recorded preliminary gains; (3) the credit risks of lending act ivities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses, which could necessitate additional provisions for loan losses, resulting both from loans we originate and loans we acquire from other financial institutions; (4) results of examinations by the Office of Comptroller of Currency and other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our allowance for loan losses or write-down assets; (5) competitive pressures among depository institutions; (6) interest rate movements and their impact on customer behavior and net interest margin; (7) the impact of repricing and competitors’ pricing initiatives on loan and deposit products; (8) fluctuations in real estate values; (9) the ability to adapt successfully to technological changes to meet customers’ needs and developments in the market place; (10) our abili ty to realize the residual values of our direct finance, leveraged, and operating leases; (11) our ability to access cost-effective funding; (12) changes in financial markets; (13) changes in economic conditions in general and in the Chicago metropolitan area in particular; (14) the costs, effects and outcomes of litigation; (15) new legislation or regulatory changes, including but not limited to the financial regulatory reform legislation, changes in federal and/or state tax laws or interpretations thereof by taxing authorities, changes in laws, rules or regulations applicable to companies that have participated in the TARP Capital Purchase Program of the U.S. Department of the Treasury and other governmental initiatives affecting the financial services industry; (16) changes in accounting principles, policies or guidelines; (17) our future acquisitions of other depository institutions or lines of business; and (18) future goodwill impairment due to changes in our business, changes in market conditions, or other factors.
We do not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date on which the forward-looking statement is made.
TABLES TO FOLLOW
| MB FINANCIAL, INC. & SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS (Unaudited) |
| As of the dates indicated |
| (Amounts in thousands, except per share data) |
| | | | September 30, | June 30, | March 31, | December 31, | September 30, |
| | | | 2010 | 2010 | 2010 | 2009 | 2009 |
| ASSETS | | | | | |
| Cash and due from banks | $ 131,381 | $ 115,450 | $ 113,664 | $ 136,763 | $ 125,010 |
| Interest earning deposits with banks | 857,997 | 262,828 | 430,366 | 265,257 | 2,549,562 |
| | | Total cash and cash equivalents | 989,378 | 378,278 | 544,030 | 402,020 | 2,674,572 |
| Investment securities: | | | | | |
| | Securities available for sale, at fair value | 1,319,665 | 1,769,207 | 2,150,491 | 2,843,233 | 3,994,980 |
| | Non-marketable securities - FHLB and FRB Stock | 78,807 | 78,807 | 70,361 | 70,361 | 70,031 |
| | | Total investment securities | 1,398,472 | 1,848,014 | 2,220,852 | 2,913,594 | 4,065,011 |
| | | | | | | | |
| Loans held for sale | - | - | - | - | 6,250 |
| Loans: | | | | | |
| | Total loans excluding covered loans | 5,989,948 | 6,149,786 | 6,259,805 | 6,350,951 | 6,401,265 |
| | Covered loans(1) | 859,038 | 861,706 | 155,051 | 173,596 | 91,230 |
| | Total loans | 6,848,986 | 7,011,492 | 6,414,856 | 6,524,547 | 6,492,495 |
| | Less allowance for loan loss | 193,926 | 195,612 | 177,787 | 177,072 | 189,232 |
| | | Net loans | 6,655,060 | 6,815,880 | 6,237,069 | 6,347,475 | 6,303,263 |
| Lease investments, net | 131,324 | 143,143 | 138,929 | 144,966 | 135,201 |
| Premises and equipment, net | 185,064 | 180,714 | 181,394 | 179,641 | 178,586 |
| Cash surrender value of life insurance | 124,116 | 123,324 | 122,618 | 121,946 | 121,278 |
| Goodwill, net | 387,069 | 387,069 | 387,069 | 387,069 | 387,069 |
| Other intangibles, net | 36,285 | 34,186 | 36,198 | 37,708 | 39,357 |
| Other real estate owned | 59,114 | 43,988 | 41,589 | 36,711 | 22,612 |
| Other real estate owned related to FDIC transactions | 63,495 | 75,205 | 24,927 | 18,759 | 7,695 |
FDIC indemnification asset(1) | 380,342 | 377,060 | 40,818 | 42,212 | 31,353 |
| Other assets | 198,845 | 231,888 | 209,747 | 233,292 | 162,965 |
| | | Total assets | $ 10,608,564 | $ 10,638,749 | $ 10,185,240 | $ 10,865,393 | $ 14,135,212 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | |
| Liabilities | | | | | |
| Deposits: | | | | | |
| | Noninterest bearing | $ 1,704,142 | $ 1,604,482 | $ 1,424,746 | $ 1,552,185 | $ 2,925,714 |
| | Interest bearing | 6,692,483 | 6,792,785 | 6,630,433 | 7,131,091 | 8,504,353 |
| | | Total deposits | 8,396,625 | 8,397,267 | 8,055,179 | 8,683,276 | 11,430,067 |
| Short-term borrowings | 282,364 | 302,087 | 263,663 | 323,917 | 437,004 |
| Long-term borrowings | 294,529 | 306,569 | 320,090 | 331,349 | 341,315 |
| Junior subordinated notes issued to capital trusts | 158,579 | 158,605 | 158,641 | 158,677 | 158,712 |
| Investment securities purchased but not yet settled | - | - | - | - | 348,632 |
| Accrued expenses and other liabilities | 140,553 | 129,308 | 95,189 | 116,994 | 147,605 |
| | | Total liabilities | 9,272,650 | 9,293,836 | 8,892,762 | 9,614,213 | 12,863,335 |
| Stockholders' Equity | | | | | |
| Preferred stock | 193,956 | 193,809 | 193,665 | 193,522 | 193,381 |
| Common stock | 540 | 538 | 527 | 511 | 507 |
| Additional paid-in capital | 716,294 | 714,882 | 689,353 | 656,595 | 648,230 |
| Retained earnings | 402,754 | 408,991 | 392,931 | 395,170 | 408,048 |
| Accumulated other comprehensive income | 22,655 | 26,783 | 15,874 | 5,546 | 21,723 |
| Treasury stock | (2,806) | (2,632) | (2,423) | (2,715) | (2,603) |
| | | Controlling interest stockholders' equity | 1,333,393 | 1,342,371 | 1,289,927 | 1,248,629 | 1,269,286 |
| Noncontrolling interest | 2,521 | 2,542 | 2,551 | 2,551 | 2,591 |
| | | Total stockholders' equity | 1,335,914 | 1,344,913 | 1,292,478 | 1,251,180 | 1,271,877 |
| Total liabilities and stockholders' equity | $ 10,608,564 | $ 10,638,749 | $ 10,185,240 | $ 10,865,393 | $ 14,135,212 |
| (1) | “Covered loans” and “FDIC indemnification asset” refer to assets MB Financial Bank acquired in loss-share transactions facilitated by the FDIC. The “FDIC indemnification asset” represents the present value of the amounts the Company expects MB Financial Bank to collect from the FDIC pursuant to the loss-share agreements. |
| MB FINANCIAL, INC. & SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF INCOME |
| (Amounts in thousands, except per share data)(Unaudited) |
| | | | Three Months Ended | Nine Months Ended |
| | | | September 30, | June 30, | March 31, | December 31, | September 30, | September 30, | September 30, |
| | | | 2010 | 2010 | 2010 | 2009 | 2009 | 2010 | 2009 |
| Interest income: | | | | | | | |
| | Loans | $ 94,697 | $ 94,699 | $ 82,387 | $ 84,015 | $ 82,820 | $ 271,783 | $ 247,255 |
| | Investment securities available for sale: | | | | | | | |
| | | Taxable | 11,420 | 12,154 | 19,966 | 22,039 | 6,444 | 43,540 | 23,738 |
| | | Nontaxable | 3,387 | 3,403 | 3,428 | 3,498 | 3,585 | 10,218 | 11,256 |
| | Federal funds sold | - | - | 2 | - | - | 2 | - |
| | Other interest bearing accounts | 248 | 185 | 91 | 698 | 760 | 524 | 1,039 |
| | | Total interest income | 109,752 | 110,441 | 105,874 | 110,250 | 93,609 | 326,067 | 283,288 |
| Interest expense: | | | | | | | |
| | Deposits | 18,597 | 20,283 | 21,372 | 31,396 | 27,662 | 60,252 | 90,218 |
| | Short-term borrowings | 281 | 264 | 345 | 1,142 | 1,222 | 890 | 4,024 |
| | Long-term borrowings & junior subordinated notes | 3,256 | 3,213 | 3,339 | 3,511 | 3,791 | 9,808 | 12,695 |
| | | Total interest expense | 22,134 | 23,760 | 25,056 | 36,049 | 32,675 | 70,950 | 106,937 |
| Net interest income | 87,618 | 86,681 | 80,818 | 74,201 | 60,934 | 255,117 | 176,351 |
| Provision for loan losses | 65,000 | 85,000 | 47,200 | 70,000 | 45,000 | 197,200 | 161,800 |
| Net interest income after provision for loan losses | 22,618 | 1,681 | 33,618 | 4,201 | 15,934 | 57,917 | 14,551 |
| Other income: | | | | | | | |
| | Loan service fees | 1,659 | 2,042 | 1,284 | 1,723 | 1,565 | 4,985 | 5,190 |
| | Deposit service fees | 10,705 | 9,461 | 8,848 | 9,311 | 7,912 | 29,014 | 21,289 |
| | Lease financing, net | 5,022 | 5,026 | 4,620 | 5,799 | 3,937 | 14,668 | 12,729 |
| | Brokerage fees | 1,407 | 1,129 | 1,245 | 1,272 | 1,004 | 3,781 | 3,334 |
| | Trust & asset management fees | 3,918 | 3,536 | 3,335 | 3,347 | 3,169 | 10,789 | 9,246 |
| | Net gain on sale of investment securities | 9,482 | 2,304 | 6,866 | 239 | 3 | 18,652 | 13,790 |
| | Increase in cash surrender value of life insurance | 1,209 | 706 | 671 | 669 | 664 | 2,586 | 1,790 |
| | Net gain (loss) on sale of other assets | 299 | (99) | 11 | 12 | 12 | 211 | (25) |
| | Acquisition related gains | - | 62,649 | - | 18,325 | 10,222 | 62,649 | 10,222 |
| | Other operating income | 2,290 | 6,146 | (162) | 2,230 | 2,412 | 8,274 | 6,662 |
| | Total other income | 35,991 | 92,900 | 26,718 | 42,927 | 30,900 | 155,609 | 84,227 |
| Other expense: | | | | | | | |
| | Salaries & employee benefits | 37,424 | 37,104 | 33,422 | 33,391 | 31,196 | 107,950 | 87,263 |
| | Occupancy & equipment expense | 8,800 | 8,928 | 9,179 | 8,885 | 7,803 | 26,907 | 22,636 |
| | Computer services expense | 2,654 | 3,322 | 2,528 | 2,882 | 2,829 | 8,504 | 7,129 |
| | Advertising & marketing expense | 1,620 | 1,639 | 1,633 | 683 | 1,296 | 4,892 | 3,502 |
| | Professional & legal expense | 1,637 | 1,370 | 1,078 | 1,465 | 1,126 | 4,085 | 3,215 |
| | Brokerage fee expense | 596 | 420 | 462 | 553 | 478 | 1,478 | 1,446 |
| | Telecommunication expense | 975 | 964 | 908 | 1,127 | 812 | 2,847 | 2,306 |
| | Other intangible amortization expense | 1,567 | 1,505 | 1,510 | 1,650 | 966 | 4,582 | 2,841 |
| | FDIC insurance premiums | 3,873 | 3,833 | 3,964 | 4,099 | 3,206 | 11,670 | 12,663 |
| | Impairment charges | - | - | - | - | 4,000 | - | 4,000 |
| | Other operating expenses | 7,525 | 7,141 | 7,228 | 6,337 | 5,446 | 21,894 | 15,677 |
| | Total other expense | 66,671 | 66,226 | 61,912 | 61,072 | 59,158 | 194,809 | 162,678 |
| Income (loss) before income taxes | (8,062) | 28,355 | (1,576) | (13,944) | (12,324) | 18,717 | (63,900) |
| Income tax expense (benefit) | (5,253) | 9,158 | (2,523) | (4,164) | (13,596) | 1,382 | (41,101) |
| Income (loss) from continuing operations | (2,809) | 19,197 | 947 | (9,780) | 1,272 | 17,335 | (22,799) |
| Income from discontinued operations, net of tax | - | - | - | - | 6,172 | - | 6,453 |
| Net income (loss) | (2,809) | 19,197 | 947 | (9,780) | 7,444 | 17,335 | (16,346) |
| Preferred stock dividends and discount accretion | 2,597 | 2,594 | 2,593 | 2,591 | 2,589 | 7,784 | 7,707 |
| | | Net income (loss) available to common shareholders | $ (5,406) | $ 16,603 | $ (1,646) | $ (12,371) | $ 4,855 | $ 9,551 | $ (24,053) |
| | | Three Months Ended | Nine Months Ended |
| | | September 30, | June 30, | March 31, | December 31, | September 30, | September 30, | September 30, |
| | | 2010 | 2010 | 2010 | 2009 | 2009 | 2010 | 2009 |
| Common share data: | | | | | | | | |
| Basic earnings (loss) per common share from continuing operations | | $ (0.05) | $ 0.36 | $ 0.02 | $ (0.19) | $ 0.03 | $ 0.33 | $ (0.58) |
| Basic earnings per common share from discontinued operations | | $ - | $ - | $ - | $ - | $ 0.16 | $ - | $ 0.13 |
| Impact of preferred stock dividends on basic earnings (loss) per common share | $ (0.05) | $ (0.05) | $ (0.05) | $ (0.05) | $ (0.07) | $ (0.15) | $ (0.21) |
| Basis earnings (loss) per common share | | $ (0.10) | $ 0.31 | $ (0.03) | $ (0.25) | $ 0.12 | $ 0.18 | $ (0.65) |
| Diluted earnings (loss) per common share from continuing operations | | $ (0.05) | $ 0.36 | $ 0.02 | $ (0.19) | $ 0.03 | $ 0.33 | $ (0.57) |
| Diluted earnings per common share from discontinued operations | | $ - | $ - | $ - | $ - | $ 0.16 | $ - | $ 0.13 |
| Impact of preferred stock dividends on diluted earnings (loss) per common share | $ (0.05) | $ (0.05) | $ (0.05) | $ (0.05) | $ (0.07) | $ (0.15) | $ (0.21) |
| Diluted earnings (loss) per common share | | $ (0.10) | $ 0.31 | $ (0.03) | $ (0.25) | $ 0.12 | $ 0.18 | $ (0.65) |
| | | | | | | | | |
| Weighted average common shares outstanding | | 53,327,219 | 52,702,779 | 51,264,727 | 50,279,008 | 39,104,894 | 52,439,130 | 36,597,280 |
| Diluted weighted average common shares outstanding | | 53,545,596 | 53,034,426 | 51,264,727 | 50,279,008 | 39,299,168 | 52,750,219 | 36,751,738 |
| | Three Months Ended | Nine Months Ended |
| | September 30, | June 30, | March 31, | December 31, | September 30, | September 30, | September 30, |
| | 2010 | 2010 | 2010 | 2009 | 2009 | 2010 | 2009 |
| Performance Ratios: | | | | | | | |
| Annualized return on average assets | (0.10%) | 7.27% | 0.04% | (0.33%) | 0.30% | 0.22% | (0.24%) |
| Annualized return on average common equity | (1.86) | 5.79 | (0.61) | (4.54) | 2.13 | 1.13 | (3.65) |
Annualized cash return on average tangible common equity(1) | (2.38) | 9.52 | (0.40) | (6.69) | 4.33 | 2.33 | (6.21) |
| Net interest rate spread | 3.71 | 3.69 | 3.42 | 2.54 | 2.51 | 3.61 | 2.66 |
Cost of funds(2) | 0.96 | 1.04 | 1.13 | 1.38 | 1.50 | 1.05 | 1.80 |
Efficiency ratio(3) | 55.40 | 56.45 | 58.11 | 59.59 | 65.70 | 56.59 | 63.53 |
Annualized net non-interest expense to average assets(4) | 1.36 | 1.45 | 1.52 | 1.21 | 1.40 | 1.44 | 1.39 |
Core pre-tax pre-provision earnings to risk-weighted assets(5) | 2.91 | 2.71 | 2.41 | 2.07 | 1.46 | 2.71 | 1.52 |
| Net interest margin | 3.81 | 3.79 | 3.55 | 2.74 | 2.74 | 3.72 | 2.89 |
| Tax equivalent effect | 0.11 | 0.12 | 0.12 | 0.12 | 0.11 | 0.11 | 0.13 |
Net interest margin - fully tax equivalent basis(6) | 3.92 | 3.91 | 3.67 | 2.86 | 2.85 | 3.83 | 3.02 |
| Asset Quality Ratios: | | | | | | | |
Non-performing loans(7) to total loans | 5.73% | 4.90% | 5.04% | 4.16% | 4.41% | 5.73% | 4.41% |
Non-performing assets(7) to total assets | 4.26 | 3.65 | 3.58 | 2.84 | 2.19 | 4.26 | 2.19 |
Allowance for loan losses to non-performing loans(7) | 49.40 | 56.89 | 55.01 | 65.26 | 66.02 | 49.40 | 66.02 |
Allowance for loan losses to non-performing loans,(7) | | | | | | | |
| including partial charge-offs taken | 64.78 | 69.55 | 65.31 | 72.34 | 70.74 | 64.78 | 70.74 |
| Allowance for loan losses to total loans | 2.83 | 2.79 | 2.77 | 2.71 | 2.91 | 2.83 | 2.91 |
| Net loan charge-offs to average loans (annualized) | 3.81 | 3.89 | 2.93 | 5.05 | 2.28 | 3.56 | 2.44 |
| Capital Ratios: | | | | | | | |
Tangible equity to tangible assets(8) | 9.07% | 9.15% | 9.02% | 8.03% | 6.26% | 9.07% | 6.26% |
Tangible common equity to risk weighted assets(9) | 10.49 | 10.34 | 9.73 | 8.83 | 9.27 | 10.49 | 9.27 |
Tangible common equity to tangible assets(10) | 7.17 | 7.25 | 7.04 | 6.18 | 4.85 | 7.17 | 4.85 |
Book value per common share(11) | $ 21.17 | $ 21.40 | $ 20.85 | $ 20.75 | $ 21.48 | $ 21.17 | $ 21.48 |
| Less: goodwill and other intangible assets, net of tax | | | | | | | |
| benefit, per common share | 7.62 | 7.61 | 7.79 | 8.07 | 8.22 | 7.62 | 8.22 |
Tangible book value per share(12) | 13.55 | 13.79 | 13.06 | 12.68 | 13.26 | 13.55 | 13.26 |
| | | | | | | | |
| Total capital (to risk-weighted assets) | 17.14% | 16.78% | 16.39% | 15.45% | 15.76% | 17.14% | 15.76% |
| Tier 1 capital (to risk-weighted assets) | 15.15 | 14.82 | 14.42 | 13.51 | 13.80 | 15.15 | 13.80 |
| Tier 1 capital (to average assets) | 10.38 | 10.48 | 10.30 | 8.71 | 10.60 | 10.38 | 10.60 |
| Tier 1 common capital (to risk-weighted assets) | 10.17 | 9.97 | 9.51 | 8.76 | 8.72 | 10.17 | 8.72 |
| (1) | Net cash flow available to common stockholders (net income available to common stockholders, plus other intangibles amortization expense, net of tax benefit) / Average tangible common equity (average common equity less average goodwill and average other intangibles, net of tax benefit). |
| (2) | Equals total interest expense divided by the sum of average interest bearing liabilities and noninterest bearing deposits. |
| (3) | Equals total other expense excluding FDIC special assessment and impairment charges divided by the sum of net interest income on a fully tax equivalent basis and total other income less net gains (losses) on securities available for sale, net gains (losses) on sale of other assets, net gains (losses) on other real estate owned, and acquisition related gains. |
| (4) | Equals total other expense excluding FDIC special assessment and impairment charges less total other income excluding net gains (losses) on securities available for sale, net gain (losses) on sale of other assets, net gains (losses) on other real estate owned, and acquisition related gains divided by average assets. |
| (5) | Equal net income before taxes excluding loan loss provision expense, FDIC special assessment, impairment charges, net gains (losses) on securities available for sale, net gain (losses) on sale of other assets, and acquisition related gains divided by risk-weighted assets. |
| (6) | Represents net interest income, on a fully tax equivalent basis assuming a 35% tax rate, as a percentage of average interest earning assets. |
| (7) | Excludes purchased credit-impaired loans and loans held for sale. Non-performing assets excludes other real estate owned related to FDIC transactions. |
| (8) | Equals total ending stockholders’ equity less goodwill and other intangibles, net of tax benefit, divided by total assets less goodwill and other intangibles, net of tax benefit. |
| (9) | Equals total ending common stockholders’ equity less goodwill and other intangibles, net of tax benefit, divided by total risk weighted assets. |
| (10) | Equals total ending common stockholders’ equity less goodwill and other intangibles, net of tax benefit, divided by total assets less goodwill and other intangibles, net of tax benefit. |
| (11) | Equals total ending common stockholders’ equity divided by common shares outstanding. |
| (12) | Equals total ending common stockholders’ equity less goodwill and other intangibles, net of tax benefit, divided by common shares outstanding. |
NON-GAAP FINANCIAL INFORMATION
This press release contains certain financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (GAAP). These measures include pre-tax, pre-provision earnings; core pre-tax, pre-provision earnings; net interest income on a fully tax equivalent basis, net interest margin on a fully tax equivalent basis; efficiency ratio, ratio of annualized net non-interest expense to average assets, and ratio of core pre-tax, pre-provision earnings to risk-weighted assets, with net gains and losses on securities available for sale, net gains and losses on sale of other assets, net gains and losses on other real estate owned, and acquisition related gains excluded from the non-interest income components and the FDIC special assessment expense and impairment charges excluded from the non-interest expense components of these ratios; ratios of tangible equity to tangible assets, tangible common equity to risk weighted assets, tangible common equity to tangible assets and Tier 1 common capital to risk-weighted assets; tangible book value per common share; and annualized cash return on average tangible common equity. Our management uses these non-GAAP measures in its analysis of our performance. Management believes that pre-tax, pre-provision earnings are a useful measure in assessing our core operating performance, particularly during times of economic stress. The tax equivalent adjustment to net interest income recognizes the income tax savings when comparing taxable and tax-exempt assets and assumes a 35% tax rate. Management believes that it is a standard practice in the banking industry to present net interest income and net interest margin on a fully tax equivalent basis, and accordingly believes that providing thes e measures may be useful for peer comparison purposes. Management also believes that by excluding net gains and losses on securities available for sale, net gains and losses on sale of other assets, net gains and losses on other real estate owned and acquisition-related gains from the non-interest income component and excluding the FDIC special assessment expense and impairment changes from other non-interest expense of the efficiency ratio, the ratio of annualized net non-interest expense to average assets and the ratio of core pre-tax, pre-provision earnings to risk-weighted assets, these ratios better reflect our core operating performance. In addition, management believes that presenting the ratio of Tier 1 common equity to risk weighted assets is useful for assessing our capital strength and for peer comparison purposes. The other measures exclude the ending balances of acquisition-related goodwill and other intangible assets, net of tax benefit, in determining tangible stockholders’ equity. Management believes the presentation of these other financial measures excluding the impact of such items provides useful supplemental information that is helpful in understanding our financial results, as they provide a method to assess management’s success in utilizing our tangible capital. These disclosures should not be viewed as substitutes for the results determined to be in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.
The following table presents a reconciliation of tangible equity to equity (in thousands):
| | September 30, | June 30, | March 31, | December 31, | September 30, |
| | 2010 | 2010 | 2010 | 2009 | 2009 |
| Stockholders' equity - as reported | $ 1,335,914 | $ 1,344,913 | $ 1,292,478 | $ 1,251,180 | $ 1,271,877 |
| | Less: goodwill | 387,069 | 387,069 | 387,069 | 387,069 | 387,069 |
| | Less: other intangible, net of tax benefit | 23,585 | 22,221 | 23,529 | 24,510 | 25,582 |
| Tangible equity | $ 925,260 | $ 935,623 | $ 881,880 | $ 839,601 | $ 859,226 |
The following table presents a reconciliation of tangible assets to total assets (in thousands):
| | September 30, | June 30, | March 31, | December 31, | September 30, |
| | 2010 | 2010 | 2010 | 2009 | 2009 |
| Total assets - as reported | $ 10,608,564 | $ 10,638,749 | $ 10,185,240 | $ 10,865,393 | $ 14,135,212 |
| | Less: goodwill | 387,069 | 387,069 | 387,069 | 387,069 | 387,069 |
| | Less: other intangible, net of tax benefit | 23,585 | 22,221 | 23,529 | 24,510 | 25,582 |
| Tangible assets | $ 10,197,910 | $ 10,229,459 | $ 9,774,642 | $ 10,453,814 | $ 13,722,561 |
The following table presents a reconciliation of tangible common equity to stockholders’ common equity (in thousands):
| | September 30, | June 30, | March 31, | December 31, | September 30, |
| | 2010 | 2010 | 2010 | 2009 | 2009 |
| Common stockholders' equity - as reported | $ 1,141,958 | $ 1,151,104 | $ 1,098,813 | $ 1,057,658 | $ 1,078,496 |
| | Less: goodwill | 387,069 | 387,069 | 387,069 | 387,069 | 387,069 |
| | Less: other intangible, net of tax benefit | 23,585 | 22,221 | 23,529 | 24,510 | 25,582 |
| Tangible common equity | $ 731,304 | $ 741,814 | $ 688,215 | $ 646,079 | $ 665,845 |
The following table presents a reconciliation of average tangible common equity to average common stockholders’ equity (in thousands):
| | | Three Months Ended | Nine Months Ended |
| | | September 30, | June 30, | March 31, | December 31, | September 30, | September 30, | September 30, |
| | | 2010 | 2010 | 2010 | 2009 | 2009 | 2010 | 2009 |
| Average common stockholders' equity - as reported | $ 1,152,058 | $ 1,150,440 | $ 1,089,859 | $ 1,081,794 | $ 905,897 | $ 1,131,013 | $ 882,200 |
| | Less: average goodwill | 387,069 | 387,069 | 387,069 | 387,069 | 387,069 | 388,074 | 387,069 |
| | Less: average other intangible assets, | | | | | | | |
| | net of tax benefit | 22,596 | 22,905 | 23,892 | 25,128 | 16,630 | 23,126 | 16,897 |
| Average tangible common equity | $ 742,393 | $ 740,466 | $ 678,898 | $ 669,597 | $ 502,198 | $ 719,813 | $ 478,234 |
The following table presents a reconciliation of net cash flow available to common stockholders to net (loss) income available to common stockholders (in thousands):
| | | Three Months Ended | Nine Months Ended |
| | | September 30, | June 30, | March 31, | December 31, | September 30, | September 30, | September 30, |
| | | 2010 | 2010 | 2010 | 2009 | 2009 | 2010 | 2009 |
| Net (loss) income available to common | | | | | | | |
| shareholders - as reported | $ (5,406) | $ 16,603 | $ (1,646) | $ (12,371) | $ 4,855 | $ 9,551 | $ (24,053) |
| | Add: other intangible amortization expense, | | | | | | | |
| | net of tax benefit | 1,018 | 978 | 982 | 1,073 | 628 | 2,978 | 1,847 |
| Net cash flow available to common shareholders | $ (4,388) | $ 17,581 | $ (664) | $ (11,299) | $ 5,483 | $ 12,529 | $ (22,206) |
Efficiency Ratio Calculation (Dollars in Thousands)
| | | Three Months Ended | Nine Months Ended |
| | | September 30, | June 30, | March 31, | December 31, | September 30, | September 30, | September 30, |
| | | 2010 | 2010 | 2010 | 2009 | 2009 | 2010 | 2009 |
| Non-interest expense | $ 66,671 | $ 66,226 | $ 61,912 | $ 61,072 | $ 59,158 | $ 194,809 | $ 162,678 |
| Adjustment for FDIC special assessment | - | - | - | - | - | - | 3,850 |
| Adjustment for impairment charges | - | - | - | - | 4,000 | - | 4,000 |
| | Non-interest expense - as adjusted | $ 66,671 | $ 66,226 | $ 61,912 | $ 61,072 | $ 55,158 | $ 194,809 | $ 154,828 |
| | | | | | | | | |
| Net interest income | $ 87,618 | $ 86,681 | $ 80,818 | $ 74,201 | $ 60,934 | $ 255,117 | $ 176,351 |
| Tax equivalent adjustment | 2,614 | 2,642 | 2,593 | 3,195 | 2,383 | 7,849 | 7,430 |
| Net interest income on a fully tax equivalent basis | 90,232 | 89,323 | 83,411 | 77,396 | 63,317 | 262,966 | 183,781 |
| Plus other income | 35,991 | 92,900 | 26,718 | 42,927 | 30,900 | 155,609 | 84,227 |
| Less net gains (losses) on other real estate owned | (3,913) | 52 | (3,299) | (733) | 25 | (7,161) | 303 |
| Less net gains on securities available for sale | 9,482 | 2,304 | 6,866 | 239 | 3 | 18,652 | 13,790 |
| Less net gains (losses) on sale of other assets | 299 | (99) | 11 | 12 | 12 | 211 | (25) |
| Less acquisition related gains | - | 62,649 | - | 18,325 | 10,222 | 62,649 | 10,222 |
| Net interest income plus non-interest income - | | | | | | | |
| | as adjusted | $ 120,355 | $ 117,317 | $ 106,551 | $ 102,480 | $ 83,955 | $ 344,224 | $ 243,718 |
| | | | | | | | | |
| Efficiency ratio | 55.40% | 56.45% | 58.11% | 59.59% | 65.70% | 56.59% | 63.53% |
| | | | | | | | | |
| Efficiency ratio (without adjustments) | 53.94% | 36.88% | 57.57% | 52.14% | 64.42% | 47.43% | 62.43% |
Annualized Net Non-interest Expense to Average Assets Calculation (Dollars in Thousands)
| | | Three Months Ended | Nine Months Ended |
| | | September 30, | June 30, | March 31, | December 31, | September 30, | September 30, | September 30, |
| | | 2010 | 2010 | 2010 | 2009 | 2009 | 2010 | 2009 |
| Non-interest expense | $ 66,671 | $ 66,226 | $ 61,912 | $ 61,072 | $ 59,158 | $ 194,809 | $ 162,678 |
| Adjustment for FDIC special assessment | - | - | - | - | - | - | 3,850 |
| Adjustment for impairment charges | - | - | - | - | 4,000 | - | 4,000 |
| | Non-interest expense - as adjusted | 66,671 | 66,226 | 61,912 | 61,072 | 55,158 | 194,809 | 154,828 |
| | | | | | | | | |
| Other income | 35,991 | 92,900 | 26,718 | 42,927 | 30,900 | 155,609 | 84,227 |
| Less net gains (loss) on other real estate owned | (3,913) | 52 | (3,299) | (733) | 25 | (7,161) | 303 |
| Less net gains on securities available for sale | 9,482 | 2,304 | 6,866 | 239 | 3 | 18,652 | 13,790 |
| Less net gains (loss) on sale of other assets | 299 | (99) | 11 | 12 | 12 | 211 | (25) |
| Less acquisition related gains | - | 62,649 | - | 18,325 | 10,222 | 62,649 | 10,222 |
| Other income - as adjusted | 30,123 | 27,994 | 23,140 | 25,084 | 20,638 | 81,258 | 59,937 |
| | | | | | | | | |
| Net non-interest expense | $ 36,548 | $ 38,232 | $ 38,772 | $ 35,988 | $ 34,520 | $ 113,551 | $ 94,891 |
| | | | | | | | | |
| Average assets | $ 10,634,556 | $ 10,584,722 | $ 10,349,664 | $ 11,786,792 | $ 9,793,875 | $ 10,524,024 | $ 9,100,092 |
| | | | | | | | | |
| Annualized net non-interest expense to average assets | 1.36% | 1.45% | 1.52% | 1.21% | 1.40% | 1.44% | 1.39% |
| | | | | | | | | |
| Annualized net non-interest expense to average assets | | | | | | |
| | (without adjustments) | 1.14% | -1.01% | 1.38% | 0.61% | 1.14% | 0.50% | 1.15% |
Core Pre-Tax, Pre-Provision Earnings
| | | Three Months Ended | Nine Months Ended |
| | | September 30, | June 30, | March 31, | December 31, | September 30, | September 30, | September 30, |
| | | 2010 | 2010 | 2010 | 2009 | 2009 | 2010 | 2009 |
| Income (loss) before income taxes | $ (8,062) | $ 28,355 | $ (1,576) | $ (13,944) | $ (12,324) | $ 18,717 | $ (63,900) |
| Provision for loan losses | 65,000 | 85,000 | 47,200 | 70,000 | 45,000 | 197,200 | 161,800 |
| | Pre-tax, pre-provision earnings | 56,938 | 113,355 | 45,624 | 56,056 | 32,676 | 215,917 | 97,900 |
| | | | | | | | | |
| Non-core other income | | | | | | | |
| | Net gains on sale of investment securities | 9,482 | 2,304 | 6,866 | 239 | 3 | 18,652 | 13,790 |
| | Net gain (loss) on sale of other assets | 299 | (99) | 11 | 12 | 12 | 211 | (25) |
| | Net gain (loss) on other real estate owned | (3,913) | 52 | (3,299) | (733) | 25 | (7,161) | 303 |
| | Acquisition related gains | - | 62,649 | - | 18,325 | 10,222 | 62,649 | 10,222 |
| Total non-core other income | 5,868 | 64,906 | 3,578 | 17,843 | 10,262 | 74,351 | 24,290 |
| | | | | | | | | |
| Non-core other expense | | | | | | | |
| | FDIC special assessment | - | - | - | - | - | - | 3,850 |
| | Impairment charges | - | - | - | - | 4,000 | - | 4,000 |
| Total non-core other expense | - | - | - | - | 4,000 | - | 7,850 |
| Core pre-tax, pre-provision earnings | $ 51,070 | $ 48,449 | $ 42,046 | $ 38,213 | $ 26,414 | $ 141,566 | $ 81,460 |
| | | | | | | | | |
| Risk-weighted assets | $ 6,971,810 | $ 7,171,744 | $ 7,074,274 | $ 7,315,068 | $ 7,186,343 | $ 6,971,810 | $ 7,186,343 |
| | | | | | | | | |
| Annualized pre-tax, pre-provision earnings to risk- | | | | | | | |
| | weighted assets | 2.91% | 2.71% | 2.41% | 2.07% | 1.46% | 2.71% | 1.52% |
| Annualized pre-tax, pre-provision earnings to risk- | | | | | | | |
| | weighted assets (without adjustments) | 3.24% | 6.34% | 2.62% | 3.04% | 1.80% | 4.14% | 1.82% |
A reconciliation of net interest margin on a fully tax equivalent basis to net interest margin is contained in the tables under “Net Interest Margin.” A reconciliation of tangible book value per common share to book value per common share is contained in the “Selected Financial Ratios” table.
NET INTEREST MARGIN
The following table presents, for the periods indicated, the total dollar amount of interest income from average interest earning assets and the resultant yields, as well as the interest expense on average interest bearing liabilities, and the resultant costs, expressed both in dollars and rates (dollars in thousands):
| | | | Three Months Ended September 30, | Three Months Ended June 30, |
| | | | 2010 | 2009 | 2010 |
| | | | Average | | Yield/ | Average | | Yield/ | Average | | Yield/ |
| | | | Balance | Interest | Rate | Balance | Interest | Rate | Balance | Interest | Rate |
| Interest Earning Assets: | | | | | | | | | |
| Loans (1) (2) (3): | | | | | | | | | |
| Commercial related credits | | | | | | | | | |
| | Commercial | $ 1,307,155 | $ 16,933 | 5.14% | $ 1,426,385 | $ 17,286 | 4.81% | $ 1,381,828 | $ 17,185 | 4.99% |
| | Commercial loans collateralized by assignment | | | | | | | | | |
| | | of lease payments | 989,412 | 14,706 | 5.95 | 847,667 | 12,769 | 6.03 | 980,959 | 15,207 | 6.20 |
| | Real estate commercial | 2,316,143 | 30,706 | 5.19 | 2,436,157 | 32,926 | 5.29 | 2,392,791 | 31,993 | 5.29 |
| | Real estate construction | 500,644 | 4,452 | 3.48 | 712,937 | 6,251 | 3.43 | 549,545 | 4,366 | 3.14 |
| Total commercial related credits | 5,113,354 | 66,797 | 5.11 | 5,423,146 | 69,232 | 5.00 | 5,305,123 | 68,751 | 5.13 |
| Other loans | | | | | | | | | |
| | Real estate residential | 327,686 | 4,126 | 5.04 | 282,523 | 3,904 | 5.53 | 307,864 | 4,343 | 5.64 |
| | Home equity | 389,996 | 4,284 | 4.36 | 407,728 | 4,526 | 4.40 | 398,028 | 4,467 | 4.50 |
| | Indirect | 182,268 | 3,192 | 6.95 | 188,300 | 3,225 | 6.79 | 181,140 | 3,288 | 7.28 |
| | Consumer loans | 58,166 | 500 | 3.41 | 56,841 | 571 | 3.99 | 60,439 | 526 | 3.49 |
| Total other loans | 958,116 | 12,102 | 5.01 | 935,392 | 12,226 | 5.19 | 947,471 | 12,624 | 5.34 |
| | Total loans, excluding covered loans | 6,071,470 | 78,899 | 5.16 | 6,358,538 | 81,458 | 5.08 | 6,252,594 | 81,375 | 5.22 |
| | Covered loans | 867,945 | 16,590 | 7.58 | 93,556 | 1,814 | 7.69 | 672,546 | 14,133 | 8.43 |
| | Total loans | 6,939,415 | 95,489 | 5.46 | 6,452,094 | 83,272 | 5.12 | 6,925,140 | 95,508 | 5.53 |
| | | | | | | | | | | | |
| Taxable investment securities | 1,450,608 | 11,420 | 3.15 | 1,032,410 | 6,444 | 2.50 | 1,633,167 | 12,154 | 2.98 |
| Investment securities exempt from federal income taxes (3) | 355,288 | 5,210 | 5.74 | 379,056 | 5,516 | 5.69 | 358,192 | 5,236 | 5.78 |
| Federal funds sold | - | - | 0.00 | - | - | - | - | - | 0.00 |
| Other interest bearing deposits | 377,555 | 248 | 0.26 | 965,276 | 760 | 0.31 | 252,262 | 185 | 0.29 |
| | Total interest earning assets | $ 9,122,866 | $ 112,367 | 4.89 | $ 8,828,836 | $ 95,992 | 4.31 | $ 9,168,761 | $ 113,083 | 4.95 |
| Non-interest earning assets | 1,511,690 | | | 965,039 | | | 1,415,961 | | |
| | Total assets | $ 10,634,556 | | | $ 9,793,875 | | | $ 10,584,722 | | |
| | | | | | | | | | | | |
| Interest Bearing Liabilities: | | | | | | | | | |
| Core funding: | | | | | | | | | |
| | Money market and NOW accounts | $ 2,789,046 | $ 4,022 | 0.57% | $ 2,118,024 | $ 4,461 | 0.84% | $ 2,745,286 | $ 3,905 | 0.57% |
| | Savings accounts | 623,555 | 469 | 0.30 | 477,048 | 447 | 0.37 | 609,378 | 487 | 0.32 |
| | Certificate of deposit | 2,740,219 | 9,546 | 1.38 | 3,019,701 | 17,422 | 2.29 | 2,870,090 | 11,012 | 1.54 |
| | Customer repurchase agreements | 260,469 | 243 | 0.37 | 226,972 | 293 | 0.51 | 270,506 | 253 | 0.38 |
| Total core funding | 6,413,289 | 14,280 | 0.88 | 5,841,745 | 22,623 | 1.54 | 6,495,260 | 15,657 | 0.97 |
| Whole sale funding: | | | | | | | | | |
| | Public funds | 80,339 | 132 | 0.65 | 102,119 | 314 | 1.22 | 103,282 | 157 | 0.61 |
| | Brokered accounts (includes fee expense) | 485,676 | 4,427 | 3.62 | 564,821 | 5,019 | 3.53 | 502,638 | 4,723 | 3.77 |
| | Other short-term borrowings | 4,279 | 39 | 3.62 | 201,588 | 929 | 1.83 | 2,152 | 10 | 1.86 |
| | Long-term borrowings | 458,657 | 3,257 | 2.78 | 504,218 | 3,790 | 2.94 | 471,316 | 3,213 | 2.70 |
| Total wholesale funding | 1,028,951 | 7,855 | 3.03 | 1,372,746 | 10,052 | 2.91 | 1,079,388 | 8,103 | 3.01 |
| Total interest bearing liabilities | $ 7,442,240 | $ 22,135 | 1.18 | $ 7,214,491 | $ 32,675 | 1.80 | $ 7,574,648 | $ 23,760 | 1.26 |
| Non-interest bearing deposits | 1,673,259 | | | 1,445,937 | | | 1,552,813 | | |
| Other non-interest bearing liabilities | 173,139 | | | 34,237 | | | 113,097 | | |
| Stockholders' equity | 1,345,918 | | | 1,099,210 | | | 1,344,164 | | |
| | | Total liabilities and stockholders' equity | $ 10,634,556 | | | $ 9,793,875 | | | $ 10,584,722 | | |
| | | Net interest income/interest rate spread (4) | | $ 90,232 | 3.71% | | $ 63,317 | 2.51% | | $ 89,323 | 3.69% |
| | | Taxable equivalent adjustment | | 2,614 | | | 2,383 | | | 2,642 | |
| | | Net interest income, as reported | | $ 87,618 | | | $ 60,934 | | | $ 86,681 | |
| | | Net interest margin (5) | | | 3.81% | | | 2.74% | | | 3.79% |
| | | Tax equivalent effect | | | 0.11% | | | 0.11% | | | 0.12% |
| | | Net interest margin on a fully equivalent basis (5) | | | 3.92% | | | 2.85% | | | 3.91% |
| (1) | Non-accrual loans are included in average loans. |
| (2) | Interest income includes amortization of deferred loan origination fees of $1.1 million, $1.2 million and $1.5 million for the three months ended September 30, 2010, September 30, 2009, and June 30, 2010, respectively. |
| (3) | Non-taxable loan and investment income is presented on a fully tax equivalent basis assuming a 35% tax rate. |
| (4) | Interest rate spread represents the difference between the average yield on interest earning assets and the average cost of interest bearing liabilities and is presented on a fully tax equivalent basis. |
| (5) | Net interest margin represents net interest income as a percentage of average interest earning assets. |
The following table represents, for the period indicated, the total dollar amount of interest income from average interest earning assets and the resultant yields, as well as the interest expense on average interest bearing liabilities, and the resultant costs, expressed both in dollars and rates (dollars in thousands):
| | | | Nine Months Ended September 30, |
| | | | 2010 | 2009 |
| | | | Average | | Yield/ | Average | | Yield/ |
| | | | Balance | Interest | Rate | Balance | Interest | Rate |
| Interest Earning Assets: | | | | | | |
| Loans (1) (2) (3): | | | | | | |
| Commercial related credits | | | | | | |
| | Commercial | $ 1,351,436 | $ 51,068 | 5.05% | $ 1,465,542 | $ 52,731 | 4.81% |
| | Commercial loans collateralized by assignment | | | | | | |
| | | of lease payments | 969,035 | 44,145 | 6.07 | 780,442 | 36,306 | 6.20 |
| | Real estate commercial | 2,382,228 | 95,262 | 5.27 | 2,390,861 | 96,913 | 5.35 |
| | Real estate construction | 548,405 | 13,616 | 3.27 | 751,192 | 21,287 | 3.74 |
| Total commercial related credits | 5,251,104 | 204,091 | 5.13 | 5,388,037 | 207,237 | 5.07 |
| Other loans | | | | | | |
| | Real estate residential | 310,645 | 12,355 | 5.30 | 284,962 | 11,962 | 5.60 |
| | Home equity | 397,182 | 13,083 | 4.40 | 408,046 | 13,451 | 4.41 |
| | Indirect | 180,808 | 9,532 | 7.05 | 189,091 | 9,562 | 6.76 |
| | Consumer loans | 59,214 | 1,576 | 3.56 | 57,721 | 1,755 | 4.07 |
| Total other loans | 947,849 | 36,546 | 5.16 | 939,820 | 36,730 | 5.23 |
| | Total loans, excluding covered loans | 6,198,953 | 240,637 | 5.19 | 6,327,857 | 243,967 | 5.15 |
| | Covered loans | 571,596 | 33,494 | 7.83 | 72,886 | 4,656 | 8.54 |
| | Total loans | 6,770,549 | 274,131 | 5.41 | 6,400,743 | 248,623 | 5.19 |
| | | | | | | | | |
| Taxable investment securities | 1,791,504 | 43,540 | 3.24 | 891,142 | 23,738 | 3.55 |
| Investment securities exempt from federal income taxes (3) | 358,026 | 15,720 | 5.79 | 398,897 | 17,318 | 5.73 |
| Federal funds sold | 471 | 2 | 0.56 | - | - | - |
| Other interest bearing deposits | 252,301 | 524 | 0.28 | 455,354 | 1,039 | 0.31 |
| | Total interest earning assets | $ 9,172,851 | $ 333,917 | 4.87 | $ 8,146,136 | $ 290,718 | 4.77 |
| Non-interest earning assets | 1,351,173 | | | 953,956 | | |
| | Total assets | $ 10,524,024 | | | $ 9,100,092 | | |
| | | | | | | | | |
| Interest Bearing Liabilities: | | | | | | |
| Core funding: | | | | | | |
| | Money market and NOW accounts | $ 2,747,977 | $ 11,556 | 0.56% | $ 1,778,656 | $ 12,250 | 0.92% |
| | Savings accounts | 606,326 | 1,406 | 0.31 | 439,674 | 1,222 | 0.37 |
| | Certificate of deposit | 2,830,191 | 32,999 | 1.56 | 2,720,074 | 55,191 | 2.71 |
| | Customer repurchase agreements | 254,396 | 741 | 0.39 | 257,289 | 879 | 0.46 |
| Total core funding | 6,438,890 | 46,702 | 0.97 | 5,195,693 | 69,542 | 1.79 |
| Whole sale funding: | | | | | | |
| | Public funds | 95,210 | 476 | 0.67 | 144,769 | 1,770 | 1.63 |
| | Brokered accounts (includes fee expense) | 494,643 | 13,815 | 3.73 | 708,372 | 19,786 | 3.73 |
| | Other short-term borrowings | 9,260 | 149 | 2.15 | 222,838 | 3,145 | 1.89 |
| | Long-term borrowings | 471,211 | 9,809 | 2.75 | 518,288 | 12,694 | 3.23 |
| Total wholesale funding | 1,070,324 | 24,249 | 3.03 | 1,594,267 | 37,395 | 3.14 |
| Total interest bearing liabilities | $ 7,509,214 | $ 70,951 | 1.26 | $6,789,960 | $ 106,937 | 2.11 |
| Non-interest bearing deposits | 1,560,914 | | | 1,162,003 | | |
| Other non-interest bearing liabilities | 129,163 | | | 73,456 | | |
| Stockholders' equity | 1,324,733 | | | 1,074,673 | | |
| | | Total liabilities and stockholders' equity | $ 10,524,024 | | | $ 9,100,092 | | |
| | | Net interest income/interest rate spread (4) | | $ 262,966 | 3.61% | | $ 183,781 | 2.66% |
| | | Taxable equivalent adjustment | | 7,849 | | | 7,430 | |
| | | Net interest income, as reported | | $ 255,117 | | | $ 176,351 | |
| | | Net interest margin (5) | | | 3.72% | | | 2.89% |
| | | Tax equivalent effect | | | 0.11% | | | 0.13% |
| | | Net interest margin on a fully equivalent basis (5) | | | 3.83% | | | 3.02% |
| (1) | Non-accrual loans are included in average loans. |
| (2) | Interest income includes amortization of deferred loan origination fees of $3.6 million and $3.9 million for the nine months ended September 30, 2010, and September 30, 2009, respectively. |
| (3) | Non-taxable loan and investment income is presented on a fully tax equivalent basis assuming a 35% tax rate. |
| (4) | Interest rate spread represents the difference between the average yield on interest earning assets and the average cost of interest bearing liabilities and is presented on a fully tax equivalent basis. |
| (5) | Net interest margin represents net interest income as a percentage of average interest earning assets. |
