Exhibit 99.3
Unaudited Pro Forma Combined Condensed Consolidated Financial Information
The following is the unaudited pro forma combined condensed consolidated financial information for MB Financial, Inc. (“MB Financial”) and Celtic Leasing Corp. (“Celtic”), giving effect to the acquisition of all of the outstanding stock of Celtic by MB Financial Bank, N.A. (“MB Financial Bank”), a wholly owned subsidiary of MB Financial. The unaudited pro forma combined condensed consolidated balance sheet as of September 30, 2012 gives effect to the acquisition as if it occurred on that date. The unaudited pro forma combined condensed consolidated statements of operations for the nine months ended September 30, 2012 and the year ended December 31, 2011 give effect to the acquisition as if it occurred on January 1, 2011. The actual completion date of the acquisition was December 28, 2012.
MB Financial Bank paid $58.7 million in cash, and estimated contingent consideration related to the transaction which may be paid out at future dates. This consideration is based on the performance of lease residual values which will be determined in future years over an earn-out period. The amount of contingent consideration established at the purchase date may be revised and any adjustments to the purchase date estimate will flow through the income statement.
The acquisition will be accounted for under the purchase method of accounting. Under the purchase method of accounting, the assets and liabilities of Celtic, as of the completion date of the acquisition, were recorded at their fair values and the excess of purchase price over the fair value of net assets was allocated to goodwill. Financial statements of MB Financial issued after the consummation of the acquisition will reflect such values and will not be restated retroactively to reflect the historical financial position or results of operations of Celtic. The operating results of Celtic will be reflected in MB Financial’s consolidated financial statements from and after the acquisition completion date.
The unaudited pro forma combined condensed consolidated financial information is based on, and should be read together with, the historical consolidated financial statements and related notes of MB Financial, contained in its Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 and its Annual Report on Form 10-K for the year ended December 31, 2011, and of Celtic, contained in this Form 8-K/A.
MB FINANCIAL, INC. AND CELTIC LEASING CORP.
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET
As of September 30, 2012
(In thousands)
Pro Forma | |||||||||
MB Financial | Celtic | Adjustments | Pro Forma | ||||||
ASSETS | |||||||||
Cash and cash equivalents | $ 456,627 | $ 41,860 | $ (58,657) | A | $ 439,830 | ||||
Investment securities | 2,368,476 | 669 | - | 2,369,145 | |||||
Loans held for sale | 7,221 | - | 7,221 | ||||||
Loans: | |||||||||
Total loans, excluding covered loans | 5,128,683 | 17,879 | 13,280 | B | 5,159,842 | ||||
Covered loans | 496,162 | - | - | 496,162 | |||||
Total loans | 5,624,845 | 17,879 | 13,280 | 5,656,004 | |||||
Less: Allowance for loan losses | 121,182 | - | - | 121,182 | |||||
Net loans | 5,503,663 | 17,879 | 13,280 | 5,534,822 | |||||
Goodwill | 387,069 | - | 35,784 | B | 422,853 | ||||
Other intangibles | 25,735 | - | 5,028 | B | 30,763 | ||||
Other assets | 714,754 | 16,714 | - | 731,468 | |||||
Total assets | $ 9,463,545 | $ 77,122 | $ (4,565) | $ 9,536,102 | |||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||
Liabilities | |||||||||
Deposits: | |||||||||
Noninterest bearing | $ 2,011,542 | $ - | $ - | $ 2,011,542 | |||||
Interest bearing | 5,467,805 | - | - | 5,467,805 | |||||
Total deposits | 7,479,347 | - | - | 7,479,347 | |||||
Borrowings and junior subordinated notes | 560,476 | - | - | 560,476 | |||||
Accrued expenses and other liabilities | 162,892 | 50,013 | 15,221 | A | 228,126 | ||||
7,523 | B | 7,523 | |||||||
Total liabilities | 8,202,715 | 50,013 | 22,744 | 8,275,472 | |||||
Stockholders' Equity | |||||||||
Common stock | 550 | 527 | (527) | C | 550 | ||||
Additional paid-in capital | 731,679 | 40 | (40) | C | 731,679 | ||||
Retained earnings | 489,426 | 26,538 | (26,738) | C | 489,226 | ||||
Accumulated other comprehensive income | 40,985 | 4 | (4) | C | 40,985 | ||||
Treasury stock | (3,304) | - | (3,304) | ||||||
Controlling interest stockholders' equity | 1,259,336 | 27,109 | (27,309) | 1,259,136 | |||||
Noncontrolling interest | 1,494 | - | - | 1,494 | |||||
Total stockholders' equity | 1,260,830 | 27,109 | (27,309) | 1,260,630 | |||||
Total liabilities and stockholders' equity | $ 9,463,545 | $ 77,122 | $ (4,565) | $ 9,536,102 |
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MB FINANCIAL, INC. AND CELTIC LEASING CORP.
UNAUDIED PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2012
(In thousands, except share and per share data)
Pro Forma | ||||||||||
MB Financial | Celtic | Adjustments | Pro Forma | |||||||
Interest income: | ||||||||||
Loans | $ 208,380 | $ 1,664 | $ (995) | D | $ 209,049 | |||||
Investment securities: | ||||||||||
Taxable | 27,053 | - | - | 27,053 | ||||||
Nontaxable | 21,624 | - | - | 21,624 | ||||||
Other interest earning accounts | 639 | - | - | 639 | ||||||
Total interest income | 257,696 | 1,664 | (995) | 258,365 | ||||||
Interest expense: | ||||||||||
Deposits | 24,192 | - | - | 24,192 | ||||||
Long-term borrowings and junior subordinated notes | 10,232 | - | - | 10,232 | ||||||
Total interest expense | 34,424 | - | - | 34,424 | ||||||
Net interest income | 223,272 | 1,664 | (995) | 223,941 | ||||||
Provision for credit losses | (9,900) | - | - | (9,900) | ||||||
Net interest income after provision for credit losses | 233,172 | 1,664 | (995) | 233,841 | ||||||
Other income: | ||||||||||
Capital markets and international banking fees | 2,700 | - | - | 2,700 | ||||||
Commercial deposit and treasury management fees | 17,541 | - | - | 17,541 | ||||||
Lease financing, net | 23,963 | 19,001 | (994) | D | 41,970 | |||||
Trust and asset management fees | 13,367 | - | - | 13,367 | ||||||
Card fees | 6,863 | - | - | 6,863 | ||||||
Loan service fees | 3,409 | - | - | 3,409 | ||||||
Consumer and other deposit service fees | 10,773 | - | - | 10,773 | ||||||
Brokerage fees | 3,704 | - | - | 3,704 | ||||||
Net loss recognized on other real estate owned | (15,968) | - | - | (15,968) | ||||||
Other operating income | 8,962 | - | - | 8,962 | ||||||
Total other income | 75,314 | 19,001 | (994) | 93,321 | ||||||
Other expense: | ||||||||||
Salaries and employee benefits | 122,658 | 6,042 | - | 128,700 | ||||||
Occupancy and equipment expense | 27,032 | 377 | - | 27,409 | ||||||
Computer services and telecommunication expense | 11,339 | 67 | - | 11,406 | ||||||
Advertising and marketing expense | 6,021 | 129 | - | 6,150 | ||||||
Professional and legal expense | 4,470 | 58 | - | 4,528 | ||||||
Other intangibles amortization expense | 3,759 | - | 1,166 | D | 4,925 | |||||
Prepayment fees on interest bearing liabilities | 12,682 | - | - | 12,682 | ||||||
Other operating expenses | 27,369 | 584 | - | 27,953 | ||||||
Total other expense | 215,330 | 7,257 | 1,166 | 223,753 | ||||||
Income before income taxes | 93,156 | 13,408 | (3,155) | 103,409 | ||||||
Income tax expense (benefit) | 26,794 | 3,322 | (1,342) | 28,774 | ||||||
2,041 | E | 2,041 | ||||||||
Net income | $ 66,362 | $ 10,086 | $ (3,854) | $ 72,594 | ||||||
Dividends and discount accretion on preferred shares | 3,269 | - | - | 3,269 | ||||||
Net income available to common stockholders | $ 63,093 | $ 10,086 | $ (3,854) | $ 69,325 | ||||||
Earnings per Share: | ||||||||||
Basic | $ 1.16 | $ - | $ - | $ 1.28 | ||||||
Diluted | 1.16 | - | - | 1.27 | ||||||
Average Shares Outstanding: | ||||||||||
Basic | 54,226,241 | - | - | 54,226,241 | ||||||
Diluted | 54,472,617 | - | - | 54,472,617 |
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MB FINANCIAL, INC. AND CELTIC LEASING CORP.
UNAUDIED PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2011
(In thousands, except share and per share data)
Pro Forma | ||||||||||
MB Financial | Celtic | Adjustments | Pro Forma | |||||||
Interest income: | ||||||||||
Loans | $ 324,793 | $ 2,805 | $ (1,326) | D | $ 326,272 | |||||
Investment securities: | ||||||||||
Taxable | 41,349 | - | - | 41,349 | ||||||
Nontaxable | 17,265 | - | - | 17,265 | ||||||
Other interest earning accounts | 1,153 | - | - | 1,153 | ||||||
Total interest income | 384,560 | 2,805 | (1,326) | 386,039 | ||||||
Interest expense: | ||||||||||
Deposits | 44,881 | - | - | 44,881 | ||||||
Long-term borrowings and junior subordinated notes | 14,406 | - | - | 14,406 | ||||||
Total interest expense | 59,287 | - | - | 59,287 | ||||||
Net interest income | 325,273 | 2,805 | (1,326) | 326,752 | ||||||
Provision for credit losses | 120,750 | - | 120,750 | |||||||
Net interest income after provision for credit losses | 204,523 | 2,805 | (1,326) | 206,002 | ||||||
Other income: | ||||||||||
Capital markets and international banking fees | 1,870 | - | - | 1,870 | ||||||
Commercial deposit and treasury management fees | 23,559 | - | - | 23,559 | ||||||
Lease financing, net | 26,939 | 19,219 | (1,326) | D | 44,832 | |||||
Trust and asset management fees | 17,324 | - | - | 17,324 | ||||||
Card fees | 7,032 | - | - | 7,032 | ||||||
Loan service fees | 6,355 | - | - | 6,355 | ||||||
Consumer and other deposit service fees | 15,375 | - | - | 15,375 | ||||||
Brokerage fees | 5,884 | - | - | 5,884 | ||||||
Accretion of FDIC indemnification asset | 4,838 | - | - | 4,838 | ||||||
Net loss recognized on other real estate owned | (13,613) | - | - | (13,613) | ||||||
Other operating income | 13,543 | - | - | 13,543 | ||||||
Total other income | 109,106 | 19,219 | (1,326) | 126,999 | ||||||
Other expense: | ||||||||||
Salaries and employee benefits | 153,858 | 9,724 | - | 163,582 | ||||||
Occupancy and equipment expense | 35,467 | 515 | - | 35,982 | ||||||
Computer services and telecommunication expense | 14,885 | 91 | - | 14,976 | ||||||
Advertising and marketing expense | 7,038 | 173 | - | 7,211 | ||||||
Professional and legal expense | 6,147 | 150 | - | 6,297 | ||||||
Other intangibles amortization expense | 5,665 | - | 1,554 | D | 7,219 | |||||
Other operating expenses | 46,573 | 774 | - | 47,347 | ||||||
Total other expense | 269,633 | 11,427 | 1,554 | 282,614 | ||||||
Income before income taxes | 43,996 | 10,597 | (4,206) | 50,387 | ||||||
Income tax expense | 5,268 | 4,324 | (1,762) | 7,830 | ||||||
Net income | $ 38,728 | $ 6,273 | $ (2,444) | $ 42,557 | ||||||
Dividends and discount accretion on preferred shares | 10,414 | - | - | 10,414 | ||||||
Net income available to common stockholders | $ 28,314 | $ 6,273 | $ (2,444) | $ 32,143 | ||||||
Earnings per Share: | ||||||||||
Basic | $ 0.52 | $ - | $ - | $ 0.59 | ||||||
Diluted | 0.52 | - | - | 0.59 | ||||||
Average Shares Outstanding: | ||||||||||
Basic | 54,057,158 | - | - | 54,057,158 | ||||||
Diluted | 54,337,280 | - | - | 54,337,280 |
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Notes to Unaudited Pro Forma Combined Condensed Consolidated Financial Statements
Note 1 – Basis of Presentation
The unaudited pro forma combined condensed consolidated financial information has been prepared under the purchase method of accounting. The unaudited pro forma combined condensed consolidated statements of operations for the year ended December 31, 2011 and nine months ended September 30, 2012, are presented as if the acquisition occurred on January 1, 2011. The unaudited pro forma combined condensed consolidated balance sheet as of September 30, 2012 is presented as if the acquisition occurred as of that date. This information is not intended to reflect the actual results that would have been achieved had the acquisition actually occurred on those dates.
Certain historical data of Celtic has been reclassified on a pro forma basis to conform to MB Financial’s classifications. The unaudited pro forma combined condensed consolidated statements of operations are presented based on MB Financial’s fiscal year end which is December 31. Celtic’s fiscal year end is June 30. Celtic’s historical statements of operations were updated by adding subsequent interim period results to the most recent fiscal year end information and deducting the comparable preceding year interim period results. Celtic’s unaudited historical statement of operations for the nine months ended September 30, 2012 was derived by adding the three months ended September 30, 2012 results to the year ended June 30, 2012 statement of operations and deducting the six months ended December 31, 2011 results. Celtic’s unaudited historical statement of operations for the year ended December 31, 2011 was derived by adding the six months ended December 31, 2011 results to the year ended June 30, 2011 statement of operations and deducting the six months ended December 31, 2010 results.
Note 2 – Purchase Price
The purchase price consists of $58.7 million paid in cash and estimated contingent consideration of $15.2 million related to the transaction which may be paid out at future dates (Adjustment Note A). The purchase accounting entries are preliminary for lease loans, goodwill and other intangibles, as MB Financial continues to analyze the portfolios and the underlying risks and collateral values of the assets. After the purchase accounting is finalized, the impact of any future changes to the amount of contingent consideration will be reflected in the statement of operations.
Note 3 – Allocation of Purchase Price of Celtic
Under purchase accounting, Celtic’s assets and liabilities and any identifiable intangible assets were required to be adjusted to their estimated fair values. The following are the pro forma adjustments made to record the transaction and to adjust Celtic’s assets and liabilities to their estimated fair values at September 30, 2012.
Purchase Price of Celtic (in thousands): | |||
Cash to be paid | $ 58,657 | ||
Estimated contingent consideration | 15,221 | ||
Total purchase price | $ 73,878 | ||
Historical net assets of Celtic as of September 30, 2012 | $ 27,109 | ||
Fair market value adjustments as of September 30, 2012: | |||
Lease loans (Adjustment Note B) | 13,280 | ||
Goodwill (Adjustment Note B) | 35,784 | ||
Other intangibles (Adjustment Note B) | 5,028 | ||
Deferred taxes on purchase accounting adjustments | (7,323) | ||
$ 73,878 |
Adjustment Note C in the adjustments to the pro forma combined condensed consolidated financial information represents the elimination of Celtic’s stockholders’ equity.
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Note 4 – Acquisition Costs of Celtic
Estimated acquisition costs of approximately $200 thousand are not included in the pro forma combined condensed consolidated statements of operations as the costs were not yet reflected in the historical financial statements of MB Financial. The acquisition costs are presented as an adjustment to other liabilities and as a reduction in retained earnings.
Note 5 – Pro Forma Condensed Combined Statements of Operations Adjustments
For purposes of determining the pro forma effect of the acquisition on the statements of operations, the following pro forma adjustments have been made as if the acquisition occurred as of January 1, 2011 and 2012 (in thousands):
For the nine months ended | For the year ended | |||
September 30, 2012 | December 31, 2011 | |||
Yield adjustment for income on lease loans (Adjustment Note D) | $ (995) | $ (1,326) | ||
Adjustment for lease revenue (Adjustment Note D) | (994) | (1,326) | ||
Amortization of core deposit intangible (Adjustment Note D) | (1,166) | (1,554) | ||
Total adjustments | (3,155) | (4,206) | ||
Tax effect on pro forma adjustments | (1,342) | (1,762) | ||
Tax adjustment due to change in state apportionment | ||||
method (Adjustment Note E) | 2,041 | - | ||
Total adjustments, net of tax | $ (3,854) | $ (2,444) |
Taxes were adjusted for pro forma purposes at a 40% rate for all statements of operations adjustments. Adjustment Note E in the adjustments to the pro forma combined condensed consolidated financial information represents the tax adjustment due to a change in Celtic’s state apportionment method for the nine months ended September 30, 2012. This tax adjustment brings Celtic’s tax expense to a normal level relative to its income for the period. In addition, for pro forma purposes, the fair market value adjustment on the lease loans and the other intangibles asset were assumed to have a weighted average useful life of eight years and six years, respectively, using the accelerated method amortization.
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