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 NET INCOME OF $19.7 MILLION, A REDUCTION IN NON-PERFORMING LOANS AND CONTINUED STRONG CAPITAL POSITION
CHICAGO, October 20, 2011 – 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 2011. The words “MB Financial,” “the Company,” “we,” “our” and “us” refer to MB Financial, Inc. and its consolidated subsidiaries, unless indicated otherwise. We had net income of $19.7 million and net income available to common stockholders of $17.1 million for the third quarter of 2011 compared to a net loss of $2.8 million and a net loss available to common stockholders of $5.4 million for the third quarter of 2010, and a net loss of $7.4 million and a net loss available to common stockholders of $10.0 million for the second quarter of 2011.
Key items for the quarter were as follows:
Credit Quality – Decreased Non-Performing Loans and Non-Performing Assets:
· | Our non-performing loans were $141.0 million or 2.42% of total loans as of September 30, 2011, a decrease of $10.0 million from $151.0 million or 2.54% of total loans at June 30, 2011. Our allowance for loan losses to non-performing loans was 91.23% as of September 30, 2011 compared to 86.12% as of June 30, 2011. |
· | Our non-performing assets were $228.7 million or 2.30% of total assets as of September 30, 2011, a decrease of $10.6 million from $239.3 million or 2.40% of total assets as of June 30, 2011. |
· | Our allowance for loan losses to total loans was 2.21% as of September 30, 2011 compared to 2.19% as of June 30, 2011. |
· | Our provision for credit losses was $11.5 million for the third quarter of 2011, while our net charge-offs were $16.7 million. Our provision for credit losses and net charge-offs for the second quarter of 2011 were $61.3 million and $92.6 million, respectively. Excluding the previously disclosed second quarter 2011 loan sale, our provision for credit losses and net charge-offs for the second quarter of 2011 would have been approximately $11.3 million and $6.0 million, respectively. |
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Pre-Tax, Pre-Provision Operating Earnings Remain Strong:
· | Pre-tax, pre-provision operating earnings (on a fully tax equivalent basis) were $46.6 million, or 3.00% of risk-weighted assets, for the third quarter of 2011 compared to $50.2 million, or 3.25% of risk-weighted assets, for the second quarter of 2011. Pre-tax, pre-provision operating earnings (on a tax equivalent basis) to average assets decreased to 1.89% for the third quarter of 2011 from 2.02% for the second quarter of 2011. |
· | Net interest income on a fully tax equivalent basis decreased $1.4 million compared to the second quarter of 2011 due to a slightly lower level of interest earning assets. |
· | Net interest margin on a fully tax equivalent basis was 3.90% for the third quarter of 2011 compared to 3.92% in the third quarter of 2010 and 3.92% in the second quarter of 2011. |
· | Core other income was $29.9 million for the third quarter of 2011, a decrease of $1.7 million, or 5.4%, compared to the second quarter of 2011. Core other expense was $67.0 million for the third quarter of 2011, a slight increase from $66.6 million for the second quarter of 2011. |
Strong Capital Position:
· | MB Financial Bank significantly exceeds the “Well-Capitalized” threshold established under the regulations of the Office of the Comptroller of the Currency. At September 30, 2011, MB Financial, Inc.’s consolidated total risk-based capital ratio was 19.61%, Tier 1 capital to risk-weighted assets ratio was 17.54% and Tier 1 capital to average asset ratio was 11.59%, compared with 19.18%, 17.11% and 11.16%, respectively, as of June 30, 2011. As of September 30, 2011, total capital was approximately $593.5 million in excess of the “Well-Capitalized” threshold, compared with $569.5 million as of June 30, 2011. Our tangible common equity to tangible assets ratio was 8.06% at September 30, 2011 compared to 7.76% at June 30, 2011. |
6
RESULTS OF OPERATIONS
Third Quarter Results
Net Interest Income
Net interest income on a fully tax equivalent basis decreased $1.4 million from the second quarter of 2011 and decreased by $6.5 million from the third quarter of 2010 to the third quarter of 2011. The decrease from the second quarter of 2011 and from the third quarter of 2010 was due primarily to a decrease in interest earning assets.
Our net interest margin, on a fully tax equivalent basis, was 3.90% for the third quarter of 2011 compared to 3.92% for the second quarter of 2011 and 3.92% for the third quarter of 2010. Our net interest margin, on a fully tax equivalent basis, was 3.90% for the nine months ended September 30, 2011 compared to 3.83% in the nine months ended September 30, 2010. The margin increase from 2010 was due to a decrease in our average cost of funds as a result of an improved deposit mix and downward repricing of interest bearing deposits, as well as a lower level of non-performing loans.
Our non-performing loans reduced net interest margin during the third quarter of 2011, second quarter of 2011 and the third quarter of 2010 by approximately 9 basis points, 15 basis points and 22 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, | |||||||||
2011 | 2011 | 2011 | 2010 | 2010 | 2011 | 2010 | |||||||||
Core other income: | |||||||||||||||
Loan service fees | $ | 2,159 | $ | 2,812 | $ | 1,126 | $ | 1,532 | $ | 1,659 | $ | 6,097 | $ | 4,985 | |
Deposit service fees | 9,932 | 9,023 | 10,030 | 9,920 | 10,705 | 28,985 | 29,014 | ||||||||
Lease financing, net | 6,494 | 6,861 | 5,783 | 7,185 | 5,022 | 19,138 | 14,668 | ||||||||
Brokerage fees | 1,273 | 1,615 | 1,419 | 1,231 | 1,407 | 4,307 | 3,781 | ||||||||
Trust and asset management fees | 4,272 | 4,455 | 4,431 | 4,243 | 3,923 | 13,158 | 10,794 | ||||||||
Increase in cash surrender value of life insurance | 1,014 | 1,451 | 968 | 930 | 1,209 | 3,433 | 2,586 | ||||||||
Accretion of FDIC indemnification asset | 985 | 1,339 | 1,831 | 3,009 | 3,602 | 4,155 | 6,669 | ||||||||
Other operating income | 3,761 | 4,041 | 3,386 | 3,857 | 2,406 | 11,188 | 8,147 | ||||||||
Total core other income | 29,890 | 31,597 | 28,974 | 31,907 | 29,933 | 90,461 | 80,644 | ||||||||
Non-core other income: (1) | |||||||||||||||
Net gain (loss) on sale of investment securities | - | 232 | (3) | (4) | 9,482 | 229 | 18,652 | ||||||||
Net gain on sale of other assets | - | 13 | 357 | 419 | 299 | 370 | 211 | ||||||||
Net gain on sale of loans held for sale (A) | - | 1,790 | - | - | - | 1,790 | - | ||||||||
Net loss recognized on other real estate owned (A) | (2,354) | (3,628) | (369) | (1,656) | (3,608) | (6,351) | (6,855) | ||||||||
Net loss recognized on other real estate owned related to FDIC transactions (A) | (764) | (1,017) | (3) | (468) | (305) | (1,784) | (305) | ||||||||
Acquisition related gains | - | - | - | - | - | - | 62,649 | ||||||||
Increase (decrease) in market value of assets held in trust deferred compensation (A) | (405) | 158 | 187 | 597 | (3) | (60) | (35) | ||||||||
Total non-core other income | (3,523) | (2,452) | 169 | (1,112) | 5,865 | (5,806) | 74,317 | ||||||||
Total other income | $ | 26,367 | $ | 29,145 | $ | 29,143 | $ | 30,795 | $ | 35,798 | $ | 84,655 | $ | 154,961 |
(1) | Letter denotes 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 decreased by $1.7 million from the second quarter of 2011 to the third quarter of 2011. Loan service fees decreased due to less prepayment and exit fees received on early payoffs during the third quarter of 2011. Deposit fees increased during the third quarter due to changes in retail products offered. Net lease financing income decreased mainly as a result of a decrease in the sales of third party equipment maintenance contracts. The increase in cash surrender value of life insurance was lower due to a death benefit recorded in the second quarter of 2011, while there was no death benefit recorded in the third quarter of 2011. Accretion of indemnification asset decreased as expected due to a corresponding decrease in the indemnification asset balance during the third quarter of 2011.
Core other income increased by $9.8 million from the nine months ended September 30, 2010 to the nine months ended September 30, 2011. Loan service fees increased due to an increase in prepayment and exit fees. Net lease financing increased primarily due to an increase in the sales of third party equipment maintenance contracts. 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 increase in cash surrender value of life insurance was higher due to an improvement in overall asset yields. Accretion of indemnification asset decreased as expected due to a corresponding decrease in the indemnification asset balance during the nine months ended September 30, 2011. Non-core other income decreased in the nine months ended September 30, 2011 compared to the nine months ended September 30, 2010 as a result of the acquisition related gains recognized on the Broadway Bank and New Century Bank FDIC-assisted transactions in the second quarter of 2010 and lower gains on sales of investment securities in 2011.
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Other Expense (in thousands):
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | June 30, | March 31, | December 31, | September 30, | September 30, | September 30, | |||||||||
2011 | 2011 | 2011 | 2010 | 2010 | 2011 | 2010 | |||||||||
Core other expense: | |||||||||||||||
Salaries and employee benefits | $ | 38,827 | $ | 37,657 | $ | 37,588 | $ | 35,802 | $ | 37,427 | $ | 114,072 | $ | 107,985 | |
Occupancy and equipment expense | 9,092 | 8,483 | 9,394 | 7,938 | 8,800 | 26,969 | 26,907 | ||||||||
Computer services expense | 2,544 | 2,633 | 2,510 | 2,445 | 2,654 | 7,687 | 8,504 | ||||||||
Advertising and marketing expense | 1,740 | 1,748 | 1,719 | 1,573 | 1,620 | 5,207 | 4,892 | ||||||||
Professional and legal expense | 1,647 | 1,853 | 1,225 | 1,718 | 1,637 | 4,725 | 4,085 | ||||||||
Brokerage fee expense | 363 | 574 | 483 | 448 | 596 | 1,420 | 1,478 | ||||||||
Telecommunication expense | 944 | 937 | 935 | 819 | 975 | 2,816 | 2,847 | ||||||||
Other intangibles amortization expense | 1,414 | 1,416 | 1,425 | 1,632 | 1,567 | 4,255 | 4,582 | ||||||||
FDIC insurance premiums | 2,272 | 3,502 | 3,428 | 3,930 | 3,873 | 9,202 | 11,670 | ||||||||
Other real estate expense, net | 1,181 | 1,251 | 398 | 858 | 734 | 2,830 | 1,836 | ||||||||
Other operating expenses | 6,989 | 6,516 | 6,572 | 6,855 | 6,598 | 20,077 | 19,410 | ||||||||
Total core other expense | 67,013 | 66,570 | 65,677 | 64,018 | 66,481 | 199,260 | 194,196 | ||||||||
Non-core other expense: (1) | |||||||||||||||
Branch impairment charges | - | - | 1,000 | - | - | 1,000 | - | ||||||||
Increase (decrease) in market value of assets held in trust for deferred compensation (A) | (405) | 158 | 187 | 597 | (3) | (60) | (35) | ||||||||
Total non-core other expense | (405) | 158 | 1,187 | 597 | (3) | 940 | (35) | ||||||||
Total other expense | $ | 66,608 | $ | 66,728 | $ | 66,864 | $ | 64,615 | $ | 66,478 | $ | 200,200 | $ | 194,161 |
(1) | Letters denote the corresponding line items where these non-core other expense items reside in the consolidated statements of income as follows: A – Salaries and employee benefits. |
Core other expense increased by approximately $450 thousand in the third quarter of 2011 compared with the second quarter of 2011. Salaries and employee benefits increased due to an increase in long-term incentives and health insurance expense. Occupancy and equipment expense increased as a result of increased property taxes. FDIC insurance premiums decreased as a result of the change in the assessment computation and the impact of improved credit quality on the computation.
Core other expense increased by $5.1 million from the nine months ended September 30, 2010 to the nine months ended September 30, 2011. Salaries and employee benefits expense increased due to additional employees added during 2010 due to the New Century and Broadway FDIC-assisted transactions, problem loan remediation staff added throughout 2010 and increased leasing commissions on higher leasing revenues. Computer services expense decreased primarily due to conversion expenditures on FDIC assisted transactions completed in 2010. Professional and legal expense increased during the nine months ended September 30, 2011 as a result of higher loan remediation expenses. FDIC insurance premiums decreased due to lower deposits, a change in the assessment computation during the second quarter of 2011, and the impact of improved credit quality on the computation. Other real estate expense increased as a result of more properties in other real estate owned. Non-core other expense was primarily impacted by a $1.0 million fixed asset impairment charge incurred in the first quarter of 2011 caused by our decision to close a branch.
8
Income Taxes
The Company had income tax expense of $9.0 million for the three months ended September 30, 2011 and a benefit of $2.5 million for the nine months ended September 30, 2011. The three month tax expense and year-to-date tax benefits are calculated based on pre-tax income excluding tax-exempt items. The year-to-date amount also includes a $2 million increase in deferred tax assets as a result of the Illinois corporate income tax rate increase which was enacted and reflected in the first quarter of 2011.
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, | ||||||||||||
2011 | 2011 | 2011 | 2010 | 2010 | ||||||||||||
Amount | % of Total | Amount | % of Total | Amount | % of Total | Amount | % of Total | Amount | % of Total | |||||||
Commercial related credits: | ||||||||||||||||
Commercial loans | $ | 1,042,583 | 18% | $ | 1,108,295 | 19% | $ | 1,154,451 | 18% | $ | 1,206,984 | 18% | $ | 1,291,115 | 19% | |
Commercial loans collateralized by assignment of lease payments (lease loans) | 1,067,191 | 18% | 1,031,677 | 17% | 1,038,507 | 16% | 1,053,446 | 16% | 1,019,083 | 15% | ||||||
Commercial real estate | 1,844,894 | 32% | 1,863,223 | 32% | 2,084,651 | 33% | 2,176,584 | 33% | 2,259,708 | 33% | ||||||
Construction real estate | 210,206 | 4% | 246,557 | 4% | 356,579 | 6% | 423,339 | 6% | 445,881 | 6% | ||||||
Total commercial related credits | 4,164,874 | 72% | 4,249,752 | 72% | 4,634,188 | 73% | 4,860,353 | 73% | 5,015,787 | 73% | ||||||
Other loans: | ||||||||||||||||
Residential real estate | 316,305 | 5% | 317,821 | 5% | 335,423 | 5% | 328,482 | 5% | 328,985 | 5% | ||||||
Indirect vehicle | 189,033 | 4% | 182,536 | 3% | 175,058 | 3% | 175,664 | 3% | 182,091 | 2% | ||||||
Home equity | 348,934 | 6% | 357,181 | 6% | 371,108 | 6% | 381,662 | 6% | 386,866 | 6% | ||||||
Consumer loans | 76,025 | 1% | 75,069 | 1% | 74,585 | 1% | 59,320 | 1% | 76,219 | 1% | ||||||
Total other loans | 930,297 | 16% | 932,607 | 15% | 956,174 | 15% | 945,128 | 15% | 974,161 | 14% | ||||||
Gross loans excluding covered loans | 5,095,171 | 88% | 5,182,359 | 87% | 5,590,362 | 88% | 5,805,481 | 88% | 5,989,948 | 87% | ||||||
Covered loans (1) | 718,566 | 12% | 755,670 | 13% | 777,634 | 12% | 812,330 | 12% | 859,038 | 13% | ||||||
Total loans | $ | 5,813,737 | 100% | $ | 5,938,029 | 100% | $ | 6,367,996 | 100% | $ | 6,617,811 | 100% | $ | 6,848,986 | 100% |
(1) | Covered loans refer to loans we acquired in FDIC-assisted transactions that are subject to loss-sharing agreements with the FDIC. |
During the second quarter of 2011, we sold certain performing, sub-performing and non-performing loans. The loans sold had an aggregate carrying amount of $281.6 million prior to the transfer to loans held for sale, which was comprised of $160.8 million in commercial real estate loans, $73.7 million in construction real estate loans, $14.5 million in commercial loans and $32.6 million in residential real estate and home equity loans.
9
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 related to FDIC-assisted transactions, as of the dates indicated (dollar amounts in thousands):
September 30, | June 30, | March 31, | December 31, | September 30, | |||||||
2011 | 2011 | 2011 | 2010 | 2010 | |||||||
Non-performing loans: | |||||||||||
Non-accrual loans(1) | $ | 140,979 | $ | 149,905 | $ | 318,923 | $ | 362,441 | $ | 392,477 | |
Loans 90 days or more past due, still accruing interest | - | 1,121 | - | 1 | 115 | ||||||
Total non-performing loans | 140,979 | 151,026 | 318,923 | 362,442 | 392,592 | ||||||
OREO | 87,469 | 88,185 | 80,107 | 71,476 | 59,114 | ||||||
Repossessed vehicles | 249 | 55 | 139 | 82 | 321 | ||||||
Total non-performing assets | $ | 228,697 | $ | 239,266 | $ | 399,169 | $ | 434,000 | $ | 452,027 | |
Total allowance for loan losses (2) | 128,610 | 130,057 | 178,410 | 192,217 | 193,926 | ||||||
Partial charge-offs taken on non-performing loans | 50,578 | 54,424 | 156,692 | 163,972 | 171,549 | ||||||
Allowance for loan losses, including partial charge-offs | $ | 179,188 | $ | 184,481 | $ | 335,102 | $ | 356,189 | $ | 365,475 | |
Accruing restructured loans(3) | $ | 34,321 | $ | 35,037 | $ | 31,819 | $ | 22,543 | $ | 12,226 | |
Total non-performing loans to total loans | 2.42% | 2.54% | 5.01% | 5.48% | 5.73% | ||||||
Total non-performing assets to total assets | 2.30% | 2.40% | 3.96% | 4.21% | 4.26% | ||||||
Allowance for loan losses to non-performing loans | 91.23% | 86.12% | 55.94% | 53.03% | 49.40% | ||||||
Allowance for loan losses to non-performing loans, | |||||||||||
including partial charge-offs taken(4) | 93.54% | 89.79% | 70.46% | 67.66% | 64.78% |
(1) | Includes $36.0 million, $22.5 million, $60.9 million, $47.6 million, and $16.9 million of restructured loans on non-accrual status at September 30, 2011, June 30, 2011, March 31, 2011, December 31, 2010 and September 30, 2010, respectively. |
(2) | Includes $12.7 million, $13.6 million and $15.6 million for unfunded credit commitments at March 31, 2011, December 31, 2010 and September 30, 2010, respectively. |
(3) | Accruing restructured loans consists primarily of commercial and commercial real estate loans that have been modified and are performing in accordance with those modified terms. |
(4) | Calculated by adding partial charge-offs to both the numerator and denominator in the calculation. |
The decreases in total non-performing loans and total non-performing assets from March 31, 2011 to June 30, 2011 were primarily due to the sale during the second quarter of 2011 of loans with an aggregate carrying amount of $281.6 million prior to the transfer to loans held for sale, $156.3 million of which were non-performing.
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, | ||||||
2011 | 2011 | 2011 | 2010 | 2010 | ||||||
30 - 59 Days Past Due | $ | 15,564 | $ | 10,568 | $ | 23,912 | $ | 9,386 | $ | 19,302 |
60 - 89 Days Past Due | 4,307 | 4,881 | 4,049 | 5,073 | 6,011 | |||||
$ | 19,871 | $ | 15,449 | $ | 27,961 | $ | 14,459 | $ | 25,313 |
Approximately $9.2 million of performing loans past due were included among the loans classified as potential problem loans (defined and discussed below) as of September 30, 2011 compared to $1.1 million as of June 30, 2011.
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The following table represents a summary of OREO, excluding OREO related to FDIC-assisted transactions (in thousands):
September 30, | June 30, | March 31, | December 31, | September 30, | ||||||
2011 | 2011 | 2011 | 2010 | 2010 | ||||||
Balance at the beginning of quarter | $ | 88,185 | $ | 80,107 | $ | 71,476 | $ | 59,114 | $ | 43,988 |
Transfers in at fair value less estimated costs to sell | 15,658 | 15,761 | 25,167 | 27,170 | 21,383 | |||||
Fair value adjustments | (2,524) | (3,417) | (1,314) | (1,562) | (3,429) | |||||
Net (losses) gains on sales of OREO | 170 | (212) | 945 | (94) | (179) | |||||
Cash received upon disposition | (14,020) | (4,054) | (16,167) | (13,152) | (2,649) | |||||
Balance at the end of quarter | $ | 87,469 | $ | 88,185 | $ | 80,107 | $ | 71,476 | $ | 59,114 |
The following table presents data related to non-performing loans, by dollar amount and category at September 30, 2011, excluding loans held for sale and credit-impaired loans that were acquired as part of our FDIC-assisted transactions (dollar amounts in thousands):
Commercial and Lease Loans | Construction Real Estate Loans | Commercial Real Estate Loans | Consumer Loans | Total Loans | |||||||||||
Number of Relationships | Amount | Number of Relationships | Amount | Number of Relationships | Amount | Amount | Amount | ||||||||
$10.0 million or more | - | $ | - | - | $ | - | - | $ | - | $ | - | $ | - | ||
$5.0 million to $9.9 million | 3 | 20,136 | - | - | 3 | 23,938 | - | 44,074 | |||||||
$1.5 million to $4.9 million | 4 | 8,854 | - | - | 13 | 37,474 | - | 46,328 | |||||||
Under $1.5 million | 37 | 8,654 | 5 | 2,913 | 54 | 25,495 | 13,515 | 50,577 | |||||||
44 | $ | 37,644 | 5 | $ | 2,913 | 70 | $ | 86,907 | $ | 13,515 | $ | 140,979 | |||
Percentage of individual loan category | 1.78% | 1.39% | 4.71% | 1.45% | 2.42% | ||||||||||
Specific reserves and partial charge-offs as a | |||||||||||||||
percentage of non-performing loans | 44% | 70% | 26% |
The following table presents data related to non-performing loans, by dollar amount and category at June 30, 2011, excluding loans held for sale and credit-impaired loans that were acquired as part of our FDIC-assisted transactions (dollar amounts in thousands):
Commercial and Lease Loans | Construction Real Estate Loans | Commercial Real Estate Loans | Consumer Loans | Total Loans | |||||||||||
Number of Relationships | Amount | Number of Relationships | Amount | Number of Relationships | Amount | Amount | Amount | ||||||||
$10.0 million or more | - | $ | - | - | $ | - | - | $ | - | $ | - | $ | - | ||
$5.0 million to $9.9 million | 3 | 20,950 | 1 | 7,708 | 4 | 32,325 | - | 60,983 | |||||||
$1.5 million to $4.9 million | - | - | 3 | 8,858 | 11 | 29,442 | - | 38,300 | |||||||
Under $1.5 million | 34 | 12,397 | 3 | 653 | 42 | 25,319 | 13,374 | 51,743 | |||||||
37 | $ | 33,347 | 7 | $ | 17,219 | 57 | $ | 87,086 | $ | 13,374 | $ | 151,026 | |||
Percentage of individual loan category | 1.56% | 6.98% | 4.67% | 1.43% | 2.54% | ||||||||||
Specific reserves and partial charge-offs as a | |||||||||||||||
percentage of non-performing loans | 46% | 57% | 25% |
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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). Potential problem loans carry a higher probability of default and require additional attention by management. The aggregate principal amount of potential problem loans was $179.7 million, or 3.09% of total loans, as of September 30, 2011, compared to $234.8 million, or 3.95% of total loans, as of June 30, 2011. The decrease was primarily due to upgrades and loan payments, as well as some downward migration to non-performing status.
“Purchased credit-impaired loans” refer to certain loans acquired in FDIC-assisted transactions, for which deterioration in credit quality occurred before the 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.
The following table displays information on commercial real estate loans by risk category and type, excluding covered loans, at September 30, 2011 (dollars in thousands):
Risk Category | |||||||||||||
Potential Problem | |||||||||||||
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 | $ | 3,526 | 38% | $ | 680 | 7% | $ | 58,587 | 3% | $ | 62,793 | 5% | |
Healthcare | - | 0% | - | 0% | 160,111 | 3% | 160,111 | 3% | |||||
Industrial | 35,866 | 31% | 67,729 | 12% | 361,102 | 3% | 464,697 | 7% | |||||
Multifamily | 8,668 | 53% | 53,479 | 4% | 336,339 | 3% | 398,486 | 5% | |||||
Office | 3,058 | 13% | 25,478 | 12% | 155,821 | 3% | 184,357 | 4% | |||||
Other | 20,038 | 5% | 8,573 | 11% | 149,272 | 3% | 177,883 | 4% | |||||
Retail | 15,751 | 13% | 24,787 | 12% | 356,029 | 2% | 396,567 | 4% | |||||
$ | 86,907 | 26% | $ | 180,726 | 10% | $ | 1,577,261 | 3% | $ | 1,844,894 | 5% |
(1) | To calculate the percentage of loan balances reserved, partial charge-offs taken on non-performing loans have been added back to both reserves and outstanding balance. |
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The following table sets forth information for commercial real estate loans by risk category, excluding covered loans, for the past four quarters (dollars in thousands):
Risk Category | ||||||||||||
Potential Problem | ||||||||||||
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 CRE loans as of September 30, 2011 | $ | 86,907 | 26% | $ | 180,726 | 10% | $ | 1,577,261 | 3% | $ | 1,844,894 | 5% |
Total CRE loans as of June 30, 2011 | $ | 87,086 | 25% | $ | 177,203 | 16% | $ | 1,598,934 | 2% | $ | 1,863,223 | 4% |
Total CRE loans as of March 31, 2011 | $ | 152,754 | 32% | $ | 256,368 | 20% | $ | 1,675,529 | 2% | $ | 2,084,651 | 7% |
Total CRE loans as of December 31, 2010 | $ | 158,864 | 32% | $ | 263,829 | 18% | $ | 1,753,891 | 2% | $ | 2,176,584 | 7% |
(1) | To calculate the percentage of loan balances reserved, partial charge-offs taken on non-performing loans have been added back to both reserves and outstanding balance. |
The following table sets forth information for construction real estate loans by risk category, excluding covered loans, for the past five quarters (dollars in thousands):
Risk Category | |||||||||||||
Potential Problem | |||||||||||||
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, 2011 | $ | 2,913 | 70% | $ | 16,425 | 17% | $ | 190,868 | 6% | $ | 210,206 | 9% | |
Total construction loans as of June 30, 2011 | $ | 17,219 | 57% | $ | 33,010 | 25% | $ | 196,328 | 5% | $ | 246,557 | 13% | |
Total construction loans as of March 31, 2011 | $ | 97,845 | 47% | $ | 45,026 | 19% | $ | 213,708 | 3% | $ | 356,579 | 23% | |
Total construction loans as of December 31, 2010 | $ | 122,077 | 47% | $ | 64,303 | 14% | $ | 236,959 | 3% | $ | 423,339 | 22% | |
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 non-performing loans have been added back to both reserves and outstanding balance. |
The decrease in commercial real estate loans and construction real estate loans from March 31, 2011 to June 30, 2011 was primarily due to the sale of loans in the second quarter of 2011, as discussed above.
13
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, | |||||||||
2011 | 2011 | 2011 | 2010 | 2010 | 2011 | 2010 | |||||||||
Balance at the beginning of period | $ | 147,107 | $ | 178,410 | $ | 192,217 | $ | 193,926 | $ | 195,612 | $ | 192,217 | $ | 177,072 | |
Provision for credit losses | 11,500 | 61,250 | 40,000 | 49,000 | 65,000 | 112,750 | 197,200 | ||||||||
Charge-offs: | |||||||||||||||
Commercial loans | (3,497) | (7,991) | (3,151) | (9,141) | (11,362) | (14,639) | (48,936) | ||||||||
Commercial loans collateralized by assignment of lease payments (lease loans) | - | (93) | - | (43) | (418) | (93) | (1,668) | ||||||||
Commercial real estate loans | (7,815) | (55,250) | (29,775) | (27,360) | (25,265) | (92,840) | (52,468) | ||||||||
Construction real estate | (6,008) | (18,826) | (21,094) | (17,136) | (29,120) | (45,928) | (77,397) | ||||||||
Residential real estate | (141) | (8,080) | (3,562) | (1,363) | (1,500) | (11,783) | (1,963) | ||||||||
Indirect vehicle | (611) | (553) | (718) | (968) | (503) | (1,882) | (2,231) | ||||||||
Home equity | (1,605) | (5,493) | (1,907) | (1,364) | (1,369) | (9,005) | (3,268) | ||||||||
Consumer loans | (475) | (344) | (544) | (428) | (600) | (1,363) | (1,327) | ||||||||
Total charge-offs | (20,152) | (96,630) | (60,751) | (57,803) | (70,137) | (177,533) | (189,258) | ||||||||
Recoveries: | |||||||||||||||
Commercial loans | 1,413 | 758 | 2,565 | 3,842 | 1,900 | 4,736 | 4,946 | ||||||||
Commercial loans collateralized by assignment of lease payments (lease loans) | 5 | 153 | 66 | 26 | 62 | 224 | 158 | ||||||||
Commercial real estate loans | 739 | 312 | 1,534 | 800 | 907 | 2,585 | 1,270 | ||||||||
Construction real estate | 681 | 2,364 | 2,026 | 1,672 | 330 | 5,071 | 1,498 | ||||||||
Residential real estate | 7 | 26 | 7 | 127 | 7 | 40 | 57 | ||||||||
Indirect vehicle | 327 | 369 | 325 | 286 | 232 | 1,021 | 877 | ||||||||
Home equity | 151 | 19 | 48 | 250 | 11 | 218 | 101 | ||||||||
Consumer loans | 83 | 76 | 373 | 91 | 2 | 532 | 5 | ||||||||
Total recoveries | 3,406 | 4,077 | 6,944 | 7,094 | 3,451 | 14,427 | 8,912 | ||||||||
Total net charge-offs | (16,746) | (92,553) | (53,807) | (50,709) | (66,686) | (163,106) | (180,346) | ||||||||
Allowance for credit losses | 141,861 | 147,107 | 178,410 | 192,217 | 193,926 | 141,861 | 193,926 | ||||||||
Allowance for unfunded credit commitments (1) | (13,251) | (17,050) | - | - | - | (13,251) | - | ||||||||
Allowance for loan losses (2) | $ | 128,610 | $ | 130,057 | $ | 178,410 | $ | 192,217 | $ | 193,926 | $ | 128,610 | $ | 193,926 | |
Total loans, excluding loans held for sale | $ | 5,813,737 | $ | 5,938,029 | $ | 6,367,996 | $ | 6,617,811 | $ | 6,848,986 | $ | 5,813,737 | $ | 6,848,986 | |
Average loans, excluding loans held for sale | $ | 5,827,181 | $ | 6,299,990 | $ | 6,460,508 | $ | 6,723,840 | $ | 6,939,415 | $ | 6,191,268 | $ | 6,770,550 | |
Ratio of allowance for loan losses to total loans, | |||||||||||||||
excluding loans held for sale | 2.21% | 2.19% | 2.80% | 2.90% | 2.83% | 2.21% | 2.83% | ||||||||
Ratio of allowance for credit losses to total loans, | |||||||||||||||
excluding loans held for sale, and unfunded credit | |||||||||||||||
commitments | 2.40% | 2.43% | 2.75% | 2.85% | 2.78% | 2.40% | 2.78% | ||||||||
Net loan charge-offs to average loans, excluding loans | |||||||||||||||
held for sale (annualized) | 1.14% | 5.89% | 3.38% | 2.99% | 3.81% | 3.52% | 3.56% |
(1) | The reserve for unfunded credit commitments (primarily letters of credit) was reclassified from the allowance for loan losses to other liabilities as of June 30, 2011. |
(2) | Includes $12.7 million, $13.6 million and $15.6 million for unfunded credit commitments at March 31, 2011, December 31, 2010 and September 30, 2010, respectively. |
The activity in the second quarter of 2011 reflects the previously disclosed sale of certain performing, sub-performing and non-performing loans, which resulted in approximately $87 million in charge-offs and an increase in the provision for losses of approximately $50 million.
14
Our allowance for loan losses is comprised of three elements: a general loss reserve, a specific reserve for impaired loans, and a reserve for smaller-balance homogenous loans. The following table presents these three elements of our allowance for loan losses (in thousands):
September 30, | June 30, | March 31, | December 31, | |||||
2011 | 2011 | 2011 | 2010 | |||||
General loss reserve | $ | 102,752 | $ | 104,002 | $ | 126,423 | $ | 126,435 |
Specific reserve (1) | 11,416 | 12,111 | 38,054 | 51,826 | ||||
Smaller-balance homogenous loans reserve | 14,442 | 13,944 | 13,933 | 13,956 | ||||
Total allowance for loan losses | $ | 128,610 | $ | 130,057 | $ | 178,410 | $ | 192,217 |
(1) | The specific reserve as of March 31, 2011 and December 31, 2010 includes reserves on unfunded credit commitments of approximately $12.7 million and $13.6 million, respectively. Beginning as of June 30, 2011, reserves on unfunded credit commitments are recorded as liabilities. |
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.
15
INVESTMENT SECURITIES
The following table sets forth the fair value, amortized cost, and total unrealized gain of our investment securities, by type (in thousands):
At September 30, | At June 30, | At March 31, | At December 31, | At September 30, | ||||||
2011 | 2011 | 2011 | 2010 | 2010 | ||||||
Securities available for sale: | ||||||||||
Fair value | ||||||||||
Government sponsored agencies and enterprises | $ | 56,007 | $ | 55,656 | $ | 56,971 | $ | 19,434 | $ | 24,698 |
States and political subdivisions | 394,279 | 392,670 | 365,481 | 364,932 | 379,675 | |||||
Mortgage-backed securities | 1,421,789 | 1,424,302 | 1,279,968 | 1,197,066 | 898,837 | |||||
Corporate bonds | 5,899 | 6,019 | 6,019 | 6,140 | 6,140 | |||||
Equity securities | 10,764 | 10,435 | 10,215 | 10,171 | 10,315 | |||||
Total fair value | $ | 1,888,738 | $ | 1,889,082 | $ | 1,718,654 | $ | 1,597,743 | $ | 1,319,665 |
Amortized cost | ||||||||||
Government sponsored agencies and enterprises | $ | 53,016 | $ | 54,423 | $ | 56,452 | $ | 18,766 | $ | 23,826 |
States and political subdivisions | 366,651 | 371,598 | 350,851 | 351,274 | 355,121 | |||||
Mortgage-backed securities | 1,399,801 | 1,401,975 | 1,258,171 | 1,175,021 | 887,422 | |||||
Corporate bonds | 5,899 | 6,019 | 6,019 | 6,140 | 6,140 | |||||
Equity securities | 10,324 | 10,246 | 10,169 | 10,093 | 10,016 | |||||
Total amortized cost | $ | 1,835,691 | $ | 1,844,261 | $ | 1,681,662 | $ | 1,561,294 | $ | 1,282,525 |
Unrealized gain | ||||||||||
Government sponsored agencies and enterprises | $ | 2,991 | $ | 1,233 | $ | 519 | $ | 668 | $ | 872 |
States and political subdivisions | 27,628 | 21,072 | 14,630 | 13,658 | 24,554 | |||||
Mortgage-backed securities | 21,988 | 22,327 | 21,797 | 22,045 | 11,415 | |||||
Corporate bonds | - | - | - | - | - | |||||
Equity securities | 440 | 189 | 46 | 78 | 299 | |||||
Total unrealized gain | $ | 53,047 | $ | 44,821 | $ | 36,992 | $ | 36,449 | $ | 37,140 |
Securities held to maturity, at cost: | ||||||||||
States and political subdivisions | $ | 240,839 | $ | - | $ | - | $ | - | $ | - |
Mortgage-backed securities | 258,199 | 230,154 | 102,206 | - | - | |||||
Total amortized cost | $ | 499,038 | $ | 230,154 | $ | 102,206 | $ | - | $ | - |
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 securities portfolio. Additionally, more than 99% of our mortgage-backed securities are agency guaranteed.
16
DEPOSIT MIX
The following table shows the composition of deposits as of the dates indicated (dollars in thousands):
September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||||
2011 | 2011 | 2011 | 2010 | 2010 | ||||||||||||
% of | % of | % of | % of | % of | ||||||||||||
Amount | Total | Amount | Total | Amount | Total | Amount | Total | Amount | Total | |||||||
Low cost deposits: | ||||||||||||||||
Noninterest bearing deposits | $ | 1,803,141 | 23% | $ | 1,776,873 | 23% | $ | 1,666,868 | 22% | $ | 1,691,599 | 21% | $ | 1,704,142 | 20% | |
Money market and NOW accounts | 2,722,162 | 35% | 2,645,953 | 34% | 2,712,314 | 35% | 2,776,181 | 34% | 2,819,731 | 34% | ||||||
Savings accounts | 751,062 | 10% | 729,222 | 9% | 718,896 | 10% | 697,851 | 8% | 633,975 | 7% | ||||||
Total low cost deposits | 5,276,365 | 68% | 5,152,048 | 66% | 5,098,078 | 65% | 5,165,631 | 63% | 5,157,848 | 61% | ||||||
Certificates of deposit: | ||||||||||||||||
Certificates of deposit | 1,958,643 | 25% | 2,082,393 | 27% | 2,273,447 | 28% | 2,447,005 | 30% | 2,649,759 | 31% | ||||||
Public funds - certificates of deposit | 42,567 | 1% | 42,422 | 1% | 53,144 | 1% | 72,112 | 1% | 90,754 | 1% | ||||||
Brokered deposit accounts | 444,332 | 6% | 441,720 | 6% | 467,337 | 6% | 468,210 | 6% | 498,264 | 6% | ||||||
Total certificates of deposit | 2,445,542 | 32% | 2,566,535 | 34% | 2,793,928 | 35% | 2,987,327 | 37% | 3,238,777 | 39% | ||||||
Total deposits | $ | 7,721,907 | 100% | $ | 7,718,583 | 100% | $ | 7,892,006 | 100% | $ | 8,152,958 | 100% | $ | 8,396,625 | 100% |
Our deposit mix improved in the quarter, with approximately 68% of deposits in lower cost sources at September 30, 2011, compared to 66% at June 30, 2011 and 61% at September 30, 2010. Our ratio of certificates of deposit to total deposits was 32% at September 30, 2011 compared to 34% at June 30, 2011 and 39% at September 30, 2010. Our ratio of noninterest bearing deposits to total deposits was 23% at September 30, 2011 and at June 30, 2011, up from 20% at September 30, 2010.
17
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 statements 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 revenues, 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 FDIC-assisted transactions we previously completed will not be realized; (3) the credit risks of lending activities, 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 ability 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 Dodd-Frank Wall Street Reform and Consumer Protection Act and regulations adopted thereunder, 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
18
MB FINANCIAL, INC. & SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS (Unaudited) |
As of the dates indicated |
(Amounts in thousands) |
September 30, | June 30, | March 31, | December 31, | September 30, | |||||||
2011 | 2011 | 2011 | 2010 | 2010 | |||||||
ASSETS | |||||||||||
Cash and due from banks | $ | 133,755 | $ | 129,942 | $ | 123,794 | $ | 106,726 | $ | 131,381 | |
Interest earning deposits with banks | 347,055 | 513,378 | 504,765 | 737,433 | 857,997 | ||||||
Total cash and cash equivalents | 480,810 | 643,320 | 628,559 | 844,159 | 989,378 | ||||||
Investment securities: | |||||||||||
Securities available for sale, at fair value | 1,888,738 | 1,889,082 | 1,718,654 | 1,597,743 | 1,319,665 | ||||||
Securities held to maturity, at cost | 499,038 | 230,154 | 102,206 | - | - | ||||||
Non-marketable securities - FHLB and FRB Stock | 80,815 | 80,815 | 80,186 | 80,186 | 78,807 | ||||||
Total investment securities | 2,468,591 | 2,200,051 | 1,901,046 | 1,677,929 | 1,398,472 | ||||||
Loans held for sale | - | - | 11,533 | - | - | ||||||
Loans: | |||||||||||
Total loans excluding covered loans | 5,095,171 | 5,182,359 | 5,590,362 | 5,805,481 | 5,989,948 | ||||||
Covered loans | 718,566 | 755,670 | 777,634 | 812,330 | 859,038 | ||||||
Total loans | 5,813,737 | 5,938,029 | 6,367,996 | 6,617,811 | 6,848,986 | ||||||
Less allowance for loan losses | 128,610 | 130,057 | 178,410 | 192,217 | 193,926 | ||||||
Net loans | 5,685,127 | 5,807,972 | 6,189,586 | 6,425,594 | 6,655,060 | ||||||
Lease investments, net | 133,345 | 139,391 | 129,182 | 126,906 | 131,324 | ||||||
Premises and equipment, net | 211,062 | 210,901 | 209,257 | 210,886 | 185,064 | ||||||
Cash surrender value of life insurance | 124,364 | 126,938 | 126,014 | 125,046 | 124,116 | ||||||
Goodwill, net | 387,069 | 387,069 | 387,069 | 387,069 | 387,069 | ||||||
Other intangibles, net | 30,904 | 32,318 | 33,734 | 35,159 | 36,791 | ||||||
Other real estate owned | 87,469 | 88,185 | 80,107 | 71,476 | 59,114 | ||||||
Other real estate owned related to FDIC transactions | 69,311 | 69,920 | 61,461 | 44,745 | 63,495 | ||||||
FDIC indemnification asset | 94,542 | 119,837 | 148,314 | 215,460 | 380,342 | ||||||
Other assets | 149,767 | 151,833 | 165,481 | 155,935 | 212,755 | ||||||
Total assets | $ | 9,922,361 | $ | 9,977,735 | $ | 10,071,343 | $ | 10,320,364 | $ | 10,622,980 | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
Liabilities | |||||||||||
Deposits: | |||||||||||
Noninterest bearing | $ | 1,803,141 | $ | 1,776,873 | $ | 1,666,868 | $ | 1,691,599 | $ | 1,704,142 | |
Interest bearing | 5,918,766 | 5,941,710 | 6,225,138 | 6,461,359 | 6,692,483 | ||||||
Total deposits | 7,721,907 | 7,718,583 | 7,892,006 | 8,152,958 | 8,396,625 | ||||||
Short-term borrowings | 257,418 | 235,733 | 295,180 | 268,844 | 282,364 | ||||||
Long-term borrowings | 274,378 | 275,559 | 275,327 | 285,073 | 294,529 | ||||||
Junior subordinated notes issued to capital trusts | 158,546 | 158,554 | 158,563 | 158,571 | 158,579 | ||||||
Accrued expenses and other liabilities | 141,490 | 243,962 | 100,031 | 110,132 | 154,969 | ||||||
Total liabilities | 8,553,739 | 8,632,391 | 8,721,107 | 8,975,578 | 9,287,066 | ||||||
Stockholders' Equity | |||||||||||
Preferred stock | 194,562 | 194,407 | 194,255 | 194,104 | 193,956 | ||||||
Common stock | 548 | 546 | 546 | 546 | 540 | ||||||
Additional paid-in capital | 730,056 | 728,244 | 726,604 | 725,400 | 716,294 | ||||||
Retained earnings | 411,659 | 396,081 | 406,594 | 402,810 | 402,754 | ||||||
Accumulated other comprehensive income | 32,322 | 27,322 | 22,566 | 22,233 | 22,655 | ||||||
Treasury stock | (3,010) | (3,771) | (2,845) | (2,828) | (2,806) | ||||||
Controlling interest stockholders' equity | 1,366,137 | 1,342,829 | 1,347,720 | 1,342,265 | 1,333,393 | ||||||
Noncontrolling interest | 2,485 | 2,515 | 2,516 | 2,521 | 2,521 | ||||||
Total stockholders' equity | 1,368,622 | 1,345,344 | 1,350,236 | 1,344,786 | 1,335,914 | ||||||
Total liabilities and stockholders' equity | $ | 9,922,361 | $ | 9,977,735 | $ | 10,071,343 | $ | 10,320,364 | $ | 10,622,980 |
19
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, | ||
2011 | 2011 | 2011 | 2010 | 2010 | 2011 | 2010 | ||
Interest income: | ||||||||
Loans | $78,046 | $84,114 | $87,167 | $92,701 | $94,697 | $249,327 | $271,783 | |
Investment securities: | ||||||||
Taxable | 11,699 | 10,290 | 7,752 | 7,001 | 11,420 | 29,741 | 43,540 | |
Nontaxable | 4,299 | 3,443 | 3,345 | 3,367 | 3,387 | 11,087 | 10,218 | |
Federal funds sold | - | - | - | - | - | - | 2 | |
Other interest earning accounts | 244 | 258 | 470 | 504 | 248 | 972 | 524 | |
Total interest income | 94,288 | 98,105 | 98,734 | 103,573 | 109,752 | 291,127 | 326,067 | |
Interest expense: | ||||||||
Deposits | 10,207 | 11,746 | 13,359 | 15,598 | 18,597 | 35,312 | 60,252 | |
Short-term borrowings | 204 | 239 | 217 | 255 | 281 | 660 | 890 | |
Long-term borrowings & junior subordinated notes | 3,461 | 3,713 | 2,953 | 3,065 | 3,256 | 10,127 | 9,808 | |
Total interest expense | 13,872 | 15,698 | 16,529 | 18,918 | 22,134 | 46,099 | 70,950 | |
Net interest income | 80,416 | 82,407 | 82,205 | 84,655 | 87,618 | 245,028 | 255,117 | |
Provision for credit losses | 11,500 | 61,250 | 40,000 | 49,000 | 65,000 | 112,750 | 197,200 | |
Net interest income after provision for credit losses | 68,916 | 21,157 | 42,205 | 35,655 | 22,618 | 132,278 | 57,917 | |
Other income: | ||||||||
Loan service fees | 2,159 | 2,812 | 1,126 | 1,532 | 1,659 | 6,097 | 4,985 | |
Deposit service fees | 9,932 | 9,023 | 10,030 | 9,920 | 10,705 | 28,985 | 29,014 | |
Lease financing, net | 6,494 | 6,861 | 5,783 | 7,185 | 5,022 | 19,138 | 14,668 | |
Brokerage fees | 1,273 | 1,615 | 1,419 | 1,231 | 1,407 | 4,307 | 3,781 | |
Trust & asset management fees | 4,272 | 4,455 | 4,431 | 4,243 | 3,923 | 13,158 | 10,794 | |
Net gain (loss) on sale of investment securities | - | 232 | (3) | (4) | 9,482 | 229 | 18,652 | |
Increase in cash surrender value of life insurance | 1,014 | 1,451 | 968 | 930 | 1,209 | 3,433 | 2,586 | |
Net gain (loss) on sale of other assets | - | 13 | 357 | 419 | 299 | 370 | 211 | |
Acquisition related gains | - | - | - | - | - | - | 62,649 | |
Accretion of FDIC indemnification asset | 985 | 1,339 | 1,831 | 3,009 | 3,602 | 4,155 | 6,669 | |
Other operating income | 238 | 1,344 | 3,201 | 2,330 | (1,510) | 4,783 | 952 | |
Total other income | 26,367 | 29,145 | 29,143 | 30,795 | 35,798 | 84,655 | 154,961 | |
Other expense: | ||||||||
Salaries & employee benefits | 38,422 | 37,815 | 37,775 | 36,399 | 37,424 | 114,012 | 107,950 | |
Occupancy & equipment expense | 9,092 | 8,483 | 9,394 | 7,938 | 8,800 | 26,969 | 26,907 | |
Computer services expense | 2,544 | 2,633 | 2,510 | 2,445 | 2,654 | 7,687 | 8,504 | |
Advertising & marketing expense | 1,740 | 1,748 | 1,719 | 1,573 | 1,620 | 5,207 | 4,892 | |
Professional & legal expense | 1,647 | 1,853 | 1,225 | 1,718 | 1,637 | 4,725 | 4,085 | |
Brokerage fee expense | 363 | 574 | 483 | 448 | 596 | 1,420 | 1,478 | |
Telecommunication expense | 944 | 937 | 935 | 819 | 975 | 2,816 | 2,847 | |
Other intangible amortization expense | 1,414 | 1,416 | 1,425 | 1,632 | 1,567 | 4,255 | 4,582 | |
FDIC insurance premiums | 2,272 | 3,502 | 3,428 | 3,930 | 3,873 | 9,202 | 11,670 | |
Branch impairment charges | - | - | 1,000 | - | - | 1,000 | - | |
Other real estate expense, net | 1,181 | 1,251 | 398 | 858 | 734 | 2,830 | 1,836 | |
Other operating expenses | 6,989 | 6,516 | 6,572 | 6,855 | 6,598 | 20,077 | 19,410 | |
Total other expense | 66,608 | 66,728 | 66,864 | 64,615 | 66,478 | 200,200 | 194,161 | |
Income (loss) before income taxes | 28,675 | (16,426) | 4,484 | 1,835 | (8,062) | 16,733 | 18,717 | |
Income taxes | 8,978 | (9,060) | (2,460) | (1,358) | (5,253) | (2,542) | 1,382 | |
Net income (loss) | 19,697 | (7,366) | 6,944 | 3,193 | (2,809) | 19,275 | 17,335 | |
Preferred stock dividends and discount accretion | 2,605 | 2,602 | 2,601 | 2,598 | 2,597 | 7,808 | 7,784 | |
Net income (loss) available to common stockholders | $17,092 | $(9,968) | $4,343 | $595 | $(5,406) | $11,467 | $9,551 |
20
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, | June 30, | March 31, | December 31, | September 30, | September 30, | September 30, | ||||||||
2011 | 2011 | 2011 | 2010 | 2010 | 2011 | 2010 | ||||||||
Common share data: | ||||||||||||||
Net income (loss) per basic common share | $ | 0.36 | $ | (0.14) | $ | 0.13 | $ | 0.06 | $ | (0.05) | $ | 0.36 | $ | 0.33 |
Impact of preferred stock dividends on basic earnings (loss) per common share | (0.04) | (0.04) | (0.05) | (0.05) | (0.05) | (0.15) | (0.15) | |||||||
Basic earnings (loss) per common share | 0.32 | (0.18) | 0.08 | 0.01 | (0.10) | 0.21 | 0.18 | |||||||
Net income (loss) per common share | 0.36 | (0.14) | 0.13 | 0.06 | (0.05) | 0.35 | 0.33 | |||||||
Impact of preferred stock dividends on diluted earnings (loss) per common share | (0.05) | (0.04) | (0.05) | (0.05) | (0.05) | (0.14) | (0.15) | |||||||
Diluted earnings (loss) per common share | 0.31 | (0.18) | 0.08 | 0.01 | (0.10) | 0.21 | 0.18 | |||||||
Weighted average common shares outstanding | 54,121,156 | 54,002,979 | 53,961,176 | 53,572,157 | 53,327,219 | 54,029,023 | 52,439,130 | |||||||
Diluted weighted average common shares outstanding | 54,323,320 | 54,002,979 | 54,254,876 | 53,790,047 | 53,327,219 | 54,295,622 | 52,750,219 |
21
. | Three Months Ended | Nine Months Ended | |||||||||||||||||||
September 30, | June 30, | March 31, | December 31, | September 30, | September 30, | September 30, | |||||||||||||||
2011 | 2011 | 2011 | 2010 | 2010 | 2011 | 2010 | |||||||||||||||
Performance Ratios: | |||||||||||||||||||||
Annualized return on average assets | 0.80 | % | (0.30) | % | 0.28 | % | 0.12 | % | (0.10) | % | 0.26 | % | 0.22 | % | |||||||
Annualized return on average common equity | 5.86 | (3.43) | 1.53 | 0.21 | (1.86) | 1.32 | 1.13 | ||||||||||||||
Annualized cash return on average tangible common equity(1) | 9.52 | (4.80) | 2.88 | 0.89 | (2.34) | 2.54 | 2.33 | ||||||||||||||
Net interest rate spread | 3.71 | 3.71 | 3.68 | 3.63 | 3.71 | 3.70 | 3.61 | ||||||||||||||
Cost of funds(2) | 0.66 | 0.74 | 0.77 | 0.83 | 0.96 | 0.72 | 1.05 | ||||||||||||||
Efficiency ratio(3) | 58.98 | 57.01 | 57.71 | 53.72 | 55.32 | 57.89 | 56.52 | ||||||||||||||
Annualized net non-interest expense to average assets(4) | 1.50 | 1.41 | 1.46 | 1.22 | 1.36 | 1.46 | 1.44 | ||||||||||||||
Pre-tax pre-provision operating earnings to risk-weighted assets(5) | 3.00 | 3.25 | 2.97 | 3.23 | 3.05 | 3.14 | 2.86 | ||||||||||||||
Pre-tax pre-provision operating earnings to average assets(5) | 1.89 | 2.02 | 1.91 | 2.09 | 2.00 | 1.94 | 1.90 | ||||||||||||||
Net interest margin | 3.74 | 3.79 | 3.76 | 3.72 | 3.81 | 3.77 | 3.72 | ||||||||||||||
Tax equivalent effect | 0.16 | 0.13 | 0.12 | 0.11 | 0.11 | 0.13 | 0.11 | ||||||||||||||
Net interest margin - fully tax equivalent basis(6) | 3.90 | 3.92 | 3.88 | 3.83 | 3.92 | 3.90 | 3.83 | ||||||||||||||
Asset Quality Ratios: | |||||||||||||||||||||
Non-performing loans(7) to total loans | 2.42 | % | 2.54 | % | 5.01 | % | 5.48 | % | 5.73 | % | 2.42 | % | 5.73 | % | |||||||
Non-performing assets(7) to total assets | 2.30 | 2.40 | 3.96 | 4.21 | 4.26 | 2.30 | 4.26 | ||||||||||||||
Allowance for loan losses to non-performing loans(7) | 91.23 | 86.12 | 55.94 | 53.03 | 49.40 | 91.23 | 49.40 | ||||||||||||||
Allowance for loan losses to non-performing loans,(7) | |||||||||||||||||||||
including partial charge-offs taken | 93.54 | 89.79 | 70.46 | 67.66 | 64.78 | 93.54 | 64.78 | ||||||||||||||
Allowance for loan losses to total loans | 2.21 | 2.19 | 2.80 | 2.90 | 2.83 | 2.21 | 2.83 | ||||||||||||||
Allowance for credit losses to total loans | |||||||||||||||||||||
and unfunded credit commitments | 2.40 | 2.43 | 2.75 | 2.85 | 2.78 | 2.40 | 2.78 | ||||||||||||||
Net loan charge-offs to average loans (annualized) | 1.14 | 5.89 | 3.38 | 2.99 | 3.81 | 3.52 | 3.56 | ||||||||||||||
Capital Ratios: | |||||||||||||||||||||
Tangible equity to tangible assets(8) | 10.10 | % | 9.79 | % | 9.74 | % | 9.43 | % | 9.06 | % | 10.10 | % | 9.06 | % | |||||||
Tangible common equity to risk weighted assets(9) | 12.42 | 11.97 | 11.36 | 10.94 | 10.46 | 12.42 | 10.46 | ||||||||||||||
Tangible common equity to tangible assets(10) | 8.06 | 7.76 | 7.73 | 7.47 | 7.16 | 8.06 | 7.16 | ||||||||||||||
Book value per common share(11) | $ | 21.48 | $ | 21.14 | $ | 21.24 | $ | 21.14 | $ | 21.22 | $ | 21.48 | $ | 21.22 | |||||||
Less: goodwill and other intangible assets, net of tax | |||||||||||||||||||||
benefit, per common share | 7.45 | 7.49 | 7.52 | 7.53 | 7.64 | 7.45 | 7.64 | ||||||||||||||
Tangible book value per common share(12) | 14.03 | 13.64 | 13.73 | 13.60 | 13.58 | 14.03 | 13.58 | ||||||||||||||
Total capital (to risk-weighted assets) | 19.61 | % | 19.18 | % | 18.33 | % | 17.75 | % | 17.10 | % | 19.61 | % | 17.10 | % | |||||||
Tier 1 capital (to risk-weighted assets) | 17.54 | 17.11 | 16.31 | 15.75 | 15.12 | 17.54 | 15.12 | ||||||||||||||
Tier 1 capital (to average assets) | 11.59 | 11.16 | 11.00 | 10.66 | 10.38 | 11.59 | 10.38 | ||||||||||||||
Tier 1 common capital (to risk-weighted assets) | 11.90 | 11.50 | 11.01 | 10.61 | 10.14 | 11.90 | 10.14 |
(1) | Net cash flow available to common stockholders (net income available to common stockholders, plus other intangibles amortization expense, net of tax benefit) divided by 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 non-core items divided by the sum of net interest income on a fully tax equivalent basis and total other income less non-core items. |
(4) | Equals total other expense excluding non-core items less total other income excluding non-core items divided by average assets. |
(5) | Equals net income before taxes, on a fully tax equivalent basis, excluding loan loss provision expense, non-core other income items, and non-core other expense items divided by risk-weighted assets or average 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) | Non-performing loans excludes purchased credit-impaired loans and loans held for sale. Non-performing assets excludes purchased credit-impaired loans, loans held for sale, and 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. |
22
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 operating earnings; core other income, core other expense, non-core other income and non-core other expense; net interest income on a fully tax equivalent basis, net interest margin on a fully tax equivalent basis; the addition of partial charge-offs to the allowance for loan losses and to the numerator and the denominator in the ratio of the allowance for loan losses to non-performing loans; efficiency ratio, ratio of annualized net non-interest expense to average assets, ratio of pre-tax, pre-provision operating earnings to risk-weighted assets and ratio of pre-tax, pre-provision operating earnings to average 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, net gain on sale of loans held for sale, acquisition related gains and increase (decrease) in market value of assets held in trust for deferred compensation excluded from the non-interest income components of these ratios, and impairment charges and increase (decrease) in market value of assets held in trust for deferred compensation 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, together with the related GAAP measures, in its analysis of our performance and in making business decisions. Management also uses these measures for peer comparisons.
Management believes that pre-tax, pre-provision operating earnings are a useful measure in assessing our core operating performance, particularly during times of economic stress. In recent periods, our results of operations have been negatively impacted by adverse economic conditions, as seen in our elevated levels of loan charge-offs and provision for credit losses. Management believes that measuring earnings before the impact of the provision for loan losses makes our financial data more comparable between reporting periods so that investors can better understand our operating performance trends. Management also believes that this is a standard figure used in the banking industry to measure performance.
Management believes that core and non-core other income and other expense are useful in assessing our core operating performance and in understanding the primary drivers of our other income and other expense when comparing periods.
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 these measures may be useful for peer comparison purposes.
Management believes that the addition of partial charge-offs to the allowance for loan losses and to the numerator and the denominator in the ratio of allowance for loan losses to non-performing loans may be useful to investors because it reflects what our loan loss reserve levels would have been had the partial charge-offs not been taken.
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, net gain on sale of loans held for sale, acquisition-related gains and increase (decrease) in market value of assets held in trust for deferred compensation from the non-interest income components, and excluding impairment changes and increase (decrease) in market value of assets held in trust for deferred compensation from the non-interest expense components, of the efficiency ratio, the ratio of annualized net non-interest expense to average assets, the ratio of pre-tax, pre-provision operating earnings to risk-weighted assets and the ratio of pre-tax, pre-provision operating earnings to average assets, these ratios better reflect our core operating performance, as the excluded items do not pertain to our core business operations and their exclusion makes these ratios more meaningful when comparing our operating results from period to period.
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 acquisition-related goodwill and other intangible assets, net of tax benefit, in determining tangible assets, tangible equity, tangible common equity and average tangible common equity and exclude other intangible amortization expense, net of tax benefit, in determining net cash flow available to common stockholders. 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 as well as our capital strength. Management also believes that providing measures that exclude balances of acquisition-related goodwill and other intangible assets, which are subjective components of valuation, facilitates the comparison of our performance with the performance of our peers. In addition, management believes that these are standard financial measures used in the banking industry to evaluate performance.
23
The non-GAAP disclosures contained herein 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, | |||||||
2011 | 2011 | 2011 | 2010 | 2010 | |||||||
Stockholders' equity - as reported | $ | 1,368,622 | $ | 1,345,344 | $ | 1,350,236 | $ | 1,344,786 | $ | 1,335,914 | |
Less: goodwill | 387,069 | 387,069 | 387,069 | 387,069 | 387,069 | ||||||
Less: other intangible, net of tax benefit | 20,088 | 21,007 | 21,927 | 22,853 | 23,914 | ||||||
Tangible equity | $ | 961,465 | $ | 937,268 | $ | 941,240 | $ | 934,864 | $ | 924,931 |
The following table presents a reconciliation of tangible assets to total assets (in thousands):
September 30, | June 30, | March 31, | December 31, | September 30, | |||||||
2011 | 2011 | 2011 | 2010 | 2010 | |||||||
Total assets - as reported | $ | 9,922,361 | $ | 9,977,735 | $ | 10,071,343 | $ | 10,320,364 | $ | 10,622,980 | |
Less: goodwill | 387,069 | 387,069 | 387,069 | 387,069 | 387,069 | ||||||
Less: other intangible, net of tax benefit | 20,088 | 21,007 | 21,927 | 22,853 | 23,914 | ||||||
Tangible assets | $ | 9,515,204 | $ | 9,569,659 | $ | 9,662,347 | $ | 9,910,442 | $ | 10,211,997 |
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, | |||||||
2011 | 2011 | 2011 | 2010 | 2010 | |||||||
Common stockholders' equity - as reported | $ | 1,174,060 | $ | 1,150,937 | $ | 1,155,981 | $ | 1,150,682 | $ | 1,141,958 | |
Less: goodwill | 387,069 | 387,069 | 387,069 | 387,069 | 387,069 | ||||||
Less: other intangible, net of tax benefit | 20,088 | 21,007 | 21,927 | 22,853 | 23,914 | ||||||
Tangible common equity | $ | 766,903 | $ | 742,861 | $ | 746,985 | $ | 740,760 | $ | 730,975 |
24
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, | |||||||||
2011 | 2011 | 2011 | 2010 | 2010 | 2011 | 2010 | |||||||||
Average common stockholders' equity - as reported | $ | 1,158,119 | $ | 1,165,022 | $ | 1,152,119 | $ | 1,147,581 | $ | 1,152,058 | $ | 1,158,417 | $ | 1,131,013 | |
Less: average goodwill | 387,069 | 387,069 | 387,069 | 387,069 | 387,069 | 387,069 | 388,074 | ||||||||
Less: average other intangible assets, net of tax benefit | 20,414 | 21,331 | 22,254 | 23,236 | 22,596 | 21,326 | 23,126 | ||||||||
Average tangible common equity | $ | 750,636 | $ | 756,622 | $ | 742,796 | $ | 737,276 | $ | 742,393 | $ | 750,022 | $ | 719,813 |
The following table presents a reconciliation of net cash flow available to common stockholders to net income (loss) 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, | |||||||||
2011 | 2011 | 2011 | 2010 | 2010 | 2011 | 2010 | |||||||||
Net income (loss) available to common stockholders - as reported | $ | 17,092 | $ | (9,968) | $ | 4,343 | $ | 595 | $ | (5,406) | $ | 11,467 | $ | 9,551 | |
Add: other intangible amortization expense, net of tax benefit | 919 | 920 | 926 | 1,062 | 1,018 | 2,766 | 2,978 | ||||||||
Net cash flow available to common stockholders | $ | 18,011 | $ | (9,048) | $ | 5,269 | $ | 1,657 | $ | (4,388) | $ | 14,233 | $ | 12,529 |
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, | |||||||||
2011 | 2011 | 2011 | 2010 | 2010 | 2011 | 2010 | |||||||||
Non-interest expense | $ | 66,608 | $ | 66,728 | $ | 66,864 | $ | 64,615 | $ | 66,478 | $ | 200,200 | $ | 194,161 | |
Adjustment for impairment charges | - | - | 1,000 | - | - | 1,000 | - | ||||||||
Adjustment for increase (decrease) in market value of assets held in trust for deferred compensation | (405) | 158 | 187 | 597 | (3) | (60) | (35) | ||||||||
Non-interest expense - as adjusted | $ | 67,013 | $ | 66,570 | $ | 65,677 | $ | 64,018 | $ | 66,481 | $ | 199,260 | $ | 194,196 | |
Net interest income | $ | 80,416 | $ | 82,407 | $ | 82,205 | $ | 84,655 | $ | 87,618 | $ | 245,028 | $ | 255,117 | |
Tax equivalent adjustment | 3,320 | 2,775 | 2,625 | 2,609 | 2,614 | 8,720 | 7,849 | ||||||||
Net interest income on a fully tax equivalent basis | 83,736 | 85,182 | 84,830 | 87,264 | 90,232 | 253,748 | 262,966 | ||||||||
Plus other income | 26,367 | 29,145 | 29,143 | 30,795 | 35,798 | 84,655 | 154,961 | ||||||||
Less net (losses) gains on other real estate owned | (3,118) | (4,645) | (372) | (2,124) | (3,913) | (8,135) | (7,160) | ||||||||
Less net (losses) gains on securities available for sale | - | 232 | (3) | (4) | 9,482 | 229 | 18,652 | ||||||||
Less net gains (losses) on sale of other assets | - | 13 | 357 | 419 | 299 | 370 | 211 | ||||||||
Less net gain on sale of loans held for sale | - | 1,790 | - | - | - | 1,790 | - | ||||||||
Less acquisition related gains | - | - | - | - | - | - | 62,649 | ||||||||
Less increase (decrease) in market value of assets held in trust for deferred compensation | (405) | 158 | 187 | 597 | (3) | (60) | (35) | ||||||||
Net interest income plus non-interest income - as adjusted | $ | 113,626 | $ | 116,779 | $ | 113,804 | $ | 119,171 | $ | 120,165 | $ | 344,209 | $ | 343,610 | |
Efficiency ratio | 58.98% | 57.01% | 57.71% | 53.72% | 55.32% | 57.89% | 56.52% | ||||||||
Efficiency ratio (without adjustments) | 62.38% | 59.82% | 60.05% | 55.97% | 53.86% | 60.72% | 47.35% |
25
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, | |||||||||
2011 | 2011 | 2011 | 2010 | 2010 | 2011 | 2010 | |||||||||
Non-interest expense | $ | 66,608 | $ | 66,728 | $ | 66,864 | $ | 64,615 | $ | 66,478 | $ | 200,200 | $ | 194,161 | |
Adjustment for impairment charges | - | - | 1,000 | - | - | 1,000 | - | ||||||||
Adjustment for increase (decrease) in market value of | |||||||||||||||
assets held in trust for deferred compensation | (405) | 158 | 187 | 597 | (3) | (60) | (35) | ||||||||
Non-interest expense - as adjusted | 67,013 | 66,570 | 65,677 | 64,018 | 66,481 | 199,260 | 194,196 | ||||||||
Other income | 26,367 | 29,145 | 29,143 | 30,795 | 35,798 | 84,655 | 154,961 | ||||||||
Less net (losses) gains on other real estate owned | (3,118) | (4,645) | (372) | (2,124) | (3,913) | (8,135) | (7,160) | ||||||||
Less net (losses) gains on securities available for sale | - | 232 | (3) | (4) | 9,482 | 229 | 18,652 | ||||||||
Less net gains (loss) on sale of other assets | - | 13 | 357 | 419 | 299 | 370 | 211 | ||||||||
Less net gain on sale of loans held for sale | - | 1,790 | - | - | - | 1,790 | - | ||||||||
Less acquisition related gains | - | - | - | - | - | - | 62,649 | ||||||||
Less increase (decrease) in market value of assets | |||||||||||||||
held in trust for deferred compensation | (405) | 158 | 187 | 597 | (3) | (60) | (35) | ||||||||
Other income - as adjusted | 29,890 | 31,597 | 28,974 | 31,907 | 29,933 | 90,461 | 80,644 | ||||||||
Net non-interest expense | $ | 37,123 | $ | 34,973 | $ | 36,703 | $ | 32,111 | $ | 36,548 | $ | 108,799 | $ | 113,552 | |
Average assets | $ | 9,807,561 | $ | 9,966,898 | $ | 10,198,626 | $ | 10,452,626 | $ | 10,634,556 | $ | 9,989,596 | $ | 10,524,024 | |
Annualized net non-interest expense to average assets | 1.50% | 1.41% | 1.46% | 1.22% | 1.36% | 1.46% | 1.44% | ||||||||
Annualized net non-interest expense to average assets | |||||||||||||||
(without adjustments) | 1.63% | 1.51% | 1.50% | 1.28% | 1.14% | 1.55% | 0.50% |
26
Calculation of Pre-Tax, Pre-Provision Operating Earnings (Dollars in Thousands)
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | June 30, | March 31, | December 31, | September 30, | September 30, | September 30, | |||||||||
2011 | 2011 | 2011 | 2010 | 2010 | 2011 | 2010 | |||||||||
Income (loss) before income taxes | $ | 28,675 | $ | (16,426) | $ | 4,484 | $ | 1,835 | $ | (8,062) | $ | 16,733 | $ | 18,717 | |
Provision for credit losses | 11,500 | 61,250 | 40,000 | 49,000 | 65,000 | 112,750 | 197,200 | ||||||||
Pre-tax, pre-provision earnings | 40,175 | 44,824 | 44,484 | 50,835 | 56,938 | 129,483 | 215,917 | ||||||||
Tax equivalent adjustment | 3,320 | 2,775 | 2,625 | 2,609 | 2,614 | 8,720 | 7,849 | ||||||||
Pre-tax, pre-provision earnings on a fully tax equivalent basis | 43,495 | 47,599 | 47,109 | 53,444 | 59,552 | 138,203 | 223,766 | ||||||||
Non-core other income | |||||||||||||||
Net (losses) gains on other real estate owned | (3,118) | (4,645) | (372) | (2,124) | (3,913) | (8,135) | (7,160) | ||||||||
Net (losses) gains on securities available for sale | - | 232 | (3) | (4) | 9,482 | 229 | 18,652 | ||||||||
Net gain (loss) on sale of other assets | - | 13 | 357 | 419 | 299 | 370 | 211 | ||||||||
Net gain on sale of loans held for sale | - | 1,790 | - | - | - | 1,790 | - | ||||||||
Acquisition related gains | - | - | - | - | - | - | 62,649 | ||||||||
Increase (decrease) in market value of assets held in | |||||||||||||||
trust for deferred compensation | (405) | 158 | 187 | 597 | (3) | (60) | (35) | ||||||||
Total non-core other income | (3,523) | (2,452) | 169 | (1,112) | 5,865 | (5,806) | 74,317 | ||||||||
Non-core other expense | |||||||||||||||
Impairment charges | - | - | 1,000 | - | - | 1,000 | - | ||||||||
Increase (decrease) in market value of assets held in | |||||||||||||||
trust for deferred compensation | (405) | 158 | 187 | 597 | (3) | (60) | (35) | ||||||||
Total non-core other expense | (405) | 158 | 1,187 | 597 | (3) | 940 | (35) | ||||||||
Pre-tax, pre-provision operating earnings | $ | 46,613 | $ | 50,209 | $ | 48,127 | $ | 55,153 | $ | 53,684 | $ | 144,949 | $ | 149,414 | |
Risk-weighted assets | $ | 6,174,508 | $ | 6,203,587 | $ | 6,577,477 | $ | 6,772,761 | $ | 6,985,940 | $ | 6,174,508 | $ | 6,985,940 | |
Average Assets | $ | 9,807,561 | $ | 9,966,898 | $ | 10,198,626 | $ | 10,452,626 | $ | 10,634,556 | $ | 9,989,596 | $ | 10,524,024 | |
Annualized pre-tax, pre-provision operating earnings to | |||||||||||||||
risk-weighted assets | 3.00% | 3.25% | 2.97% | 3.23% | 3.05% | 3.14% | 2.86% | ||||||||
Annualized pre-tax, pre-provision operating earnings to | |||||||||||||||
risk-weighted assets (without adjustments) | 2.58% | 2.90% | 2.74% | 2.98% | 3.23% | 2.80% | 4.13% | ||||||||
Annualized pre-tax, pre-provision operating earnings to | |||||||||||||||
average assets | 1.89% | 2.02% | 1.91% | 2.09% | 2.00% | 1.94% | 1.90% | ||||||||
Annualized pre-tax, pre-provision operating earnings to | |||||||||||||||
average assets (without adjustments) | 1.63% | 1.80% | 1.77% | 1.93% | 2.12% | 1.73% | 2.74% |
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. Reconciliations of the allowance for loan losses including partial charge-offs to the allowance for loan losses, and the ratio of the allowance for loan losses to non-performing loans including partial charge-offs to the same ratio without the addition of partial charge-offs, are contained in the first table under “Asset Quality.” Reconciliations of core and non-core other income and other expense to other income and other expense are contained in the tables under “Results of Operations—Third Quarter Results.”
27
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, | ||||||||||||||||
2011 | 2010 | 2011 | |||||||||||||||
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 | $ | 1,070,852 | $ | 12,915 | 4.78% | $ | 1,307,155 | 16,933 | 5.14% | $ | 1,147,173 | $ | 13,578 | 4.75% | |||
Commercial loans collateralized by assignment | |||||||||||||||||
of lease payments | 1,015,925 | 13,694 | 5.39 | 989,412 | 14,706 | 5.95 | 1,041,311 | 14,502 | 5.57 | ||||||||
Real estate commercial | 1,845,988 | 25,230 | 5.35 | 2,316,143 | 30,706 | 5.19 | 2,051,711 | 26,745 | 5.16 | ||||||||
Real estate construction | 238,396 | 2,233 | 3.67 | 500,644 | 4,452 | 3.48 | 349,367 | 3,789 | 4.29 | ||||||||
Total commercial related credits | 4,171,161 | 54,072 | 5.07 | 5,113,354 | 66,797 | 5.11 | 4,589,562 | 58,614 | 5.05 | ||||||||
Other loans | |||||||||||||||||
Real estate residential | 317,050 | 3,739 | 4.72 | 327,686 | 4,126 | 5.04 | 339,048 | 3,989 | 4.71 | ||||||||
Home equity | 354,131 | 3,828 | 4.29 | 389,996 | 4,284 | 4.36 | 367,829 | 3,949 | 4.31 | ||||||||
Indirect | 185,850 | 2,968 | 6.34 | 182,268 | 3,192 | 6.95 | 178,978 | 3,046 | 6.83 | ||||||||
Consumer loans | 56,257 | 439 | 3.10 | 58,166 | 500 | 3.41 | 56,356 | 436 | 3.10 | ||||||||
Total other loans | 913,288 | 10,974 | 4.77 | 958,116 | 12,102 | 5.01 | 942,211 | 11,420 | 4.86 | ||||||||
Total loans, excluding covered loans | 5,084,449 | 65,046 | 5.08 | 6,071,470 | 78,899 | 5.16 | 5,531,773 | 70,034 | 5.08 | ||||||||
Covered loans | 742,732 | 14,004 | 7.48 | 867,945 | 16,590 | 7.58 | 768,127 | 15,003 | 7.83 | ||||||||
Total loans | 5,827,181 | 79,050 | 5.38 | 6,939,415 | 95,489 | 5.46 | 6,299,900 | 85,037 | 5.41 | ||||||||
Taxable investment securities | 1,869,961 | 11,699 | 2.50 | 1,450,608 | 11,420 | 3.15 | 1,668,406 | 10,290 | 2.47 | ||||||||
Investment securities exempt from federal income taxes (3) | 456,777 | 6,614 | 5.67 | 355,288 | 5,210 | 5.74 | 357,828 | 5,297 | 5.86 | ||||||||
Federal funds sold | - | - | 0.00 | - | - | 0.00 | - | - | 0.00 | ||||||||
Other interest earning deposits | 365,723 | 244 | 0.26 | 377,555 | 248 | 0.26 | 389,311 | 257 | 0.26 | ||||||||
Total interest earning assets | $ | 8,519,642 | $ | 97,607 | 4.55 | $ | 9,122,866 | $ | 112,367 | 4.89 | $ | 8,715,445 | $ | 100,881 | 4.64 | ||
Non-interest earning assets | 1,287,919 | 1,511,690 | 1,251,453 | ||||||||||||||
Total assets | $ | 9,807,561 | $ | 10,634,556 | $ | 9,966,898 | |||||||||||
Interest Bearing Liabilities: | |||||||||||||||||
Core funding: | |||||||||||||||||
Money market and NOW accounts | $ | 2,656,490 | $ | 1,731 | 0.26% | $ | 2,789,046 | $ | 4,022 | 0.57% | $ | 2,676,663 | $ | 1,922 | 0.29% | ||
Savings accounts | 742,334 | 320 | 0.17 | 623,555 | 469 | 0.30 | 725,810 | 312 | 0.17 | ||||||||
Certificate of deposit | 2,006,293 | 4,706 | 0.93 | 2,740,219 | 9,546 | 1.38 | 2,173,951 | 5,522 | 1.02 | ||||||||
Customer repurchase agreements | 218,928 | 146 | 0.26 | 260,469 | 243 | 0.37 | 242,939 | 155 | 0.26 | ||||||||
Total core funding | 5,624,045 | 6,903 | 0.49 | 6,413,289 | 14,280 | 0.88 | 5,819,363 | 7,911 | 0.55 | ||||||||
Whole sale funding: | |||||||||||||||||
Public funds | 42,263 | 53 | 0.50 | 80,339 | 132 | 0.65 | 45,219 | 67 | 0.59 | ||||||||
Brokered accounts (includes fee expense) | 412,714 | 3,396 | 3.26 | 485,676 | 4,427 | 3.62 | 462,003 | 3,924 | 3.41 | ||||||||
Other borrowings | 442,066 | 3,519 | 3.11 | 462,936 | 3,296 | 2.79 | 461,653 | 3,796 | 3.25 | ||||||||
Total wholesale funding | 897,043 | 6,968 | 3.08 | 1,028,951 | 7,855 | 3.03 | 968,875 | 7,787 | 3.22 | ||||||||
Total interest bearing liabilities | $ | 6,521,088 | $ | 13,871 | 0.84 | $ | 7,442,240 | $ | 22,135 | 1.18 | $ | 6,788,238 | $ | 15,698 | 0.93 | ||
Non-interest bearing deposits | 1,810,501 | 1,673,259 | 1,724,429 | ||||||||||||||
Other non-interest bearing liabilities | 123,391 | 173,139 | 94,976 | ||||||||||||||
Stockholders' equity | 1,352,581 | 1,345,918 | 1,359,255 | ||||||||||||||
Total liabilities and stockholders' equity | $ | 9,807,561 | $ | 10,634,556 | $ | 9,966,898 | |||||||||||
Net interest income/interest rate spread (4) | $ | 83,736 | 3.71% | $ | 90,232 | 3.71% | $ | 85,183 | 3.71% | ||||||||
Taxable equivalent adjustment | 3,320 | 2,614 | 2,775 | ||||||||||||||
Net interest income, as reported | $ | 80,416 | $ | 87,618 | $ | 82,408 | |||||||||||
Net interest margin (5) | 3.74% | 3.81% | 3.79% | ||||||||||||||
Tax equivalent effect | 0.16% | 0.11% | 0.13% | ||||||||||||||
Net interest margin on a fully equivalent basis (5) | 3.90% | 3.92% | 3.92% |
(1) | Non-accrual loans are included in average loans. |
(2) | Interest income includes amortization of deferred loan origination fees of $972 thousand, $1.3 million, and $1.1 million for the three months ended September 30, 2011, June 30, 2011, and September 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. |
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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):
Nine Months Ended September 30, | ||||||||||||
2011 | 2010 | |||||||||||
Average | Yield/ | Average | Yield/ | |||||||||
Balance | Interest | Rate | Balance | Interest | Rate | |||||||
Interest Earning Assets: | ||||||||||||
Loans (1) (2) (3): | ||||||||||||
Commercial related credits | ||||||||||||
Commercial | $ | 1,127,230 | $ | 40,824 | 4.84% | $ | 1,351,436 | $ | 51,068 | 5.05% | ||
Commercial loans collateralized by assignment | ||||||||||||
of lease payments | 1,020,414 | 42,286 | 5.53 | 969,035 | 44,145 | 6.07 | ||||||
Real estate commercial | 2,011,356 | 80,210 | 5.26 | 2,382,228 | 95,262 | 5.27 | ||||||
Real estate construction | 331,019 | 9,541 | 3.80 | 548,405 | 13,616 | 3.27 | ||||||
Total commercial related credits | 4,490,019 | 172,861 | 5.08 | 5,251,104 | 204,091 | 5.13 | ||||||
Other loans | ||||||||||||
Real estate residential | 329,594 | 12,195 | 4.93 | 310,645 | 12,355 | 5.30 | ||||||
Home equity | 366,026 | 11,780 | 4.30 | 397,182 | 13,083 | 4.40 | ||||||
Indirect | 179,772 | 8,954 | 6.66 | 180,808 | 9,532 | 7.05 | ||||||
Consumer loans | 56,689 | 1,475 | 3.48 | 59,214 | 1,576 | 3.56 | ||||||
Total other loans | 932,081 | 34,404 | 4.93 | 947,849 | 36,546 | 5.16 | ||||||
Total loans, excluding covered loans | 5,422,100 | 207,265 | 5.11 | 6,198,953 | 240,637 | 5.19 | ||||||
Covered loans | 771,486 | 44,812 | 7.77 | 571,596 | 33,494 | 7.83 | ||||||
Total loans | 6,193,586 | 252,077 | 5.44 | 6,770,549 | 274,131 | 5.41 | ||||||
Taxable investment securities | 1,619,182 | 29,741 | 2.45 | 1,791,504 | 43,540 | 3.24 | ||||||
Investment securities exempt from federal income taxes (3) | 388,208 | 17,057 | 5.79 | 358,026 | 15,720 | 5.79 | ||||||
Federal funds sold | - | - | 0.00 | 471 | 2 | 0.56 | ||||||
Other interest earning deposits | 499,286 | 972 | 0.26 | 252,301 | 524 | 0.28 | ||||||
Total interest earning assets | $ | 8,700,262 | $ | 299,847 | 4.61 | $ | 9,172,851 | $ | 333,917 | 4.87 | ||
Non-interest earning assets | 1,289,334 | 1,351,173 | ||||||||||
Total assets | $ | 9,989,596 | $ | 10,524,024 | ||||||||
Interest Bearing Liabilities: | ||||||||||||
Core funding: | ||||||||||||
Money market and NOW accounts | $ | 2,686,327 | $ | 6,139 | 0.31% | $ | 2,747,977 | $ | 11,556 | 0.67% | ||
Savings accounts | 726,316 | 1,052 | 0.19 | 606,326 | 1,406 | 0.31 | ||||||
Certificate of deposit | 2,179,748 | 16,646 | 1.02 | 2,830,191 | 32,999 | 1.56 | ||||||
Customer repurchase agreements | 241,322 | 488 | 0.27 | 254,396 | 741 | 0.39 | ||||||
Total core funding | 5,833,713 | 24,325 | 0.56 | 6,438,890 | 46,702 | 0.97 | ||||||
Whole sale funding: | ||||||||||||
Public funds | 51,193 | 222 | 0.58 | 95,210 | 476 | 0.67 | ||||||
Brokered accounts (includes fee expense) | 447,178 | 11,253 | 3.36 | 494,643 | 13,815 | 3.73 | ||||||
Other borrowings | 447,993 | 10,299 | 3.03 | 480,471 | 9,958 | 2.73 | ||||||
Total wholesale funding | 946,364 | 21,774 | 3.08 | 1,070,324 | 24,249 | 3.03 | ||||||
Total interest bearing liabilities | $ | 6,780,077 | $ | 46,099 | 0.91 | $ | 7,509,214 | $ | 70,951 | 1.26 | ||
Non-interest bearing deposits | 1,736,152 | 1,560,914 | ||||||||||
Other non-interest bearing liabilities | 120,639 | 129,163 | ||||||||||
Stockholders' equity | 1,352,728 | 1,324,733 | ||||||||||
Total liabilities and stockholders' equity | $ | 9,989,596 | $ | 10,524,024 | ||||||||
Net interest income/interest rate spread (4) | $ | 253,748 | 3.70% | $ | 262,966 | 3.61% | ||||||
Taxable equivalent adjustment | 8,720 | 7,849 | ||||||||||
Net interest income, as reported | $ | 245,028 | $ | 255,117 | ||||||||
Net interest margin (5) | 3.77% | 3.72% | ||||||||||
Tax equivalent effect | 0.13% | 0.11% | ||||||||||
Net interest margin on a fully equivalent basis (5) | 3.90% | 3.83% |
(1) | Non-accrual loans are included in average loans. |
(2) | Interest income includes amortization of deferred loan origination fees of $3.5 million and $3.6 million for the nine months ended September 30, 2011, and September 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. |
29