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:
Berry Allen - Investor Relations
E-Mail: beallen@mbfinancial.com
FOR IMMEDIATE RELEASE
MB FINANCIAL, INC. REPORTS EARNINGS FOR THE FIRST QUARTER OF 2016
CHICAGO, April 18, 2016 – MB Financial, Inc. (NASDAQ: MBFI), the holding company for MB Financial Bank, N.A., today announced 2016 first quarter net income available to common stockholders of $37.1 million, or $0.50 per diluted common share, compared to $41.6 million, or $0.56 per diluted common share, last quarter and $32.1 million, or $0.43 per diluted common share, in the first quarter a year ago.
Highlights Include:
Growth in Core Earnings for the Quarter
Core (or operating) earnings increased by $1.3 million, or $0.02 per diluted common share, compared to last quarter and $2.6 million, or $0.04 per diluted common share, compared to the first quarter of last year.
The following table presents a reconciliation of net income to operating earnings (in thousands):
1Q16 | 4Q15 | 1Q15 | ||||||||||
Net income - as reported | $ | 39,114 | $ | 43,607 | $ | 34,111 | ||||||
Less non-core items: | ||||||||||||
Net loss on investment securities | — | (3 | ) | (460 | ) | |||||||
Net (loss) gain on sale of other assets | (48 | ) | — | 4 | ||||||||
Merger related and repositioning expenses | (3,287 | ) | 4,186 | (8,069 | ) | |||||||
Prepayment fees on interest bearing liabilities | — | — | (85 | ) | ||||||||
Total non-core items | (3,335 | ) | 4,183 | (8,610 | ) | |||||||
Income tax expense on non-core items | (577 | ) | 1,140 | (3,417 | ) | |||||||
Non-core items, net of tax | (2,758 | ) | 3,043 | (5,193 | ) | |||||||
Operating earnings | 41,872 | 40,564 | 39,304 | |||||||||
Dividends on preferred shares | 2,000 | 2,000 | 2,000 | |||||||||
Operating earnings available to common stockholders | $ | 39,872 | $ | 38,564 | $ | 37,304 | ||||||
Diluted operating earnings per common share | $ | 0.54 | $ | 0.52 | $ | 0.50 | ||||||
Weighted average common shares outstanding for diluted operating earnings per common share | 73,966,935 | 73,953,165 | 75,164,716 |
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• | Net interest income on a fully tax equivalent basis decreased $2.6 million (-2.0%) to $126.5 million in the first quarter of 2016 compared to the prior quarter due to one less day in the quarter (approximately $1.4 million) and lower accretion income on loans acquired in the Taylor Capital merger ($2.4 million) partially offset by net interest income related to an increase in average interest earning asset balances. |
• | Our net interest margin on a fully tax equivalent basis, excluding accretion on loans acquired in the Taylor Capital merger, was stable at 3.55% compared to 3.56% last quarter. |
• | Our core non-interest income was $81.7 million compared to $75.1 million in the prior quarter (8.9% increase). The improvement was largely driven by an increase in fees and promotional revenue (lease financing) from the sale of third-party equipment maintenance contracts as well as trust and asset management fees which increased primarily due to $1.7 million in fees from MSA Holdings, LLC ("MSA"), which we acquired on December 31, 2015. |
• | Our core non-interest expense increased $1.7 million (+1.3%) compared to the prior quarter primarily due to an increase in leasing commission expense (salaries and employee benefits) as a result of higher lease financing revenues. |
Growth in Loan Balances During the Quarter
• | Loan balances, excluding purchased credit-impaired loans, increased $168.3 million (+1.7%, or +7.0% annualized) during the first quarter of 2016. |
Change from 12/31/2015 to 3/31/2016 | |||||||||||||||
(Dollars in thousands) | 3/31/2016 | 12/31/2015 | Amount | Percent | |||||||||||
Commercial-related credits: | |||||||||||||||
Commercial loans | $ | 3,509,604 | $ | 3,616,286 | $ | (106,682 | ) | (3.0 | )% | ||||||
Commercial loans collateralized by assignment of lease payments (lease loans) | 1,774,104 | 1,779,072 | (4,968 | ) | (0.3 | ) | |||||||||
Commercial real estate | 2,831,814 | 2,695,676 | 136,138 | 5.1 | |||||||||||
Construction real estate | 310,278 | 252,060 | 58,218 | 23.1 | |||||||||||
Total commercial-related credits | 8,425,800 | 8,343,094 | 82,706 | 1.0 | |||||||||||
Other loans: | |||||||||||||||
Residential real estate | 677,791 | 628,169 | 49,622 | 7.9 | |||||||||||
Indirect vehicle | 432,915 | 384,095 | 48,820 | 12.7 | |||||||||||
Home equity | 207,079 | 216,573 | (9,494 | ) | (4.4 | ) | |||||||||
Consumer loans | 77,318 | 80,661 | (3,343 | ) | (4.1 | ) | |||||||||
Total other loans | 1,395,103 | 1,309,498 | 85,605 | 6.5 | |||||||||||
Total loans, excluding purchased credit-impaired | 9,820,903 | 9,652,592 | 168,311 | 1.7 | |||||||||||
Purchased credit-impaired | 140,445 | 141,406 | (961 | ) | (0.7 | ) | |||||||||
Total loans | $ | 9,961,348 | $ | 9,793,998 | $ | 167,350 | 1.7 | % |
Stable Deposit Balances During the Quarter
• | Total low cost deposits continued to represent 84% of total deposits at March 31, 2016 and non-interest bearing deposits continued to comprise 40% of total deposits. |
Change from 12/31/2015 to 3/31/2016 | |||||||||||||||
(Dollars in thousands) | 3/31/2016 | 12/31/2015 | Amount | Percent | |||||||||||
Low cost deposits: | |||||||||||||||
Noninterest bearing deposits | $ | 4,667,410 | $ | 4,627,184 | $ | 40,226 | 0.9 | % | |||||||
Money market and NOW | 4,048,054 | 4,144,633 | (96,579 | ) | (2.3 | ) | |||||||||
Savings | 991,300 | 974,555 | 16,745 | 1.7 | |||||||||||
Total low cost deposits | 9,706,764 | 9,746,372 | (39,608 | ) | (0.4 | ) | |||||||||
Certificates of deposit: | |||||||||||||||
Certificates of deposit | 1,255,457 | 1,244,292 | 11,165 | 0.9 | |||||||||||
Brokered certificates of deposit | 571,605 | 514,551 | 57,054 | 11.1 | |||||||||||
Total certificates of deposit | 1,827,062 | 1,758,843 | 68,219 | 3.9 | |||||||||||
Total deposits | $ | 11,533,826 | $ | 11,505,215 | $ | 28,611 | 0.2 | % |
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Credit Quality Metrics
• | Provision for credit losses was $7.6 million in the first quarter of 2016 compared to $6.8 million in the fourth quarter of 2015. |
• | Our net loan charge-offs during the first quarter of 2016 were $1.3 million, or 0.06% of loans (annualized), compared to net loan charge-offs of $3.3 million, or 0.14% of loans (annualized), in the fourth quarter of 2015. |
• | Non-performing loans and non-performing assets decreased by $9.9 million and $13.1 million, respectively, from December 31, 2015 primarily due to loans that paid off during the quarter. |
• | Potential problem loans decreased by $29.7 million from December 31, 2015 primarily due to loans that paid off during the quarter. |
• | Our allowance for loan and lease losses to total loans ratio was 1.35% at March 31, 2016 compared to 1.31% at December 31, 2015. |
American Chartered Bancorp, Inc. Pending Merger Update
• | The transaction was approved by American Chartered shareholders in March 2016. |
• | The merger remains subject to regulatory approval and is expected to close around June 30, 2016. |
RESULTS OF OPERATIONS
First Quarter Results
Net Interest Income
Change from 4Q15 to 1Q16 | Change from 1Q15 to 1Q16 | |||||||||||||||||
(Dollars in thousands) | 1Q16 | 4Q15 | 1Q15 | |||||||||||||||
Net interest income - fully tax equivalent | $ | 126,499 | $ | 129,076 | -2.0 | % | $ | 119,473 | +5.9 | % | ||||||||
Net interest income - fully tax equivalent, excluding acquisition accounting discount accretion on Taylor Capital loans | $ | 119,146 | $ | 119,373 | -0.2 | % | $ | 110,897 | +7.4 | % | ||||||||
Net interest margin - fully tax equivalent | 3.79 | % | 3.86 | % | -0.07 | % | 3.93 | % | -0.14 | |||||||||
Net interest margin - fully tax equivalent, excluding acquisition accounting discount accretion on Taylor Capital loans | 3.55 | % | 3.56 | % | -0.01 | % | 3.62 | % | -0.07 |
Reconciliations of net interest income - fully tax equivalent to net interest income, as reported, net interest margin - fully tax equivalent to net interest margin and net interest margin - fully tax equivalent, excluding acquisition accounting discount accretion on Taylor Capital loans to net interest margin are set forth in the tables in the "Net Interest Margin" section.
Net interest income on a fully tax equivalent basis decreased in the first quarter of 2016 compared to the prior quarter due to one less day in the quarter (approximately $1.4 million) and lower accretion income on loans acquired in the Taylor Capital merger ($2.4 million) partially offset by net interest income related to an increase in average interest earning asset balances.
Net interest income on a fully tax equivalent basis increased in the first quarter of 2016 compared to the first quarter of 2015 primarily due to an increase in average interest earning assets, partially offset by a decrease in our net interest margin.
Compared to the first quarter of 2015, our net interest margin on a fully tax equivalent basis, excluding accretion of the acquisition accounting discount recorded on loans acquired in the Taylor Capital merger, decreased by seven basis points primarily due to a decrease in average yields earned on loans (excluding accretion) and, to a lesser extent, an increase in cost of funds.
See the supplemental net interest margin tables for further detail.
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Non-interest Income (in thousands):
1Q16 | 4Q15 | 3Q15 | 2Q15 | 1Q15 | ||||||||||||||||
Core non-interest income: | ||||||||||||||||||||
Key fee initiatives: | ||||||||||||||||||||
Lease financing revenues, net | $ | 19,046 | $ | 15,937 | $ | 20,000 | $ | 15,564 | $ | 25,080 | ||||||||||
Mortgage banking revenue | 27,482 | 26,542 | 30,692 | 35,648 | 24,544 | |||||||||||||||
Commercial deposit and treasury management fees | 11,878 | 11,711 | 11,472 | 11,062 | 11,038 | |||||||||||||||
Trust and asset management fees | 7,950 | 6,077 | 6,002 | 5,752 | 5,714 | |||||||||||||||
Card fees | 3,525 | 3,651 | 3,335 | 4,409 | 3,927 | |||||||||||||||
Capital markets and international banking service fees | 3,227 | 2,355 | 2,357 | 1,508 | 1,928 | |||||||||||||||
Total key fee initiatives | 73,108 | 66,273 | 73,858 | 73,943 | 72,231 | |||||||||||||||
Consumer and other deposit service fees | 3,025 | 3,440 | 3,499 | 3,260 | 3,083 | |||||||||||||||
Brokerage fees | 1,158 | 1,252 | 1,281 | 1,543 | 1,678 | |||||||||||||||
Loan service fees | 1,752 | 1,890 | 1,531 | 1,353 | 1,485 | |||||||||||||||
Increase in cash surrender value of life insurance | 854 | 864 | 852 | 836 | 839 | |||||||||||||||
Other operating income | 1,836 | 1,344 | 1,730 | 2,098 | 2,102 | |||||||||||||||
Total core non-interest income | 81,733 | 75,063 | 82,751 | 83,033 | 81,418 | |||||||||||||||
Non-core non-interest income: | ||||||||||||||||||||
Net gain (loss) on investment securities | — | (3 | ) | 371 | (84 | ) | (460 | ) | ||||||||||||
Net (loss) gain on sale of other assets | (48 | ) | — | 1 | (7 | ) | 4 | |||||||||||||
(Decrease) increase in market value of assets held in trust for deferred compensation (1) | 8 | 565 | (872 | ) | 7 | 306 | ||||||||||||||
Total non-core non-interest income | (40 | ) | 562 | (500 | ) | (84 | ) | (150 | ) | |||||||||||
Total non-interest income | $ | 81,693 | $ | 75,625 | $ | 82,251 | $ | 82,949 | $ | 81,268 |
(1) | Resides in other operating income in the consolidated statements of operations. |
Core non-interest income for the first quarter of 2016 increased by $6.7 million, or 8.9%, to $81.7 million from the fourth quarter of 2015.
• | Lease financing revenues increased due to an increase in fees and promotional revenue from the sale of third-party equipment maintenance contracts. |
• | Trust and asset management fees increased primarily due to the acquisition of MSA. |
• | Mortgage banking revenue increased due to higher mortgage servicing fees partly offset by a decrease in mortgage origination fees. |
• | Capital markets and international banking services fees increased due to higher swap fees. |
Core non-interest income for the first quarter of 2016 increased by $315 thousand, or 0.4%, to $81.7 million from the first quarter of 2015.
• | Mortgage banking revenue increased due to higher mortgage servicing fees partly offset by lower mortgage origination fees. |
• | Trust and asset management fees increased due to the addition of new customers as well as the acquisition of MSA. |
• | Capital markets and international banking services fees increased due to higher derivatives fees. |
• | Commercial deposit and treasury management fees increased due to new customer activity. |
• | Lease financing revenues decreased due to lower fees from the sale of third-party equipment maintenance contracts. |
• | Card fees decreased due to the impact of becoming subject to the Durbin amendment of the Dodd-Frank Act starting on July 1, 2015. We estimate the quarterly impact of the Durbin amendment, when comparing the first quarter of 2016 with the first quarter of 2015, was $1.2 million. |
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Non-interest Expense (in thousands):
1Q16 | 4Q15 | 3Q15 | 2Q15 | 1Q15 | ||||||||||||||||
Core non-interest expense:(1) | ||||||||||||||||||||
Salaries and employee benefits expense | $ | 85,502 | $ | 84,356 | $ | 88,760 | $ | 86,138 | $ | 84,447 | ||||||||||
Occupancy and equipment expense | 13,260 | 12,935 | 12,456 | 12,081 | 12,763 | |||||||||||||||
Computer services and telecommunication expense | 8,750 | 8,548 | 8,558 | 8,407 | 8,634 | |||||||||||||||
Advertising and marketing expense | 2,855 | 2,549 | 2,578 | 2,497 | 2,446 | |||||||||||||||
Professional and legal expense | 2,492 | 2,715 | 1,496 | 1,902 | 2,480 | |||||||||||||||
Other intangible amortization expense | 1,626 | 1,546 | 1,542 | 1,509 | 1,518 | |||||||||||||||
Net (gain) loss recognized on other real estate owned (A) | (637 | ) | (256 | ) | 520 | 662 | 888 | |||||||||||||
Net loss (gain) recognized on other real estate owned related to FDIC transactions (A) | 154 | (549 | ) | 65 | (88 | ) | (273 | ) | ||||||||||||
Other real estate expense, net (A) | 137 | 76 | (8 | ) | 150 | 281 | ||||||||||||||
Other operating expenses | 18,366 | 18,932 | 18,782 | 18,238 | 18,276 | |||||||||||||||
Total core non-interest expense | 132,505 | 130,852 | 134,749 | 131,496 | 131,460 | |||||||||||||||
Non-core non-interest expense: (1) | ||||||||||||||||||||
Merger related and repositioning expenses (B) | 3,287 | (4,186 | ) | 389 | 1,234 | 8,069 | ||||||||||||||
Prepayment fees on interest bearing liabilities | — | — | — | — | 85 | |||||||||||||||
Increase (decrease) in market value of assets held in trust for deferred compensation (C) | 8 | 565 | (872 | ) | 7 | 306 | ||||||||||||||
Total non-core non-interest expense | 3,295 | (3,621 | ) | (483 | ) | 1,241 | 8,460 | |||||||||||||
Total non-interest expense | $ | 135,800 | $ | 127,231 | $ | 134,266 | $ | 132,737 | $ | 139,920 |
(1) | Letters denote the corresponding line items where these non-core non-interest expense items reside in the consolidated statements of operations as follows: A – Net loss (gain) recognized on other real estate owned and other expense, B – See merger related and repositioning expenses table below, and C – Salaries and employee benefits. |
Core non-interest expense increased by $1.7 million, or 1.3%, from the fourth quarter of 2015 to $132.5 million for the first quarter of 2016.
• | Salaries and employee benefits expense was up due to an increase in leasing commission expense as a result of higher lease financing revenues. |
• | Occupancy and equipment expense increased due to higher rental operating expenses and real estate taxes offset partly by lower building repair and maintenance expenses. |
Core non-interest expense increased by $1.0 million, or 0.8%, from the first quarter of 2015 to $132.5 million for the first quarter of 2016.
• | Salaries and employee benefits expense was up due to annual pay increases as well as an increase in temporary help in our mortgage and IT areas. |
• | Occupancy and equipment expense increased due to higher depreciation expense, rental operating expenses and real estate taxes offset partly by lower building repair and maintenance expenses. |
The following table presents the detail of the merger related and repositioning expenses (dollars in thousands):
1Q16 | 4Q15 | 3Q15 | 2Q15 | 1Q15 | ||||||||||||||||
Merger related and repositioning expenses: | ||||||||||||||||||||
Salaries and employee benefits | $ | 81 | $ | (212 | ) | $ | 3 | $ | — | $ | 33 | |||||||||
Occupancy and equipment expense | — | — | 2 | 96 | 177 | |||||||||||||||
Computer services and telecommunication expense | 305 | (103 | ) | 9 | 130 | 270 | ||||||||||||||
Advertising and marketing expense | 23 | 2 | — | — | — | |||||||||||||||
Professional and legal expense | 97 | 1,454 | 305 | 511 | 190 | |||||||||||||||
Branch exit and facilities impairment charges | 44 | 616 | 70 | 438 | 7,391 | |||||||||||||||
Contingent consideration expense - Celtic acquisition (1) | 2,703 | — | — | — | — | |||||||||||||||
Other operating expenses | 34 | (5,943 | ) | — | 59 | 8 | ||||||||||||||
Total merger related and repositioning expenses | $ | 3,287 | $ | (4,186 | ) | $ | 389 | $ | 1,234 | $ | 8,069 |
(1) | Resides in other operating expenses in the consolidated statements of operations. |
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In the first quarter of 2016, merger related and repositioning expenses included contingent consideration for our acquisition of Celtic Leasing Corp. due to strong lease residual performance. In the fourth quarter of 2015, merger related and repositioning expenses were impacted by the reversal of an accrual for a potential contingent loss we assumed in connection with the Taylor Capital merger.
Operating Segments
The Company's operations consist of three reportable operating segments: Banking, Leasing and Mortgage Banking. Our Banking Segment generates revenues primarily from its lending, deposit gathering and fee business activities. Our Leasing Segment generates revenues through lease originations and related services offered through the Company's leasing subsidiaries: LaSalle Systems Leasing, Inc., Celtic Leasing Corp. and MB Equipment Finance, LLC. Our Mortgage Banking Segment originates residential mortgage loans for sale to investors through its retail and third party origination channels as well as residential mortgage loans held in our loan portfolio. The Mortgage Banking Segment also services residential mortgage loans owned by investors and the Company.
The following tables present summary financial information, adjusted for funds transfer pricing and internal allocations of certain expenses, for the reportable segments (in thousands):
Banking | Leasing | Mortgage Banking | Non-core Items | Consolidated | |||||||||||||||
Three months ended March 31, 2016 | |||||||||||||||||||
Net interest income | $ | 109,608 | $ | 2,423 | $ | 7,273 | $ | — | $ | 119,304 | |||||||||
Provision for credit losses | 7,001 | 437 | 125 | — | 7,563 | ||||||||||||||
Net interest income after provision for credit losses | 102,607 | 1,986 | 7,148 | — | 111,741 | ||||||||||||||
Non-interest income: | |||||||||||||||||||
Lease financing revenues, net | 679 | 18,367 | — | — | 19,046 | ||||||||||||||
Mortgage origination fees | — | — | 16,894 | — | 16,894 | ||||||||||||||
Mortgage servicing fees | — | — | 10,588 | — | 10,588 | ||||||||||||||
Other non-interest income | 34,388 | 828 | (3 | ) | (48 | ) | 35,165 | ||||||||||||
Total non-interest income | 35,067 | 19,195 | 27,479 | (48 | ) | 81,693 | |||||||||||||
Non-interest expense: | |||||||||||||||||||
Salaries and employee benefits | 53,421 | 9,072 | 23,017 | 81 | 85,591 | ||||||||||||||
Occupancy and equipment expense | 10,430 | 895 | 1,935 | — | 13,260 | ||||||||||||||
Computer services and telecommunication expense | 6,446 | 363 | 1,941 | 305 | 9,055 | ||||||||||||||
Professional and legal expense | 1,486 | 409 | 597 | 97 | 2,589 | ||||||||||||||
Other operating expenses | 15,570 | 1,447 | 5,484 | 2,804 | 25,305 | ||||||||||||||
Total non-interest expense | 87,353 | 12,186 | 32,974 | 3,287 | 135,800 | ||||||||||||||
Income before income taxes | 50,321 | 8,995 | 1,653 | (3,335 | ) | 57,634 | |||||||||||||
Income tax expense | 14,927 | 3,509 | 661 | (577 | ) | 18,520 | |||||||||||||
Net income | $ | 35,394 | $ | 5,486 | $ | 992 | $ | (2,758 | ) | $ | 39,114 | ||||||||
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Banking | Leasing | Mortgage Banking | Non-core Items | Consolidated | |||||||||||||||
Three months ended December 31, 2015 | |||||||||||||||||||
Net interest income | $ | 111,691 | $ | 2,714 | $ | 7,364 | $ | — | $ | 121,769 | |||||||||
Provision for credit losses | 6,654 | — | 104 | — | 6,758 | ||||||||||||||
Net interest income after provision for credit losses | 105,037 | 2,714 | 7,260 | — | 115,011 | ||||||||||||||
Non-interest income: | |||||||||||||||||||
Lease financing revenues, net | 1,180 | 14,757 | — | — | 15,937 | ||||||||||||||
Mortgage origination fees | — | — | 17,596 | — | 17,596 | ||||||||||||||
Mortgage servicing fees | — | — | 8,946 | — | 8,946 | ||||||||||||||
Other non-interest income | 32,337 | 802 | 10 | (3 | ) | 33,146 | |||||||||||||
Total non-interest income | 33,517 | 15,559 | 26,552 | (3 | ) | 75,625 | |||||||||||||
Non-interest expense: | |||||||||||||||||||
Salaries and employee benefits | 54,655 | 7,474 | 22,792 | (212 | ) | 84,709 | |||||||||||||
Occupancy and equipment expense | 10,344 | 855 | 1,736 | — | 12,935 | ||||||||||||||
Computer services and telecommunication expense | 6,200 | 340 | 2,008 | (103 | ) | 8,445 | |||||||||||||
Professional and legal expense | 1,709 | 328 | 678 | 1,454 | 4,169 | ||||||||||||||
Other operating expenses | 15,757 | 1,501 | 5,040 | (5,325 | ) | 16,973 | |||||||||||||
Total non-interest expense | 88,665 | 10,498 | 32,254 | (4,186 | ) | 127,231 | |||||||||||||
Income before income taxes | 49,889 | 7,775 | 1,558 | 4,183 | 63,405 | ||||||||||||||
Income tax expense | 14,998 | 3,037 | 623 | 1,140 | 19,798 | ||||||||||||||
Net income | $ | 34,891 | $ | 4,738 | $ | 935 | $ | 3,043 | $ | 43,607 |
Net income from our Banking Segment for the first quarter of 2016 increased compared to the prior quarter. This increase was primarily due to higher fee income coupled with better expense control which offset lower accretion income on loans acquired in the Taylor Capital merger.
Net income from our Leasing Segment for the first quarter of 2016 increased compared to the prior quarter. This increase was primarily due to an increase in lease financing revenues due to an increase in fees and promotional revenue from the sale of third-party equipment maintenance contracts partly offset by an increase in commission expense and higher provision for credit losses.
Net income from our Mortgage Banking Segment for the first quarter of 2016 was stable compared to the prior quarter as an increase in mortgage servicing fees was partly offset by a decrease in mortgage origination fees and higher non-interest expenses.
The following table presents additional information regarding the Mortgage Banking Segment (dollars in thousands):
1Q16 | 4Q15 | 3Q15 | 2Q15 | 1Q15 | ||||||||||||||||
Origination volume: | $ | 1,328,804 | $ | 1,437,057 | $ | 1,880,960 | $ | 2,010,175 | $ | 1,688,541 | ||||||||||
Refinance | 49 | % | 42 | % | 34 | % | 43 | % | 61 | % | ||||||||||
Purchase | 51 | 58 | 66 | 57 | 39 | |||||||||||||||
Origination volume by channel: | ||||||||||||||||||||
Retail | 19 | % | 18 | % | 18 | % | 18 | % | 18 | % | ||||||||||
Third party | 81 | 82 | 82 | 82 | 82 | |||||||||||||||
Mortgage servicing book (unpaid principal balance of loans serviced for others) at period end (1) | $ | 16,911,325 | $ | 16,218,613 | $ | 15,582,911 | $ | 23,588,345 | $ | 22,978,750 | ||||||||||
Mortgage servicing rights, recorded at fair value, at period end | 145,800 | 168,162 | 148,097 | 261,034 | 219,254 | |||||||||||||||
Notional value of rate lock commitments, at period end | 823,000 | 622,906 | 800,162 | 992,025 | 1,069,145 |
(1) 3Q15 does not include the unpaid principal balance of serviced loans sold in July 2015 that continued to be sub-serviced through October 2015.
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LOAN PORTFOLIO
The following table sets forth the composition of the loan portfolio (excluding loans held for sale) based on period end balances as of the dates indicated (dollars in thousands):
3/31/2016 | 12/31/2015 | 9/30/2015 | 6/30/2015 | 3/31/2015 | |||||||||||||||||||||||||||||||
Amount | % of Total | Amount | % of Total | Amount | % of Total | Amount | % of Total | Amount | % of Total | ||||||||||||||||||||||||||
Commercial-related credits: | |||||||||||||||||||||||||||||||||||
Commercial loans | $ | 3,509,604 | 36 | % | $ | 3,616,286 | 37 | % | $ | 3,440,632 | 37 | % | $ | 3,354,889 | 37 | % | $ | 3,258,652 | 37 | % | |||||||||||||||
Commercial loans collateralized by assignment of lease payments (lease loans) | 1,774,104 | 18 | 1,779,072 | 18 | 1,693,540 | 18 | 1,690,866 | 18 | 1,628,031 | 18 | |||||||||||||||||||||||||
Commercial real estate | 2,831,814 | 28 | 2,695,676 | 27 | 2,580,009 | 27 | 2,539,991 | 28 | 2,525,640 | 28 | |||||||||||||||||||||||||
Construction real estate | 310,278 | 3 | 252,060 | 3 | 255,620 | 3 | 189,599 | 2 | 184,105 | 2 | |||||||||||||||||||||||||
Total commercial-related credits | 8,425,800 | 85 | 8,343,094 | 85 | 7,969,801 | 85 | 7,775,345 | 85 | 7,596,428 | 85 | |||||||||||||||||||||||||
Other loans: | |||||||||||||||||||||||||||||||||||
Residential real estate | 677,791 | 7 | 628,169 | 6 | 607,171 | 6 | 533,118 | 6 | 505,558 | 5 | |||||||||||||||||||||||||
Indirect vehicle | 432,915 | 4 | 384,095 | 4 | 345,731 | 4 | 303,777 | 3 | 273,105 | 3 | |||||||||||||||||||||||||
Home equity | 207,079 | 2 | 216,573 | 2 | 223,173 | 2 | 230,478 | 3 | 241,078 | 3 | |||||||||||||||||||||||||
Consumer loans | 77,318 | 1 | 80,661 | 1 | 87,612 | 1 | 86,463 | 1 | 77,645 | 1 | |||||||||||||||||||||||||
Total other loans | 1,395,103 | 14 | 1,309,498 | 13 | 1,263,687 | 13 | 1,153,836 | 13 | 1,097,386 | 12 | |||||||||||||||||||||||||
Total loans, excluding purchased credit-impaired loans | 9,820,903 | 99 | 9,652,592 | 98 | 9,233,488 | 98 | 8,929,181 | 98 | 8,693,814 | 97 | |||||||||||||||||||||||||
Purchased credit-impaired loans | 140,445 | 1 | 141,406 | 2 | 155,693 | 2 | 164,775 | 2 | 227,514 | 3 | |||||||||||||||||||||||||
Total loans | $ | 9,961,348 | 100 | % | $ | 9,793,998 | 100 | % | $ | 9,389,181 | 100 | % | $ | 9,093,956 | 100 | % | $ | 8,921,328 | 100 | % |
Our loan balances, excluding purchased credit-impaired loans, increased $168.3 million (+1.7%, or +7.0% annualized) during the first quarter of 2016. Commercial loan balances decreased due to seasonal borrowings of approximately $100 million that were outstanding at December 31, 2015 and repaid in the first quarter of 2016. Residential real estate loan balances have increased over the past year as a result of retaining adjustable rate mortgages originated by our Mortgage Banking Segment in our loan portfolio.
The following table sets forth the composition of the loan portfolio (excluding loans held for sale) based on quarterly average balances for the periods indicated (dollars in thousands):
1Q16 | 4Q15 | 3Q15 | 2Q15 | 1Q15 | |||||||||||||||||||||||||||||||
Amount | % of Total | Amount | % of Total | Amount | % of Total | Amount | % of Total | Amount | % of Total | ||||||||||||||||||||||||||
Commercial-related credits: | |||||||||||||||||||||||||||||||||||
Commercial loans | $ | 3,531,441 | 36 | % | $ | 3,492,161 | 37 | % | $ | 3,372,279 | 37 | % | $ | 3,309,519 | 37 | % | $ | 3,190,755 | 36 | % | |||||||||||||||
Commercial loans collateralized by assignment of lease payments (lease loans) | 1,754,558 | 18 | 1,708,404 | 18 | 1,674,939 | 18 | 1,634,583 | 18 | 1,647,761 | 18 | |||||||||||||||||||||||||
Commercial real estate | 2,734,148 | 28 | 2,627,004 | 28 | 2,568,539 | 28 | 2,522,473 | 28 | 2,538,995 | 29 | |||||||||||||||||||||||||
Construction real estate | 276,797 | 3 | 274,188 | 2 | 210,506 | 2 | 191,935 | 2 | 191,257 | 2 | |||||||||||||||||||||||||
Total commercial-related credits | 8,296,944 | 85 | 8,101,757 | 85 | 7,826,263 | 85 | 7,658,510 | 85 | 7,568,768 | 85 | |||||||||||||||||||||||||
Other loans: | |||||||||||||||||||||||||||||||||||
Residential real estate | 640,231 | 7 | 612,275 | 6 | 566,115 | 6 | 512,766 | 6 | 493,366 | 5 | |||||||||||||||||||||||||
Indirect vehicle | 404,473 | 4 | 365,744 | 4 | 325,323 | 4 | 286,107 | 3 | 267,265 | 3 | |||||||||||||||||||||||||
Home equity | 210,678 | 2 | 219,440 | 2 | 226,365 | 2 | 233,867 | 3 | 246,537 | 3 | |||||||||||||||||||||||||
Consumer loans | 80,569 | 1 | 83,869 | 1 | 85,044 | 1 | 76,189 | 1 | 72,374 | 1 | |||||||||||||||||||||||||
Total other loans | 1,335,951 | 14 | 1,281,328 | 13 | 1,202,847 | 13 | 1,108,929 | 13 | 1,079,542 | 12 | |||||||||||||||||||||||||
Total loans, excluding purchased credit-impaired loans | 9,632,895 | 99 | 9,383,085 | 98 | 9,029,110 | 98 | 8,767,439 | 98 | 8,648,310 | 97 | |||||||||||||||||||||||||
Purchased credit-impaired loans | 139,451 | 1 | 154,562 | 2 | 156,309 | 2 | 202,374 | 2 | 240,376 | 3 | |||||||||||||||||||||||||
Total loans | $ | 9,772,346 | 100 | % | $ | 9,537,647 | 100 | % | $ | 9,185,419 | 100 | % | $ | 8,969,813 | 100 | % | $ | 8,888,686 | 100 | % |
Our average loan balances, excluding purchased credit-impaired loans, increased $249.8 million (+2.7%, or +10.7% annualized) during the first quarter of 2016.
8
ASSET QUALITY
The following table presents a summary of criticized assets (excluding loans held for sale) as of the dates indicated (dollars in thousands):
3/31/2016 | 12/31/2015 | 9/30/2015 | 6/30/2015 | 3/31/2015 | ||||||||||||||||
Non-performing loans: | ||||||||||||||||||||
Non-accrual loans (1) | $ | 93,602 | $ | 98,065 | $ | 92,302 | $ | 91,943 | $ | 81,571 | ||||||||||
Loans 90 days or more past due, still accruing interest | 1,112 | 6,596 | 4,275 | 6,112 | 1,707 | |||||||||||||||
Total non-performing loans | 94,714 | 104,661 | 96,577 | 98,055 | 83,278 | |||||||||||||||
Other real estate owned | 28,309 | 31,553 | 29,587 | 28,517 | 21,839 | |||||||||||||||
Repossessed assets | 187 | 81 | 216 | 78 | 160 | |||||||||||||||
Total non-performing assets | $ | 123,210 | $ | 136,295 | $ | 126,380 | $ | 126,650 | $ | 105,277 | ||||||||||
Potential problem loans (2) | $ | 110,193 | $ | 139,941 | $ | 122,966 | $ | 116,443 | $ | 107,703 | ||||||||||
Purchased credit-impaired loans | $ | 140,445 | $ | 141,406 | $ | 155,693 | $ | 164,775 | $ | 227,514 | ||||||||||
Total non-performing, potential problem and purchased credit-impaired loans | $ | 345,352 | $ | 386,008 | $ | 375,236 | $ | 379,273 | $ | 418,495 | ||||||||||
Total allowance for loan and lease losses | $ | 134,493 | $ | 128,140 | $ | 124,626 | $ | 120,070 | $ | 113,412 | ||||||||||
Accruing restructured loans (3) | 27,269 | 26,991 | 20,120 | 16,875 | 16,874 | |||||||||||||||
Total non-performing loans to total loans | 0.95 | % | 1.07 | % | 1.03 | % | 1.08 | % | 0.93 | % | ||||||||||
Total non-performing assets to total assets | 0.79 | 0.87 | 0.85 | 0.84 | 0.73 | |||||||||||||||
Allowance for loan and lease losses to non-performing loans | 142.00 | 122.43 | 129.04 | 122.45 | 136.18 |
(1) | Includes $24.0 million, $23.6 million, $21.4 million, $24.5 million and $25.5 million of restructured loans on non-accrual status at March 31, 2016, December 31, 2015, September 30, 2015, June 30, 2015 and March 31, 2015, respectively. |
(2) | We define potential problem loans as loans rated substandard that do not meet the definition of a non-performing loan. Potential problem loans carry a higher probability of default and require additional attention by management. |
(3) | Accruing restructured loans consist primarily of residential real estate and home equity loans that have been modified and are performing in accordance with those modified terms as of the dates indicated. |
The following table presents data related to non-performing loans by category (excluding loans held for sale and purchased credit-impaired loans that were acquired as part of our FDIC-assisted transactions and the Taylor Capital merger) as of the dates indicated (in thousands):
3/31/2016 | 12/31/2015 | 9/30/2015 | 6/30/2015 | 3/31/2015 | ||||||||||||||||
Commercial and lease | $ | 28,590 | $ | 37,076 | $ | 34,465 | $ | 31,053 | $ | 18,315 | ||||||||||
Commercial real estate | 27,786 | 29,073 | 25,437 | 32,358 | 29,645 | |||||||||||||||
Construction real estate | — | — | — | 337 | 337 | |||||||||||||||
Consumer related | 38,338 | 38,512 | 36,675 | 34,307 | 34,981 | |||||||||||||||
Total non-performing loans | $ | 94,714 | $ | 104,661 | $ | 96,577 | $ | 98,055 | $ | 83,278 |
The following table represents a summary of other real estate owned (excluding other real estate owned acquired as part of our FDIC-assisted transactions) as of the dates indicated (in thousands):
3/31/2016 | 12/31/2015 | 9/30/2015 | 6/30/2015 | 3/31/2015 | ||||||||||||||||
Balance at the beginning of quarter | $ | 31,553 | $ | 29,587 | $ | 28,517 | $ | 21,839 | $ | 19,198 | ||||||||||
Transfers in at fair value less estimated costs to sell | 1,270 | 5,964 | 2,402 | 8,595 | 4,615 | |||||||||||||||
Fair value adjustments | 45 | (721 | ) | (565 | ) | (920 | ) | (922 | ) | |||||||||||
Net gains on sales of other real estate owned | 592 | 977 | 45 | 258 | 34 | |||||||||||||||
Cash received upon disposition | (5,151 | ) | (4,254 | ) | (812 | ) | (1,255 | ) | (1,086 | ) | ||||||||||
Balance at the end of quarter | $ | 28,309 | $ | 31,553 | $ | 29,587 | $ | 28,517 | $ | 21,839 |
9
Below is a reconciliation of the activity in our allowance for credit and loan losses for the periods indicated (dollars in thousands):
1Q16 | 4Q15 | 3Q15 | 2Q15 | 1Q15 | ||||||||||||||||
Allowance for credit losses, balance at the beginning of period | $ | 131,508 | $ | 128,038 | $ | 124,130 | $ | 117,189 | $ | 114,057 | ||||||||||
Provision for credit losses - legacy | 6,409 | 6,758 | 1,225 | (600 | ) | (550 | ) | |||||||||||||
Provision for credit losses - acquired Taylor Capital loan portfolio renewals | 1,154 | — | 4,133 | 4,896 | 5,524 | |||||||||||||||
Charge-offs: | ||||||||||||||||||||
Commercial loans | 713 | 710 | 1,657 | 57 | 569 | |||||||||||||||
Commercial loans collateralized by assignment of lease payments (lease loans) | 574 | 685 | 1,980 | 100 | — | |||||||||||||||
Commercial real estate | 352 | 1,251 | 170 | 108 | 2,034 | |||||||||||||||
Construction real estate | — | 23 | 5 | 3 | 3 | |||||||||||||||
Residential real estate | 368 | 261 | 292 | 318 | 579 | |||||||||||||||
Home equity | 238 | 407 | 358 | 276 | 444 | |||||||||||||||
Indirect vehicle | 931 | 898 | 581 | 627 | 874 | |||||||||||||||
Consumer loans | 412 | 550 | 467 | 500 | 424 | |||||||||||||||
Total charge-offs | 3,588 | 4,785 | 5,510 | 1,989 | 4,927 | |||||||||||||||
Recoveries: | ||||||||||||||||||||
Commercial loans | 380 | 235 | 456 | 816 | 242 | |||||||||||||||
Commercial loans collateralized by assignment of lease payments (lease loans) | 50 | 12 | 11 | 340 | 749 | |||||||||||||||
Commercial real estate | 594 | 385 | 2,402 | 2,561 | 1,375 | |||||||||||||||
Construction real estate | 27 | 19 | 216 | 35 | 2 | |||||||||||||||
Residential real estate | 24 | 98 | 337 | 8 | 72 | |||||||||||||||
Home equity | 318 | 132 | 186 | 160 | 101 | |||||||||||||||
Indirect vehicle | 463 | 499 | 334 | 545 | 475 | |||||||||||||||
Consumer loans | 393 | 117 | 118 | 169 | 69 | |||||||||||||||
Total recoveries | 2,249 | 1,497 | 4,060 | 4,634 | 3,085 | |||||||||||||||
Total net charge-offs (recoveries) | 1,339 | 3,288 | 1,450 | (2,645 | ) | 1,842 | ||||||||||||||
Allowance for credit losses | 137,732 | 131,508 | 128,038 | 124,130 | 117,189 | |||||||||||||||
Allowance for unfunded credit commitments | (3,239 | ) | (3,368 | ) | (3,412 | ) | (4,060 | ) | (3,777 | ) | ||||||||||
Allowance for loan and lease losses | $ | 134,493 | $ | 128,140 | $ | 124,626 | $ | 120,070 | $ | 113,412 | ||||||||||
Total loans, excluding loans held for sale | $ | 9,961,348 | $ | 9,793,998 | $ | 9,389,181 | $ | 9,093,956 | $ | 8,921,328 | ||||||||||
Average loans, excluding loans held for sale | 9,772,346 | 9,537,647 | 9,185,419 | 8,969,813 | 8,888,686 | |||||||||||||||
Ratio of allowance for loan and lease losses to total loans, excluding loans held for sale | 1.35 | % | 1.31 | % | 1.33 | % | 1.32 | % | 1.27 | % | ||||||||||
Net loan charge-offs (recoveries) to average loans, excluding loans held for sale (annualized) | 0.06 | 0.14 | 0.06 | (0.12 | ) | 0.08 |
The following table presents the three elements of the Company's allowance for loan and lease losses as of the dates indicated (in thousands):
3/31/2016 | 12/31/2015 | 9/30/2015 | 6/30/2015 | 3/31/2015 | ||||||||||||||||
Commercial related loans: | ||||||||||||||||||||
General reserve | $ | 98,001 | $ | 94,164 | $ | 93,903 | $ | 89,642 | $ | 88,425 | ||||||||||
Specific reserve | 20,995 | 16,173 | 13,683 | 11,303 | 5,658 | |||||||||||||||
Consumer related reserve | 15,497 | 17,803 | 17,040 | 19,125 | 19,329 | |||||||||||||||
Total allowance for loan and lease losses | $ | 134,493 | $ | 128,140 | $ | 124,626 | $ | 120,070 | $ | 113,412 |
10
Purchased loans acquired in a business combination are recorded at estimated fair value on their purchase date without a carryover of the related allowance for loan and lease losses. These acquired loans are segregated into three types: pass rated loans with no discount attributable to credit quality, non-impaired loans with a discount attributable at least in part to credit quality and impaired loans with evidence of significant credit deterioration.
• | Pass rated loans (typically performing loans) are accounted for in accordance with ASC 310-20 "Nonrefundable Fees and Other Costs" as these loans do not have evidence of credit deterioration since origination. |
• | Non-impaired loans (typically performing substandard loans) are accounted for in accordance with ASC 310-30 if they display at least some level of credit deterioration since origination. |
• | Impaired loans (typically substandard loans on non-accrual status) are accounted for in accordance with ASC 310-30 as they display significant credit deterioration since origination. |
For pass rated loans (non-purchased credit-impaired loans), the difference between the estimated fair value of the loans (computed on a loan by loan basis) and the principal outstanding is accreted over the remaining life of the loans.
In accordance with ASC 310-30, for both purchased non-impaired loans and purchased credit-impaired loans ("PCI loans"), the difference between contractually required payments at acquisition and the cash flows expected to be collected is referred to as the non-accretable difference. Further, any excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable yield and is recognized into interest income over the remaining life of the loan when there is a reasonable expectation about the amount and timing of such cash flows.
Changes in the purchase accounting discount for loans acquired in the Taylor Capital merger were as follows for the three months ended March 31, 2016 (in thousands):
Non-Accretable Discount - PCI Loans | Accretable Discount - PCI Loans | Accretable Discount - Non-PCI Loans | Total | |||||||||||||
Balance at beginning of period | $ | 14,661 | $ | 12,298 | $ | 34,768 | $ | 61,727 | ||||||||
Charge-offs | (123 | ) | — | — | (123 | ) | ||||||||||
Accretion | — | (2,403 | ) | (4,950 | ) | (7,353 | ) | |||||||||
Transfer | (3,584 | ) | 3,584 | — | — | |||||||||||
Balance at end of period | $ | 10,954 | $ | 13,479 | $ | 29,818 | $ | 54,251 |
Changes in the purchase accounting discount for loans acquired in the Taylor Capital merger were as follows for the three months ended December 31, 2015(in thousands):
Non-Accretable Discount - PCI Loans | Accretable Discount - PCI Loans | Accretable Discount - Non-PCI Loans | Total | |||||||||||||
Balance at beginning of period | $ | 19,747 | $ | 9,368 | $ | 40,961 | $ | 70,076 | ||||||||
Recoveries | 1,354 | — | — | 1,354 | ||||||||||||
Accretion | — | (3,510 | ) | (6,193 | ) | (9,703 | ) | |||||||||
Transfer | (6,440 | ) | 6,440 | — | — | |||||||||||
Balance at end of period | $ | 14,661 | $ | 12,298 | $ | 34,768 | $ | 61,727 |
The $3.6 million and $6.4 million purchase accounting discount transfer from non-accretable discount on purchased credit-impaired loans to accretable discount for the three months ended March 31, 2016 and December 31, 2015, respectively, was due to better than expected cash flows on several pools of purchased credit-impaired loans.
11
INVESTMENT SECURITIES
The following table sets forth, by type, the fair value and amortized cost of our investment securities, excluding FHLB and FRB stock, as well as the unrealized gain, net of our investment securities available for sale as of the dates indicated (in thousands):
3/31/2016 | 12/31/2015 | 9/30/2015 | 6/30/2015 | 3/31/2015 | ||||||||||||||||
Securities available for sale: | ||||||||||||||||||||
Fair value | ||||||||||||||||||||
Government sponsored agencies and enterprises | $ | 64,762 | $ | 64,611 | $ | 65,461 | $ | 65,485 | $ | 66,070 | ||||||||||
States and political subdivisions | 398,024 | 396,367 | 399,274 | 395,912 | 403,628 | |||||||||||||||
Mortgage-backed securities | 834,559 | 893,656 | 847,426 | 902,017 | 856,933 | |||||||||||||||
Corporate bonds | 224,530 | 219,628 | 228,251 | 246,468 | 252,042 | |||||||||||||||
Equity securities | 10,969 | 10,761 | 10,826 | 10,669 | 10,751 | |||||||||||||||
Total fair value | $ | 1,532,844 | $ | 1,585,023 | $ | 1,551,238 | $ | 1,620,551 | $ | 1,589,424 | ||||||||||
Amortized cost | ||||||||||||||||||||
Government sponsored agencies and enterprises | $ | 63,600 | $ | 63,805 | $ | 64,008 | $ | 64,211 | $ | 64,411 | ||||||||||
States and political subdivisions | 371,006 | 373,285 | 379,015 | 380,221 | 381,704 | |||||||||||||||
Mortgage-backed securities | 820,825 | 888,325 | 834,791 | 890,334 | 841,727 | |||||||||||||||
Corporate bonds | 225,657 | 222,784 | 228,711 | 245,506 | 250,543 | |||||||||||||||
Equity securities | 10,814 | 10,757 | 10,701 | 10,644 | 10,587 | |||||||||||||||
Total amortized cost | $ | 1,491,902 | $ | 1,558,956 | $ | 1,517,226 | $ | 1,590,916 | $ | 1,548,972 | ||||||||||
Unrealized gain, net | ||||||||||||||||||||
Government sponsored agencies and enterprises | $ | 1,162 | $ | 806 | $ | 1,453 | $ | 1,274 | $ | 1,659 | ||||||||||
States and political subdivisions | 27,018 | 23,082 | 20,259 | 15,691 | 21,924 | |||||||||||||||
Mortgage-backed securities | 13,734 | 5,331 | 12,635 | 11,683 | 15,206 | |||||||||||||||
Corporate bonds | (1,127 | ) | (3,156 | ) | (460 | ) | 962 | 1,499 | ||||||||||||
Equity securities | 155 | 4 | 125 | 25 | 164 | |||||||||||||||
Total unrealized gain, net | $ | 40,942 | $ | 26,067 | $ | 34,012 | $ | 29,635 | $ | 40,452 | ||||||||||
Securities held to maturity, at amortized cost: | ||||||||||||||||||||
States and political subdivisions | $ | 986,340 | $ | 1,016,519 | $ | 1,002,963 | $ | 974,032 | $ | 764,931 | ||||||||||
Mortgage-backed securities | 205,570 | 214,291 | 221,889 | 229,595 | 235,928 | |||||||||||||||
Total amortized cost | $ | 1,191,910 | $ | 1,230,810 | $ | 1,224,852 | $ | 1,203,627 | $ | 1,000,859 |
12
DEPOSIT MIX
The following table shows the composition of deposits based on period end balances as of the dates indicated (dollars in thousands):
3/31/2016 | 12/31/2015 | 9/30/2015 | 6/30/2015 | 3/31/2015 | |||||||||||||||||||||||||||||||
Amount | % of Total | Amount | % of Total | Amount | % of Total | Amount | % of Total | Amount | % of Total | ||||||||||||||||||||||||||
Low cost deposits: | |||||||||||||||||||||||||||||||||||
Noninterest bearing deposits | $ | 4,667,410 | 40 | % | $ | 4,627,184 | 40 | % | $ | 4,434,067 | 39 | % | $ | 4,378,005 | 40 | % | $ | 4,290,499 | 39 | % | |||||||||||||||
Money market, NOW and interest bearing deposits | 4,048,054 | 35 | 4,144,633 | 36 | 4,129,414 | 37 | 3,842,264 | 35 | 4,002,818 | 36 | |||||||||||||||||||||||||
Savings | 991,300 | 9 | 974,555 | 8 | 953,746 | 8 | 970,875 | 9 | 969,560 | 9 | |||||||||||||||||||||||||
Total low cost deposits | 9,706,764 | 84 | 9,746,372 | 84 | 9,517,227 | 84 | 9,191,144 | 84 | 9,262,877 | 84 | |||||||||||||||||||||||||
Certificates of deposit: | |||||||||||||||||||||||||||||||||||
Certificates of deposit | 1,255,457 | 11 | 1,244,292 | 11 | 1,279,842 | 12 | 1,261,843 | 12 | 1,354,633 | 12 | |||||||||||||||||||||||||
Brokered certificates of deposit | 571,605 | 5 | 514,551 | 5 | 457,509 | 4 | 408,827 | 4 | 401,991 | 4 | |||||||||||||||||||||||||
Total certificates of deposit | 1,827,062 | 16 | 1,758,843 | 16 | 1,737,351 | 16 | 1,670,670 | 16 | 1,756,624 | 16 | |||||||||||||||||||||||||
Total deposits | $ | 11,533,826 | 100 | % | $ | 11,505,215 | 100 | % | $ | 11,254,578 | 100 | % | $ | 10,861,814 | 100 | % | $ | 11,019,501 | 100 | % |
Non-interest bearing deposits grew by $40.2 million (+0.9%, or +3.5% annualized) during the first quarter of 2016 and comprised 40% of total deposits at quarter-end. Total low cost deposits decreased $39.6 million (-0.4%, or -1.6% annualized) to $9.7 billion at March 31, 2016 compared to December 31, 2015 and represented 84% of total deposits at quarter-end.
The following table shows the composition of deposits based on quarterly average balances for the periods indicated (dollars in thousands):
1Q16 | 4Q15 | 3Q15 | 2Q15 | 1Q15 | |||||||||||||||||||||||||||||||
Amount | % of Total | Amount | % of Total | Amount | % of Total | Amount | % of Total | Amount | % of Total | ||||||||||||||||||||||||||
Low cost deposits: | |||||||||||||||||||||||||||||||||||
Noninterest bearing deposits | $ | 4,606,008 | 40 | % | $ | 4,617,076 | 40 | % | $ | 4,428,065 | 39 | % | $ | 4,273,931 | 39 | % | $ | 4,199,948 | 38 | % | |||||||||||||||
Money market, NOW and interest bearing deposits | 4,109,150 | 36 | 4,214,099 | 37 | 4,119,625 | 36 | 3,940,201 | 36 | 3,937,707 | 36 | |||||||||||||||||||||||||
Savings | 984,019 | 9 | 959,049 | 8 | 965,060 | 9 | 972,327 | 9 | 952,345 | 9 | |||||||||||||||||||||||||
Total low cost deposits | 9,699,177 | 85 | 9,790,224 | 85 | 9,512,750 | 84 | 9,186,459 | 84 | 9,090,000 | 83 | |||||||||||||||||||||||||
Certificates of deposit: | |||||||||||||||||||||||||||||||||||
Certificates of deposit | 1,237,971 | 11 | 1,245,947 | 11 | 1,304,516 | 12 | 1,302,031 | 12 | 1,420,320 | 13 | |||||||||||||||||||||||||
Brokered certificates of deposit | 534,910 | 4 | 492,839 | 4 | 427,649 | 4 | 412,517 | 4 | 476,245 | 4 | |||||||||||||||||||||||||
Total certificates of deposit | 1,772,881 | 15 | 1,738,786 | 15 | 1,732,165 | 16 | 1,714,548 | 16 | 1,896,565 | 17 | |||||||||||||||||||||||||
Total deposits | $ | 11,472,058 | 100 | % | $ | 11,529,010 | 100 | % | $ | 11,244,915 | 100 | % | $ | 10,901,007 | 100 | % | $ | 10,986,565 | 100 | % |
CAPITAL
Tangible book value per common share was $17.04 at March 31, 2016 compared to $16.53 at December 31, 2015 and $16.08 at March 31, 2015.
Our regulatory capital ratios remain strong. MB Financial Bank, N.A. (the "Bank") was categorized as “well capitalized” at March 31, 2016 under the Prompt Corrective Action (“PCA”) provisions. The Bank would be categorized as "well capitalized" under the fully phased in rules under the Basel III regulatory capital reform.
13
FORWARD-LOOKING STATEMENTS
When used in this press release and in reports filed with or furnished to the Securities and Exchange Commission (the "SEC"), in other 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 the pending MB Financial-American Chartered merger might not be realized within the expected 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 requisite regulatory approvals for the pending MB Financial-American Chartered merger might not be obtained, or may take longer to obtain than expected; (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 originated loans and loans acquired from other financial institutions; (4) competitive pressures among depository institutions; (5) interest rate movements and their impact on customer behavior, net interest margin and the value of our mortgage servicing rights; (6) the possibility that our mortgage banking business may experience increased volatility in its revenues and earnings and the possibility that the profitability of our mortgage banking business could be significantly reduced if we are unable to originate and sell mortgage loans at profitable margins or if changes in interest rates negatively impact the value of our mortgage servicing rights; (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) the possibility that security measures implemented might not be sufficient to mitigate the risk of a cyber attack or cyber theft, and that such security measures might not protect against systems failures or interruptions; (11) our ability to realize the residual values of its direct finance, leveraged and operating leases; (12) the ability to access cost-effective funding; (13) changes in financial markets; (14) changes in economic conditions in general and in the Chicago metropolitan area in particular; (15) the costs, effects and outcomes of litigation; (16) new legislation or regulatory changes, including but not limited to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) and regulations adopted thereunder, changes in capital requirements pursuant to the Dodd-Frank Act, changes in the interpretation and/or application of laws and regulations by regulatory authorities, other governmental initiatives affecting the financial services industry and changes in federal and/or state tax laws or interpretations thereof by taxing authorities; (17) changes in accounting principles, policies or guidelines; (18) our future acquisitions of other depository institutions or lines of business; and (19) 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.
ADDITIONAL INFORMATION
In connection with the proposed merger between MB Financial and American Chartered, MB Financial filed a registration statement on Form S-4 with the SEC, which was declared effective by the SEC on February 4, 2016. The registration statement includes a proxy statement/prospectus, which was sent to the shareholders of American Chartered. Investors and shareholders of American Chartered are advised to read the proxy statement/prospectus, which was filed by MB Financial with the SEC on February 4, 2016, and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they contain, or will contain, as the case may be, important information about MB Financial, American Chartered and the proposed transaction. Copies of all documents relating to the merger filed by MB Financial can be obtained free of charge from the SEC’s website at www.sec.gov. These documents also can be obtained free of charge by accessing MB Financial’s website at www.mbfinancial.com under the tab “Investor Relations” and then under “SEC Filings.” Alternatively, these documents, when available, can be obtained free of charge from MB Financial upon written request to MB Financial, Inc., Corporate Secretary, 6111 North River Road, Rosemont, Illinois 60018 or by calling (847) 653-1992.
TABLES TO FOLLOW
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MB FINANCIAL, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
As of the dates indicated
(In thousands)
3/31/2016 | 12/31/2015 | 9/30/2015 | 6/30/2015 | 3/31/2015 | ||||||||||||||||
ASSETS | ||||||||||||||||||||
Cash and due from banks | $ | 271,732 | $ | 307,869 | $ | 234,220 | $ | 290,266 | $ | 248,840 | ||||||||||
Interest earning deposits with banks | 113,785 | 73,572 | 66,025 | 144,154 | 52,212 | |||||||||||||||
Total cash and cash equivalents | 385,517 | 381,441 | 300,245 | 434,420 | 301,052 | |||||||||||||||
Federal funds sold | — | — | — | 5 | — | |||||||||||||||
Investment securities: | ||||||||||||||||||||
Securities available for sale, at fair value | 1,532,844 | 1,585,023 | 1,551,238 | 1,620,551 | 1,589,424 | |||||||||||||||
Securities held to maturity, at amortized cost | 1,191,910 | 1,230,810 | 1,224,852 | 1,203,627 | 1,000,859 | |||||||||||||||
Non-marketable securities - FHLB and FRB Stock | 121,750 | 114,233 | 91,400 | 111,400 | 87,677 | |||||||||||||||
Total investment securities | 2,846,504 | 2,930,066 | 2,867,490 | 2,935,578 | 2,677,960 | |||||||||||||||
Loans held for sale | 632,196 | 744,727 | 676,020 | 801,343 | 686,838 | |||||||||||||||
Loans: | ||||||||||||||||||||
Total loans, excluding purchased credit-impaired loans | 9,820,903 | 9,652,592 | 9,233,488 | 8,929,181 | 8,693,814 | |||||||||||||||
Purchased credit-impaired loans | 140,445 | 141,406 | 155,693 | 164,775 | 227,514 | |||||||||||||||
Total loans | 9,961,348 | 9,793,998 | 9,389,181 | 9,093,956 | 8,921,328 | |||||||||||||||
Less: Allowance for loan and lease losses | 134,493 | 128,140 | 124,626 | 120,070 | 113,412 | |||||||||||||||
Net loans | 9,826,855 | 9,665,858 | 9,264,555 | 8,973,886 | 8,807,916 | |||||||||||||||
Lease investments, net | 216,046 | 211,687 | 184,223 | 167,966 | 159,191 | |||||||||||||||
Premises and equipment, net | 238,578 | 236,013 | 234,115 | 234,651 | 234,077 | |||||||||||||||
Cash surrender value of life insurance | 137,807 | 136,953 | 136,089 | 135,237 | 134,401 | |||||||||||||||
Goodwill | 725,068 | 725,070 | 711,521 | 711,521 | 711,521 | |||||||||||||||
Other intangibles | 43,186 | 44,812 | 37,520 | 34,979 | 36,488 | |||||||||||||||
Mortgage servicing rights, at fair value | 145,800 | 168,162 | 148,097 | 261,034 | 219,254 | |||||||||||||||
Other real estate owned, net | 28,309 | 31,553 | 29,587 | 28,517 | 21,839 | |||||||||||||||
Other real estate owned related to FDIC transactions | 10,397 | 10,717 | 13,825 | 13,867 | 17,890 | |||||||||||||||
Other assets | 339,390 | 297,948 | 346,814 | 285,190 | 319,883 | |||||||||||||||
Total assets | $ | 15,575,653 | $ | 15,585,007 | $ | 14,950,101 | $ | 15,018,194 | $ | 14,328,310 | ||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||||||||
Liabilities | ||||||||||||||||||||
Deposits: | ||||||||||||||||||||
Noninterest bearing | $ | 4,667,410 | $ | 4,627,184 | $ | 4,434,067 | $ | 4,378,005 | $ | 4,290,499 | ||||||||||
Interest bearing | 6,866,416 | 6,878,031 | 6,820,511 | 6,483,809 | 6,729,002 | |||||||||||||||
Total deposits | 11,533,826 | 11,505,215 | 11,254,578 | 10,861,814 | 11,019,501 | |||||||||||||||
Short-term borrowings | 884,101 | 1,005,737 | 940,529 | 1,382,635 | 615,231 | |||||||||||||||
Long-term borrowings | 439,615 | 400,274 | 95,175 | 89,639 | 85,477 | |||||||||||||||
Junior subordinated notes issued to capital trusts | 185,820 | 186,164 | 186,068 | 185,971 | 185,874 | |||||||||||||||
Accrued expenses and other liabilities | 409,406 | 400,333 | 410,523 | 420,396 | 363,934 | |||||||||||||||
Total liabilities | 13,452,768 | 13,497,723 | 12,886,873 | 12,940,455 | 12,270,017 | |||||||||||||||
Stockholders' Equity | ||||||||||||||||||||
Preferred stock | 115,280 | 115,280 | 115,280 | 115,280 | 115,280 | |||||||||||||||
Common stock | 756 | 756 | 756 | 754 | 754 | |||||||||||||||
Additional paid-in capital | 1,284,438 | 1,280,870 | 1,277,348 | 1,273,333 | 1,268,851 | |||||||||||||||
Retained earnings | 756,272 | 731,812 | 702,789 | 677,246 | 651,178 | |||||||||||||||
Accumulated other comprehensive income | 24,687 | 15,777 | 20,968 | 18,778 | 26,101 | |||||||||||||||
Treasury stock | (59,863 | ) | (58,504 | ) | (55,258 | ) | (9,035 | ) | (5,277 | ) | ||||||||||
Controlling interest stockholders' equity | 2,121,570 | 2,085,991 | 2,061,883 | 2,076,356 | 2,056,887 | |||||||||||||||
Noncontrolling interest | 1,315 | 1,293 | 1,345 | 1,383 | 1,406 | |||||||||||||||
Total stockholders' equity | 2,122,885 | 2,087,284 | 2,063,228 | 2,077,739 | 2,058,293 | |||||||||||||||
Total liabilities and stockholders' equity | $ | 15,575,653 | $ | 15,585,007 | $ | 14,950,101 | $ | 15,018,194 | $ | 14,328,310 |
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MB FINANCIAL, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Dollars in thousands, except per share data) | 1Q16 | 4Q15 | 3Q15 | 2Q15 | 1Q15 | |||||||||||||||
Interest income: | ||||||||||||||||||||
Loans: | ||||||||||||||||||||
Taxable | $ | 104,923 | $ | 106,137 | $ | 100,573 | $ | 98,768 | $ | 98,846 | ||||||||||
Nontaxable | 2,586 | 2,602 | 2,283 | 2,259 | 2,174 | |||||||||||||||
Investment securities: | ||||||||||||||||||||
Taxable | 9,566 | 9,708 | 9,655 | 10,002 | 9,934 | |||||||||||||||
Nontaxable | 10,776 | 10,969 | 10,752 | 10,140 | 9,113 | |||||||||||||||
Federal funds sold | — | 1 | — | — | — | |||||||||||||||
Other interest earning accounts | 141 | 110 | 89 | 57 | 62 | |||||||||||||||
Total interest income | 127,992 | 129,527 | 123,352 | 121,226 | 120,129 | |||||||||||||||
Interest expense: | ||||||||||||||||||||
Deposits | 5,622 | 5,357 | 5,102 | 4,554 | 4,645 | |||||||||||||||
Short-term borrowings | 721 | 385 | 395 | 355 | 277 | |||||||||||||||
Long-term borrowings and junior subordinated notes | 2,345 | 2,016 | 1,886 | 1,844 | 1,812 | |||||||||||||||
Total interest expense | 8,688 | 7,758 | 7,383 | 6,753 | 6,734 | |||||||||||||||
Net interest income | 119,304 | 121,769 | 115,969 | 114,473 | 113,395 | |||||||||||||||
Provision for credit losses | 7,563 | 6,758 | 5,358 | 4,296 | 4,974 | |||||||||||||||
Net interest income after provision for credit losses | 111,741 | 115,011 | 110,611 | 110,177 | 108,421 | |||||||||||||||
Non-interest income: | ||||||||||||||||||||
Lease financing revenue, net | 19,046 | 15,937 | 20,000 | 15,564 | 25,080 | |||||||||||||||
Mortgage banking revenue | 27,482 | 26,542 | 30,692 | 35,648 | 24,544 | |||||||||||||||
Commercial deposit and treasury management fees | 11,878 | 11,711 | 11,472 | 11,062 | 11,038 | |||||||||||||||
Trust and asset management fees | 7,950 | 6,077 | 6,002 | 5,752 | 5,714 | |||||||||||||||
Card fees | 3,525 | 3,651 | 3,335 | 4,409 | 3,927 | |||||||||||||||
Capital markets and international banking service fees | 3,227 | 2,355 | 2,357 | 1,508 | 1,928 | |||||||||||||||
Consumer and other deposit service fees | 3,025 | 3,440 | 3,499 | 3,260 | 3,083 | |||||||||||||||
Brokerage fees | 1,158 | 1,252 | 1,281 | 1,543 | 1,678 | |||||||||||||||
Loan service fees | 1,752 | 1,890 | 1,531 | 1,353 | 1,485 | |||||||||||||||
Increase in cash surrender value of life insurance | 854 | 864 | 852 | 836 | 839 | |||||||||||||||
Net (loss) gain on investment securities | — | (3 | ) | 371 | (84 | ) | (460 | ) | ||||||||||||
Net (loss) gain on sale of assets | (48 | ) | — | 1 | (7 | ) | 4 | |||||||||||||
Other operating income | 1,844 | 1,909 | 858 | 2,105 | 2,408 | |||||||||||||||
Total non-interest income | 81,693 | 75,625 | 82,251 | 82,949 | 81,268 | |||||||||||||||
Non-interest expense: | ||||||||||||||||||||
Salaries and employee benefits expense | 85,591 | 84,709 | 87,891 | 86,145 | 84,786 | |||||||||||||||
Occupancy and equipment expense | 13,260 | 12,935 | 12,458 | 12,177 | 12,940 | |||||||||||||||
Computer services and telecommunication expense | 9,055 | 8,445 | 8,567 | 8,537 | 8,904 | |||||||||||||||
Advertising and marketing expense | 2,878 | 2,551 | 2,578 | 2,497 | 2,446 | |||||||||||||||
Professional and legal expense | 2,589 | 4,169 | 1,801 | 2,413 | 2,670 | |||||||||||||||
Other intangible amortization expense | 1,626 | 1,546 | 1,542 | 1,509 | 1,518 | |||||||||||||||
Branch exit and facilities impairment charges | 44 | 616 | 70 | 438 | 7,391 | |||||||||||||||
Net (gain) loss recognized on other real estate owned and other expense | (346 | ) | (729 | ) | 577 | 724 | 896 | |||||||||||||
Prepayment fees on interest bearing liabilities | — | — | — | — | 85 | |||||||||||||||
Other operating expenses | 21,103 | 12,989 | 18,782 | 18,297 | 18,284 | |||||||||||||||
Total non-interest expense | 135,800 | 127,231 | 134,266 | 132,737 | 139,920 | |||||||||||||||
Income before income taxes | 57,634 | 63,405 | 58,596 | 60,389 | 49,769 | |||||||||||||||
Income tax expense | 18,520 | 19,798 | 18,318 | 19,437 | 15,658 | |||||||||||||||
Net income | 39,114 | 43,607 | 40,278 | 40,952 | 34,111 | |||||||||||||||
Dividends on preferred shares | 2,000 | 2,000 | 2,000 | 2,000 | 2,000 | |||||||||||||||
Net income available to common stockholders | $ | 37,114 | $ | 41,607 | $ | 38,278 | $ | 38,952 | $ | 32,111 |
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1Q16 | 4Q15 | 3Q15 | 2Q15 | 1Q15 | ||||||||||||||||
Common share data: | ||||||||||||||||||||
Basic earnings per common share | $ | 0.51 | $ | 0.57 | $ | 0.52 | $ | 0.52 | $ | 0.43 | ||||||||||
Diluted earnings per common share | 0.50 | 0.56 | 0.51 | 0.52 | 0.43 | |||||||||||||||
Weighted average common shares outstanding for basic earnings per common share | 73,330,731 | 73,296,602 | 74,297,281 | 74,596,925 | 74,567,104 | |||||||||||||||
Weighted average common shares outstanding for diluted earnings per common share | 73,966,935 | 73,953,165 | 75,029,827 | 75,296,029 | 75,164,716 | |||||||||||||||
Common shares outstanding (at end of period) | 73,639,487 | 73,678,329 | 73,776,196 | 75,073,292 | 75,122,076 |
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Selected Financial Data: | ||||||||||||||||||||
1Q16 | 4Q15 | 3Q15 | 2Q15 | 1Q15 | ||||||||||||||||
Performance Ratios: | ||||||||||||||||||||
Annualized return on average assets | 1.02 | % | 1.13 | % | 1.06 | % | 1.12 | % | 0.96 | % | ||||||||||
Annualized operating return on average assets (1) | 1.09 | 1.06 | 1.06 | 1.14 | 1.11 | |||||||||||||||
Annualized return on average common equity | 7.52 | 8.48 | 7.75 | 8.02 | 6.78 | |||||||||||||||
Annualized operating return on average common equity (1) | 8.08 | 7.86 | 7.75 | 8.19 | 7.87 | |||||||||||||||
Annualized cash return on average tangible common equity (2) | 12.47 | 13.97 | 12.74 | 13.21 | 11.31 | |||||||||||||||
Annualized cash operating return on average tangible common equity (3) | 13.37 | 12.97 | 12.74 | 13.47 | 13.09 | |||||||||||||||
Net interest rate spread | 3.63 | 3.72 | 3.60 | 3.72 | 3.80 | |||||||||||||||
Cost of funds (4) | 0.27 | 0.24 | 0.23 | 0.22 | 0.23 | |||||||||||||||
Efficiency ratio (5) | 63.49 | 63.95 | 65.35 | 64.26 | 65.29 | |||||||||||||||
Annualized net non-interest expense to average assets (6) | 1.31 | 1.44 | 1.36 | 1.32 | 1.40 | |||||||||||||||
Core non-interest income to revenues (7) | 39.38 | 36.91 | 40.35 | 40.80 | 40.66 | |||||||||||||||
Net interest margin | 3.57 | 3.64 | 3.52 | 3.63 | 3.73 | |||||||||||||||
Tax equivalent effect | 0.22 | 0.22 | 0.21 | 0.21 | 0.20 | |||||||||||||||
Net interest margin - fully tax equivalent basis (8) | 3.79 | 3.86 | 3.73 | 3.84 | 3.93 | |||||||||||||||
Loans to deposits | 86.37 | 85.13 | 83.43 | 83.72 | 80.96 | |||||||||||||||
Asset Quality Ratios: | ||||||||||||||||||||
Non-performing loans (9) to total loans | 0.95 | % | 1.07 | % | 1.03 | % | 1.08 | % | 0.93 | % | ||||||||||
Non-performing assets (9) to total assets | 0.79 | 0.87 | 0.85 | 0.84 | 0.73 | |||||||||||||||
Allowance for loan and lease losses to non-performing loans (9) | 142.00 | 122.43 | 129.04 | 122.45 | 136.18 | |||||||||||||||
Allowance for loan and lease losses to total loans | 1.35 | 1.31 | 1.33 | 1.32 | 1.27 | |||||||||||||||
Net loan (recoveries) charge-offs to average loans (annualized) | 0.06 | 0.14 | 0.06 | (0.12 | ) | 0.08 | ||||||||||||||
Capital Ratios: | ||||||||||||||||||||
Tangible equity to tangible assets (10) | 9.24 | % | 8.99 | % | 9.34 | % | 9.41 | % | 9.73 | % | ||||||||||
Tangible common equity to tangible assets (11) | 8.46 | 8.21 | 8.53 | 8.60 | 8.89 | |||||||||||||||
Tangible common equity to risk weighted assets (12) | 9.56 | 9.34 | 9.69 | 10.02 | 10.09 | |||||||||||||||
Total capital (to risk-weighted assets) (13) | 12.66 | 12.54 | 12.94 | 13.07 | 13.22 | |||||||||||||||
Tier 1 capital (to risk-weighted assets) (13) | 11.62 | 11.54 | 11.92 | 12.06 | 12.24 | |||||||||||||||
Common equity tier 1 capital (to risk-weighted assets) (13) | 9.34 | 9.27 | 9.56 | 9.66 | 9.79 | |||||||||||||||
Tier 1 capital (to average assets) (13) | 10.38 | 10.40 | 10.43 | 10.69 | 10.80 | |||||||||||||||
Per Share Data: | ||||||||||||||||||||
Book value per common share (14) | $ | 27.26 | $ | 26.77 | $ | 26.40 | $ | 26.14 | $ | 25.86 | ||||||||||
Less: goodwill and other intangible assets, net of benefit, per common share | 10.22 | 10.24 | 9.97 | 9.78 | 9.78 | |||||||||||||||
Tangible book value per common share (15) | $ | 17.04 | $ | 16.53 | $ | 16.43 | $ | 16.36 | $ | 16.08 | ||||||||||
Cash dividends per common share | $ | 0.17 | $ | 0.17 | $ | 0.17 | $ | 0.17 | $ | 0.14 |
(1) | Annualized operating return on average assets is computed by dividing annualized operating earnings by average total assets. Annualized operating return on average common equity is computed by dividing annualized operating earnings by average common equity. Operating earnings is defined as net income as reported less non-core items, net of tax. |
(2) | Annualized cash return on average tangible equity is computed by dividing net cash flow available to common stockholders (net income available to common stockholders, plus other intangibles amortization expense, net of tax benefit) by average tangible common equity (average common stockholders' equity less average goodwill and average other intangibles, net of tax benefit). |
(3) | Annualized cash operating return on average tangible common equity is computed by dividing annualized cash operating earnings (operating earnings plus other intangibles amortization expense, net of tax benefit, less dividends on preferred shares) by average tangible common equity. Operating earnings is defined as net income as reported less non-core items, net of tax. |
(4) | Equals total interest expense divided by the sum of average interest bearing liabilities and noninterest bearing deposits. |
(5) | Equals total non-interest expense excluding non-core items divided by the sum of net interest income on a fully tax equivalent basis, total non-interest income less non-core items, and tax equivalent adjustment on the increase in cash surrender value of life insurance. |
(6) | Equals total non-interest expense excluding non-core items less total non-interest income excluding non-core items, and including tax equivalent adjustment on the increase in cash surrender value of life insurance divided by average assets. |
18
(7) | Equals total non-interest income excluding non-core items and tax equivalent adjustment on the increase in cash surrender value of life insurance divided by the sum of net interest income on a fully tax equivalent basis, total non-interest income less non-core items, and tax equivalent adjustment on the increase in cash surrender value of life insurance. |
(8) | Represents net interest income on a fully tax equivalent basis assuming a 35% tax rate, as a percentage of average interest earning assets. |
(9) | 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. |
(10) | 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. |
(11) | 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. |
(12) | Equals total ending common stockholders’ equity less goodwill and other intangibles, net of tax benefit, divided by risk-weighted assets. Current quarter risk-weighted assets are estimated. |
(13) | Current quarter ratios are estimated. |
(14) | Equals total ending common stockholders’ equity divided by common shares outstanding. |
(15) | Equals total ending common stockholders’ equity less goodwill and other intangibles, net of tax benefit, divided by common shares outstanding. |
NON-GAAP FINANCIAL INFORMATION
This press release contains certain financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (GAAP). These measures include core (or operating) earnings, core non-interest income, core non-interest income to revenues (with non-core items excluded from both core non-interest income and revenues), core non-interest expense, non-core non-interest income and non-core non-interest expense, net interest income on a fully tax equivalent basis, net interest margin on a fully tax equivalent basis, net interest margin on a fully tax equivalent basis excluding acquisition accounting discount accretion on Taylor Capital loans, efficiency ratio and the ratio of annualized net non-interest expense to average assets with net gains and losses on investment securities, net gains and losses on sale of other assets, 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 prepayment fees on interest bearing liabilities, merger related and repositioning expenses, and increase (decrease) in market value of assets held in trust for deferred compensation excluded from the non-interest expense components of these ratios, with tax equivalent adjustment for tax-exempt interest income and increase in cash surrender value of life insurance, as applicable; ratios of tangible equity to tangible assets, tangible common equity to risk-weighted assets and Tier 1 common capital to risk-weighted assets; tangible book value per common share; annualized operating return on average assets, annualized operating return on average common equity, annualized cash return on average tangible common equity and annualized cash operating 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 operating earnings, core and non-core non-interest income and core and non-core non-interest expense are useful in assessing our core operating performance and in understanding the primary drivers of our non-interest income and non-interest expense when comparing periods.
The tax equivalent adjustment to net interest income, net interest margin, tax-exempt interest income and increase in cash surrender value of life insurance 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. For the same reasons, management believes that the tax equivalent adjustments to tax-exempt interest income and increase in cash surrender value of life insurance are useful.
Management also believes that by excluding net gains and losses on investment securities, net gains and losses on sale of other assets and increase (decrease) in market value of assets held in trust for deferred compensation from the non-interest income components, and excluding prepayment fees on interest bearing liabilities, merger related and repositioning expenses and increase in market value of assets held in trust for deferred compensation from the non-interest expense components, of the efficiency ratio and the ratio of annualized net non-interest expense 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
19
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.
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.
Reconciliations of net interest margin on a fully tax equivalent basis to net interest margin and net interest margin on a fully tax equivalent basis excluding acquisition accounting discount accretion on Taylor Capital loans to net interest margin are 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 core and non-core non-interest income and non-interest expense to non-interest income and non-interest expense are contained in the tables under “Results of Operations—First Quarter Results.”
The following table presents a reconciliation of tangible equity to stockholders' equity (in thousands):
3/31/2016 | 12/31/2015 | 9/30/2015 | 6/30/2015 | 3/31/2015 | ||||||||||||||||
Stockholders' equity - as reported | $ | 2,122,885 | $ | 2,087,284 | $ | 2,063,228 | $ | 2,077,739 | $ | 2,058,293 | ||||||||||
Less: goodwill | 725,068 | 725,070 | 711,521 | 711,521 | 711,521 | |||||||||||||||
Less: other intangible assets, net of tax benefit | 28,071 | 29,128 | 24,388 | 22,736 | 23,717 | |||||||||||||||
Tangible equity | $ | 1,369,746 | $ | 1,333,086 | $ | 1,327,319 | $ | 1,343,482 | $ | 1,323,055 |
The following table presents a reconciliation of tangible assets to total assets (in thousands):
3/31/2016 | 12/31/2015 | 9/30/2015 | 6/30/2015 | 3/31/2015 | ||||||||||||||||
Total assets - as reported | $ | 15,575,653 | $ | 15,585,007 | $ | 14,950,101 | $ | 15,018,194 | $ | 14,328,310 | ||||||||||
Less: goodwill | 725,068 | 725,070 | 711,521 | 711,521 | 711,521 | |||||||||||||||
Less: other intangible assets, net of tax benefit | 28,071 | 29,128 | 24,388 | 22,736 | 23,717 | |||||||||||||||
Tangible assets | $ | 14,822,514 | $ | 14,830,809 | $ | 14,214,192 | $ | 14,283,937 | $ | 13,593,072 |
The following table presents a reconciliation of tangible common equity to common stockholders' equity (in thousands):
3/31/2016 | 12/31/2015 | 9/30/2015 | 6/30/2015 | 3/31/2015 | ||||||||||||||||
Common stockholders' equity - as reported | $ | 2,007,605 | $ | 1,972,004 | $ | 1,947,948 | $ | 1,962,459 | $ | 1,943,013 | ||||||||||
Less: goodwill | 725,068 | 725,070 | 711,521 | 711,521 | 711,521 | |||||||||||||||
Less: other intangible assets, net of tax benefit | 28,071 | 29,128 | 24,388 | 22,736 | 23,717 | |||||||||||||||
Tangible common equity | $ | 1,254,466 | $ | 1,217,806 | $ | 1,212,039 | $ | 1,228,202 | $ | 1,207,775 |
20
The following table presents a reconciliation of average tangible equity to average common stockholders’ equity (in thousands):
1Q16 | 4Q15 | 3Q15 | 2Q15 | 1Q15 | ||||||||||||||||
Average common stockholders' equity - as reported | $ | 1,984,379 | $ | 1,945,772 | $ | 1,958,947 | $ | 1,947,231 | $ | 1,922,151 | ||||||||||
Less: average goodwill | 725,070 | 711,669 | 711,521 | 711,521 | 711,521 | |||||||||||||||
Less: average other intangible assets, net of tax benefit | 28,511 | 23,826 | 23,900 | 23,092 | 24,157 | |||||||||||||||
Average tangible common equity | $ | 1,230,798 | $ | 1,210,277 | $ | 1,223,526 | $ | 1,212,618 | $ | 1,186,473 |
The following table presents a reconciliation of net cash flow available to common stockholders to net income available to common stockholders (in thousands):
1Q16 | 4Q15 | 3Q15 | 2Q15 | 1Q15 | ||||||||||||||||
Net income available to common stockholders - as reported | $ | 37,114 | $ | 41,607 | $ | 38,278 | $ | 38,952 | $ | 32,111 | ||||||||||
Add: other intangible amortization expense, net of tax benefit | 1,057 | 1,005 | 1,002 | 981 | 987 | |||||||||||||||
Net cash flow available to common stockholders | $ | 38,171 | $ | 42,612 | $ | 39,280 | $ | 39,933 | $ | 33,098 |
The following table presents a reconciliation of net income to operating earnings (in thousands):
1Q16 | 4Q15 | 3Q15 | 2Q15 | 1Q15 | ||||||||||||||||
Net income - as reported | $ | 39,114 | $ | 43,607 | $ | 40,278 | $ | 40,952 | $ | 34,111 | ||||||||||
Less non-core items: | ||||||||||||||||||||
Net (loss) gain on investment securities | — | (3 | ) | 371 | (84 | ) | (460 | ) | ||||||||||||
Net (loss) gain on sale of other assets | (48 | ) | — | 1 | (7 | ) | 4 | |||||||||||||
Merger related and repositioning expenses | (3,287 | ) | 4,186 | (389 | ) | (1,234 | ) | (8,069 | ) | |||||||||||
Prepayment fees on interest bearing liabilities | — | — | — | — | (85 | ) | ||||||||||||||
Total non-core items | (3,335 | ) | 4,183 | (17 | ) | (1,325 | ) | (8,610 | ) | |||||||||||
Income tax expense on non-core items | (577 | ) | 1,140 | (6 | ) | (526 | ) | (3,417 | ) | |||||||||||
Non-core items, net of tax | (2,758 | ) | 3,043 | (11 | ) | (799 | ) | (5,193 | ) | |||||||||||
Operating earnings | 41,872 | 40,564 | 40,289 | 41,751 | 39,304 | |||||||||||||||
Dividends on preferred shares | 2,000 | 2,000 | 2,000 | 2,000 | 2,000 | |||||||||||||||
Operating earnings available to common stockholders | $ | 39,872 | $ | 38,564 | $ | 38,289 | $ | 39,751 | $ | 37,304 | ||||||||||
Diluted operating earnings per common share | $ | 0.54 | $ | 0.52 | $ | 0.51 | $ | 0.53 | $ | 0.50 | ||||||||||
Weighted average common shares outstanding for diluted operating earnings per common share | 73,966,935 | 73,953,165 | 75,029,827 | 75,296,029 | 75,164,716 |
21
Efficiency Ratio Calculation (Dollars in Thousands)
1Q16 | 4Q15 | 3Q15 | 2Q15 | 1Q15 | ||||||||||||||||
Non-interest expense | $ | 135,800 | $ | 127,231 | $ | 134,266 | $ | 132,737 | $ | 139,920 | ||||||||||
Less merger related and repositioning expenses | 3,287 | (4,186 | ) | 389 | 1,234 | 8,069 | ||||||||||||||
Less prepayment fees on interest bearing liabilities | — | — | — | — | 85 | |||||||||||||||
Less increase (decrease) in market value of assets held in trust for deferred compensation | 8 | 565 | (872 | ) | 7 | 306 | ||||||||||||||
Non-interest expense - as adjusted | $ | 132,505 | $ | 130,852 | $ | 134,749 | $ | 131,496 | $ | 131,460 | ||||||||||
Net interest income | $ | 119,304 | $ | 121,769 | $ | 115,969 | $ | 114,473 | $ | 113,395 | ||||||||||
Tax equivalent adjustment | 7,195 | 7,307 | 7,019 | 6,676 | 6,078 | |||||||||||||||
Net interest income on a fully tax equivalent basis | 126,499 | 129,076 | 122,988 | 121,149 | 119,473 | |||||||||||||||
Plus non-interest income | 81,693 | 75,625 | 82,251 | 82,949 | 81,268 | |||||||||||||||
Plus tax equivalent adjustment on the increase in cash surrender value of life insurance | 460 | 465 | 459 | 450 | 452 | |||||||||||||||
Less net (loss) gain on investment securities | — | (3 | ) | 371 | (84 | ) | (460 | ) | ||||||||||||
Less net (loss) gain on sale of other assets | (48 | ) | — | 1 | (7 | ) | 4 | |||||||||||||
Less increase (decrease) in market value of assets held in trust for deferred compensation | 8 | 565 | (872 | ) | 7 | 306 | ||||||||||||||
Net interest income plus non-interest income - as adjusted | $ | 208,692 | $ | 204,604 | $ | 206,198 | $ | 204,632 | $ | 201,343 | ||||||||||
Efficiency ratio | 63.49 | % | 63.95 | % | 65.35 | % | 64.26 | % | 65.29 | % | ||||||||||
Efficiency ratio (without adjustments) | 67.56 | % | 64.46 | % | 67.74 | % | 67.24 | % | 71.88 | % |
Annualized Net Non-interest Expense to Average Assets Calculation (Dollars in Thousands)
1Q16 | 4Q15 | 3Q15 | 2Q15 | 1Q15 | ||||||||||||||||
Non-interest expense | $ | 135,800 | $ | 127,231 | $ | 134,266 | $ | 132,737 | $ | 139,920 | ||||||||||
Less merger related and repositioning expenses | 3,287 | (4,186 | ) | 389 | 1,234 | 8,069 | ||||||||||||||
Less prepayment fees on interest bearing liabilities | — | — | — | — | 85 | |||||||||||||||
Less increase (decrease) in market value of assets held in trust for deferred compensation | 8 | 565 | (872 | ) | 7 | 306 | ||||||||||||||
Non-interest expense - as adjusted | 132,505 | 130,852 | 134,749 | 131,496 | 131,460 | |||||||||||||||
Non-interest income | 81,693 | 75,625 | 82,251 | 82,949 | 81,268 | |||||||||||||||
Less net (loss) gain on investment securities | — | (3 | ) | 371 | (84 | ) | (460 | ) | ||||||||||||
Less net (loss) gain on sale of other assets | (48 | ) | — | 1 | (7 | ) | 4 | |||||||||||||
Less increase (decrease) in market value of assets held in trust for deferred compensation | 8 | 565 | (872 | ) | 7 | 306 | ||||||||||||||
Non-interest income - as adjusted | 81,733 | 75,063 | 82,751 | 83,033 | 81,418 | |||||||||||||||
Less tax equivalent adjustment on the increase in cash surrender value of life insurance | 460 | 465 | 459 | 450 | 452 | |||||||||||||||
Net non-interest expense | $ | 50,312 | $ | 55,324 | $ | 51,539 | $ | 48,013 | $ | 49,590 | ||||||||||
Average assets | $ | 15,487,565 | $ | 15,244,633 | $ | 15,059,429 | $ | 14,631,999 | $ | 14,363,244 | ||||||||||
Annualized net non-interest expense to average assets | 1.31 | % | 1.44 | % | 1.36 | % | 1.32 | % | 1.40 | % | ||||||||||
Annualized net non-interest expense to average assets (without adjustments) | 1.41 | % | 1.34 | % | 1.37 | % | 1.36 | % | 1.66 | % |
22
Core Non-interest Income to Revenues Ratio Calculation (Dollars in Thousands)
1Q16 | 4Q15 | 3Q15 | 2Q15 | 1Q15 | ||||||||||||||||
Non-interest income | $ | 81,693 | $ | 75,625 | $ | 82,251 | $ | 82,949 | $ | 81,268 | ||||||||||
Plus tax equivalent adjustment on the increase in cash surrender value of life insurance | 460 | 465 | 459 | 450 | 452 | |||||||||||||||
Less net (loss) gain on investment securities | — | (3 | ) | 371 | (84 | ) | (460 | ) | ||||||||||||
Less net (loss) gain on sale of other assets | (48 | ) | — | 1 | (7 | ) | 4 | |||||||||||||
Less increase (decrease) in market value of assets held in trust for deferred compensation | 8 | 565 | (872 | ) | 7 | 306 | ||||||||||||||
Non-interest income - as adjusted | $ | 82,193 | $ | 75,528 | $ | 83,210 | $ | 83,483 | $ | 81,870 | ||||||||||
Net interest income | $ | 119,304 | $ | 121,769 | $ | 115,969 | $ | 114,473 | $ | 113,395 | ||||||||||
Tax equivalent adjustment | 7,195 | 7,307 | 7,019 | 6,676 | 6,078 | |||||||||||||||
Net interest income on a fully tax equivalent basis | 126,499 | 129,076 | 122,988 | 121,149 | 119,473 | |||||||||||||||
Plus non-interest income | 81,693 | 75,625 | 82,251 | 82,949 | 81,268 | |||||||||||||||
Plus tax equivalent adjustment on the increase in cash surrender value of life insurance | 460 | 465 | 459 | 450 | 452 | |||||||||||||||
Less net (loss) gain on investment securities | — | (3 | ) | 371 | (84 | ) | (460 | ) | ||||||||||||
Less net (loss) gain on sale of other assets | (48 | ) | — | 1 | (7 | ) | 4 | |||||||||||||
Less increase (decrease) in market value of assets held in trust for deferred compensation | 8 | 565 | (872 | ) | 7 | 306 | ||||||||||||||
Total revenue - as adjusted and on a fully tax equivalent basis | $ | 208,692 | $ | 204,604 | $ | 206,198 | $ | 204,632 | $ | 201,343 | ||||||||||
Total revenue - unadjusted | $ | 200,997 | $ | 197,394 | $ | 198,220 | $ | 197,422 | $ | 194,663 | ||||||||||
Core non-interest income to revenues ratio | 39.38 | % | 36.91 | % | 40.35 | % | 40.80 | % | 40.66 | % | ||||||||||
Non-interest income to revenues ratio (without adjustments) | 40.64 | % | 38.31 | % | 41.49 | % | 42.02 | % | 41.75 | % |
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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):
1Q16 | 1Q15 | 4Q15 | ||||||||||||||||||||||||||||||||
Average Balance | Interest | Yield/ Rate | Average Balance | Interest | Yield/ Rate | Average Balance | Interest | Yield/ Rate | ||||||||||||||||||||||||||
Interest Earning Assets: | ||||||||||||||||||||||||||||||||||
Loans held for sale | $ | 661,021 | $ | 5,966 | 3.61 | % | $ | 658,169 | $ | 5,785 | 3.52 | % | $ | 681,682 | $ | 6,276 | 3.68 | % | ||||||||||||||||
Loans (1) (2) (3): | ||||||||||||||||||||||||||||||||||
Commercial-related credits | ||||||||||||||||||||||||||||||||||
Commercial | 3,531,441 | 37,357 | 4.18 | 3,190,755 | 32,623 | 4.09 | 3,492,161 | 35,890 | 4.02 | |||||||||||||||||||||||||
Commercial loans collateralized by assignment of lease payments | 1,754,558 | 16,577 | 3.78 | 1,647,761 | 15,438 | 3.75 | 1,708,404 | 15,901 | 3.72 | |||||||||||||||||||||||||
Real estate commercial | 2,734,148 | 28,039 | 4.06 | 2,538,995 | 27,548 | 4.34 | 2,627,004 | 27,759 | 4.13 | |||||||||||||||||||||||||
Real estate construction | 276,797 | 2,902 | 4.15 | 191,257 | 4,081 | 8.54 | 274,188 | 3,736 | 5.33 | |||||||||||||||||||||||||
Total commercial-related credits | 8,296,944 | 84,875 | 4.05 | 7,568,768 | 79,690 | 4.21 | 8,101,757 | 83,286 | 4.02 | |||||||||||||||||||||||||
Other loans | ||||||||||||||||||||||||||||||||||
Real estate residential | 640,231 | 5,695 | 3.56 | 493,366 | 5,028 | 4.08 | 612,275 | 5,490 | 3.59 | |||||||||||||||||||||||||
Home equity | 210,678 | 2,033 | 3.88 | 246,537 | 2,468 | 4.06 | 219,440 | 2,142 | 3.87 | |||||||||||||||||||||||||
Indirect | 404,473 | 4,758 | 4.73 | 267,265 | 3,485 | 5.29 | 365,744 | 4,403 | 4.78 | |||||||||||||||||||||||||
Consumer loans | 80,569 | 794 | 3.97 | 72,374 | 797 | 4.47 | 83,869 | 777 | 3.67 | |||||||||||||||||||||||||
Total other loans | 1,335,951 | 13,280 | 4.00 | 1,079,542 | 11,778 | 4.42 | 1,281,328 | 12,812 | 3.97 | |||||||||||||||||||||||||
Total loans, excluding purchased credit-impaired loans | 9,632,895 | 98,155 | 4.10 | 8,648,310 | 91,468 | 4.29 | 9,383,085 | 96,098 | 4.06 | |||||||||||||||||||||||||
Purchased credit-impaired loans | 139,451 | 4,780 | 13.75 | 240,376 | 4,937 | 8.33 | 154,562 | 7,766 | 19.93 | |||||||||||||||||||||||||
Total loans | 9,772,346 | 102,935 | 4.24 | 8,888,686 | 96,405 | 4.40 | 9,537,647 | 103,864 | 4.32 | |||||||||||||||||||||||||
Taxable investment securities | 1,524,583 | 9,566 | 2.51 | 1,556,530 | 9,934 | 2.55 | 1,510,047 | 9,708 | 2.57 | |||||||||||||||||||||||||
Investment securities exempt from federal income taxes (3) | 1,362,468 | 16,579 | 4.87 | 1,126,133 | 14,021 | 4.98 | 1,383,592 | 16,875 | 4.88 | |||||||||||||||||||||||||
Federal funds sold | 42 | — | 1.00 | 16 | — | — | 100 | 1 | 1.00 | |||||||||||||||||||||||||
Other interest earning deposits | 113,748 | 141 | 0.50 | 102,346 | 62 | 0.25 | 141,891 | 110 | 0.31 | |||||||||||||||||||||||||
Total interest earning assets | $ | 13,434,208 | $ | 135,187 | 4.05 | % | $ | 12,331,880 | $ | 126,207 | 4.15 | % | $ | 13,254,959 | $ | 136,834 | 4.10 | % | ||||||||||||||||
Non-interest earning assets | 2,053,357 | 2,031,364 | 1,989,674 | |||||||||||||||||||||||||||||||
Total assets | $ | 15,487,565 | $ | 14,363,244 | $ | 15,244,633 | ||||||||||||||||||||||||||||
Interest Bearing Liabilities: | ||||||||||||||||||||||||||||||||||
Core funding: | ||||||||||||||||||||||||||||||||||
Money market, NOW and interest bearing deposits | $ | 4,109,150 | $ | 2,086 | 0.20 | % | $ | 3,937,707 | $ | 1,595 | 0.16 | % | $ | 4,214,099 | $ | 1,999 | 0.19 | % | ||||||||||||||||
Savings deposits | 984,019 | 159 | 0.06 | 952,345 | 120 | 0.05 | 959,049 | 123 | 0.05 | |||||||||||||||||||||||||
Certificates of deposit | 1,237,971 | 1,413 | 0.46 | 1,420,320 | 1,452 | 0.42 | 1,245,947 | 1,431 | 0.46 | |||||||||||||||||||||||||
Customer repurchase agreements | 190,114 | 94 | 0.20 | 245,875 | 119 | 0.20 | 230,412 | 115 | 0.20 | |||||||||||||||||||||||||
Total core funding | 6,521,254 | 3,752 | 0.23 | 6,556,247 | 3,286 | 0.20 | 6,649,507 | 3,668 | 0.22 | |||||||||||||||||||||||||
Wholesale funding: | ||||||||||||||||||||||||||||||||||
Brokered certificates of deposit (includes fee expense) | 534,910 | 1,964 | 1.48 | 476,245 | 1,478 | 1.26 | 492,839 | 1,804 | 1.45 | |||||||||||||||||||||||||
Other borrowings | 1,327,274 | 2,972 | 0.89 | 731,688 | 1,970 | 1.08 | 1,031,301 | 2,286 | 0.87 | |||||||||||||||||||||||||
Total wholesale funding | 1,862,184 | 4,936 | 1.07 | 1,207,933 | 3,448 | 1.12 | 1,524,140 | 4,090 | 1.06 | |||||||||||||||||||||||||
Total interest bearing liabilities | $ | 8,383,438 | $ | 8,688 | 0.42 | % | $ | 7,764,180 | $ | 6,734 | 0.35 | % | $ | 8,173,647 | $ | 7,758 | 0.38 | % | ||||||||||||||||
Non-interest bearing deposits | 4,606,008 | 4,199,948 | 4,617,076 | |||||||||||||||||||||||||||||||
Other non-interest bearing liabilities | 398,460 | 361,685 | 392,858 | |||||||||||||||||||||||||||||||
Stockholders' equity | 2,099,659 | 2,037,431 | 2,061,052 | |||||||||||||||||||||||||||||||
Total liabilities and stockholders' equity | $ | 15,487,565 | $ | 14,363,244 | $ | 15,244,633 | ||||||||||||||||||||||||||||
Net interest income/interest rate spread (4) | $ | 126,499 | 3.63 | % | $ | 119,473 | 3.80 | % | $ | 129,076 | 3.72 | % | ||||||||||||||||||||||
Taxable equivalent adjustment | 7,195 | 6,078 | 7,307 | |||||||||||||||||||||||||||||||
Net interest income, as reported | $ | 119,304 | $ | 113,395 | $ | 121,769 | ||||||||||||||||||||||||||||
Net interest margin (5) | 3.57 | % | 3.73 | % | 3.64 | % | ||||||||||||||||||||||||||||
Tax equivalent effect | 0.22 | % | 0.20 | % | 0.22 | % | ||||||||||||||||||||||||||||
Net interest margin on a fully tax equivalent basis (5) | 3.79 | % | 3.93 | % | 3.86 | % |
(1) | Non-accrual loans are included in average loans. |
(2) | Interest income includes amortization of deferred loan origination fees and costs. |
(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. |
24
The table below reflects the impact the acquisition accounting loan discount accretion on Taylor Capital loans had on the loan yield and net interest margin on a fully tax equivalent basis for the three months ended March 31, 2016, March 31, 2015 and December 31, 2015 (dollars in thousands):
1Q16 | 1Q15 | 4Q15 | |||||||||||||||||||||||||||||||
Average Balance | Interest | Yield | Average Balance | Interest | Yield | Average Balance | Interest | Yield | |||||||||||||||||||||||||
Loan yield excluding acquisition accounting discount accretion on Taylor Capital loans: | |||||||||||||||||||||||||||||||||
Total loans, as reported | $ | 9,772,346 | $ | 102,935 | 4.24 | % | $ | 8,888,686 | $ | 96,405 | 4.40 | % | $ | 9,537,647 | $ | 103,864 | 4.32 | % | |||||||||||||||
Less acquisition accounting discount accretion on non-PCI loans | (32,293 | ) | 4,950 | (57,802 | ) | 7,948 | (37,865 | ) | 6,193 | ||||||||||||||||||||||||
Less acquisition accounting discount accretion on PCI loans | (25,696 | ) | 2,403 | (35,092 | ) | 628 | (28,037 | ) | 3,510 | ||||||||||||||||||||||||
Total loans, excluding acquisition accounting discount accretion on Taylor Capital loans | $ | 9,830,335 | $ | 95,582 | 3.91 | % | $ | 8,981,580 | $ | 87,829 | 3.97 | % | $ | 9,603,549 | $ | 94,161 | 3.89 | % | |||||||||||||||
Net interest margin on a fully tax equivalent basis, excluding acquisition accounting discount accretion on Taylor Capital loans: | |||||||||||||||||||||||||||||||||
Total interest earning assets, as reported | $ | 13,434,208 | $ | 126,499 | 3.79 | % | $ | 12,331,880 | $ | 119,473 | 3.93 | % | $ | 13,254,959 | $ | 129,076 | 3.86 | % | |||||||||||||||
Less acquisition accounting discount accretion on non-PCI loans | (32,293 | ) | 4,950 | (57,802 | ) | 7,948 | (37,865 | ) | 6,193 | ||||||||||||||||||||||||
Less acquisition accounting discount accretion on PCI loans | (25,696 | ) | 2,403 | (35,092 | ) | 628 | (28,037 | ) | 3,510 | ||||||||||||||||||||||||
Total interest earning assets/net interest margin on a fully tax equivalent basis, excluding acquisition accounting discount accretion on Taylor Capital loans | $ | 13,492,197 | $ | 119,146 | 3.55 | % | $ | 12,424,774 | $ | 110,897 | 3.62 | % | $ | 13,320,861 | $ | 119,373 | 3.56 | % |
The table below reflects the impact that the loan discount accretion and provision for credit losses on Taylor Capital loans had on earnings for the three months ended March 31, 2016 and December 31, 2015 (dollars in thousands):
1Q16 | 4Q15 | |||||||
Acquisition accounting discount accretion on Taylor Capital loans | $ | 7,353 | $ | 9,703 | ||||
Provision for credit losses on Taylor Capital loans | 1,154 | — | ||||||
Earnings impact of discount accretion and merger related provision | 6,199 | 9,703 | ||||||
Tax expense | 2,460 | 3,850 | ||||||
Earnings impact of discount accretion and merger related provision, net of tax | $ | 3,739 | $ | 5,853 |
25