QuickLinks -- Click here to rapidly navigate through this document
| Filed by MB Financial, Inc. Pursuant to Rule 425 under the Securities Act of 1933 and deemed filed pursuant to Rule 14a-12 under the Securities Exchange Act of 1934 | |||
Subject Companies: | MB Financial Inc. (Exchange Act File No. 0-24566 MidCity Financial Corporation | ||
Date: April 20, 2001 | |||
Set forth below are materials presented during the conference call/webcast held by MB Financial, Inc. and MidCity Financial Corporation on April 20, 2001.
 |  |
MB Financial, Inc.
and
MidCity Financial Corporation
are combining in a merger-of-equals
Conference Call Information |
MB Financial, Inc. and MidCity Financial Corporation will host a conference call at 11:00 am C.S.T. on April 20, 2001. The number to call in the United States is (888) 276-0007. If this time is inconvenient, a taped rebroadcast will be continuously played for 80 hours at (800) 475-6701 in the United States (access code 583315) starting at 2:30 pm C.S.T. A copy of this presentation, along with a web cast of this call, can be found atwww.mbfinancial.com underInvestor Relations. |
1
| |
Forward Looking Statements
When used in this document or other public shareholder communications, in filings with the Securities and Exchange Commission, or in oral statements made with the approval of an authorized executive officer, the words or phrases "believe," "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. Various factors could cause actual results to differ materially from the results anticipated or projected. These factors include, but are not limited to, the following: (1) expected cost savings and synergies from the merger might not be realized within the expected time frame; (2) revenues following the merger could be lower than expected; (3) costs or difficulties related to the integration of the businesses of MB Financial and MidCity might be greater than expected; (4) the requisite shareholder and/or regulatory approvals of the transaction might not be obtained; (5) deposit attrition, operating costs, customer loss and business disruption following the merger may be greater than expected (6) competitive pressures among depository institutions; (7) the credit risks of lending activities; (8) changes in the interest rate environment and in the demand for loans; (9) general economic conditions, either nationally or in the states in which the combined company will be doing business, might be less favorable than expected; (10) new legislation or regulatory changes; and (11) changes in accounting principles, policies or guidelines.
We do not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statement is made.
A registration statement on Form S- 4 will be filed with the Securities and Exchange Commission in connection with the proposed transaction. The registration statement will include a joint proxy statement/prospectus which will be sent to the shareholders of both MB Financial, Inc. and MidCity Financial Corporation seeking their approval of the proposed transaction. Investors and security holders are advised to read the registration statement and joint proxy statement/prospectus because they will contain important information. When filed, these documents can be obtained free of charge from the web site maintained by the SEC at "www.sec.gov." These documents also can be obtained free of charge upon written request to MB Financial, Inc., Investor Relations, 1200 North Ashland Avenue, Chicago, Illinois 60622 or by calling (773) 645-7868.
MB Financial, Inc. and its directors and executive officers may be deemed to be participants in the solicitation of proxies from MB Financial shareholders to approve the merger. Information about these participants may be obtained through the SEC's web site from the definitive proxy statement filed with the SEC by MB Financial on March 21, 2001. Additional information regarding the interests of these participants, as well as information regarding the directors and executive officers of MidCity Financial, may be obtained by reading the joint proxy statement/prospectus regarding the proposed transaction when it becomes available.
2
| |
Transaction Summary
Transaction Structure: | MB Financial, Inc. and MidCity Financial Corporation will form a new company into which both will merge. | |
Name of New Company: | MB Financial, Inc. | |
Fixed Exchange Ratio: | 230.32955 MBFI shares per MidCity share; one new MBFI share for each current MBFI share | |
Pro forma Ownership: | MBFI 40% / MidCity 60% | |
Form of Consideration: | 100% MBFI common stock | |
Value per MidCity share: | $3,800.44(1) | |
Transaction Value: | $292 million in total— 175 million for MidCity Financial Corporation 117 million for MB Financial, Inc. | |
Accounting and Tax Treatment: | Pooling of interests Tax-free exchange | |
Breakup Fee: | $5 million (approximately 3% of aggregate transaction value) for each company |
- (1)
- Based on MBFI share price as of close April 19, 2001
3
| |
Transaction Summary
Expected Closing: | 3rd Quarter 2001 | |
Expected Integration Completion: | Not later than 1st quarter 2002 | |
Transaction Costs: | $19.6 million (pre-tax) | |
Operating Expense Savings: | $8.2 million (pre-tax) (9.7% of combined) 100% realized in 2002 | |
Required Approvals: | MidCity and MBFI shareholders and customary regulatory approvals | |
Dividend: | Initial dividend target $0.15 per quarter |
4
| |
Current Subsidiary Bank Structures
Note: Figures are total assets as of December 31, 2000
5
| |
Pro Forma Subsidiary Bank Structure
MidCity's and MB Financial's Illinois banks will be merged. The name has yet to be determined. The Oklahoma and Texas banks will retain separate charters and current names.
6
| |
New Management Structure
Board Representation: 9 MidCity / 8 MBFI Headquarters: Chicago, Illinois
| Function | Title | Executive | ||
|---|---|---|---|---|
| Chairman (non-executive) | Chairman | E.M. Bakwin (MidCity) | ||
CEO & President | CEO & President | Mitchell Feiger (MBFI) | ||
Finance | Chief Financial Officer, Senior Vice President | Jill York (MBFI) | ||
Commercial Banking | Chairman of Illinois Bank, Group President | Ronald Santo (MidCity) | ||
Commercial Banking | Executive Vice President | Thomas Panos (MBFI) | ||
Commerical Banking & Lease Banking | Illinois Bank CEO & President | Burton Field (MBFI) | ||
Wealth Management, Operations | Executive Vice President | William McCarty III (MidCity) | ||
Retail Banking | Senior Vice President | Thomas FitzGibbon (MBFI) | ||
Human Resources | Senior Vice President | Jeffrey Husserl (MBFI) |
7
| |
Transaction Rationale—Strategic
- •
- Combines a company with strong internal funding sources and a company with strong asset generation.
- •
- Creates a company well positioned to become the premier business bank in the Chicago market.
- •
- New entity enhances the existing banking platform for continued growth both internal and external.
- •
- Creates a platform to aggressively pursue a wealth/asset management line of business.
8
| |
Transaction Rationale—Financial/Operational
- •
- Accretive to both companies' GAAP earnings in first full year of operations (2002). Accretive to MBFI's book value.
- •
- There are additional opportunities to restructure and redeploy assets into higher yielding assets without significant incremental credit risk.
- •
- Identified cost savings are achievable within 6 months of closing.
- •
- Experienced integrators, low execution risk.
9
| |
Overview of MB Financial, Inc.
- •
- Created in February 1999 through the merger of Avondale Financial Corp. and Coal City Corporation, the ticker is MBFI.
- •
- As of December 31, 2000, assets were $1.5 billion, deposits were $1.1 billion and equity was $91.7 million.
- •
- MBFI announced the acquisition of FSL Holdings, Inc., with $211 million in assets, in February 2001. The transaction is currently pending and expected to close before the end of second quarter 2001.
- •
- Mid-market business banking focus with strengths in commercial and industrial lending, equipment leasing and commercial real estate lending.
- •
- Strong asset growth and excellent asset quality.
- •
- MB Financial has a history of acquiring other depository institutions, consolidating operations, and recognizing cost saves within a short period of time after closing.
| — | Manufacturers National Corporation | 1992 | ||
| — | Peterson Bank | 1995 | ||
| — | U.S. Bancorp, Inc. | 1997 | ||
| — | Avondale Financial Corp. | 1999 |
- •
- Significant insider ownership.
10
| |
Overview of MidCity Financial Corporation
- •
- Mid-City National Bank of Chicago was founded in 1911. The holding company was established in 1982.
- •
- 26 branch offices:
- —
- 19 branches in Cook and DuPage counties Illinois (metropolitan Chicago)
- —
- 5 branches in Oklahoma City, Oklahoma metropolitan area
- —
- 2 branches in Dallas, Texas metropolitan area
- •
- As of December 31, 2000, assets were $1.8 billion, deposits were $1.6 billion and equity was $185.6 million.
- •
- Commercial banking focus with strengths in commercial and industrial lending, wealth management services and deposit gathering.
- •
- Strong deposit franchise and commercial customer base.
11
| |
Overview of MidCity Financial Corporation
- •
- MidCity also has a history of acquiring other depository institutions and successfully consolidating them.
| — | Clyde Federal Savings | 1991 | ||
| — | First Western | 1992 | ||
| — | Peoples Federal Savings & Loan Association of Chicago | 1995 | ||
| — | Abrams Centre National Bank | 1997 | ||
| — | Republic Bank (Waukegan branch) | 1998 | ||
| — | Damen Financial Corporation | 1999 |
- •
- Significant insider ownership.
12
| |
Geographic Footprint
13
| |
Deposit Market Share—Cook County, IL
| | | | | | June '00 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| County | Rank Institution | Inst Type | Number of Branches | Total Deposits | Market Share | |||||||||
| Cook, IL | 1 | Bank One Corp. (IL) | Bank | 146 | 25,870,710 | 19.86 | ||||||||
| Total County Deposits = $130,288,985 | 2 3 | ABN AMRO North America HC (IL) Bank of Montreal | Bank Bank | 128 86 | 25,263,885 11,859,791 | 19.39 9.10 | ||||||||
| 4 | Northern Trust Corp. (IL) | Bank | 11 | 7,860,001 | 6.03 | |||||||||
| 5 | Charter One Financial (OH) | Bank | 53 | 3,560,498 | 2.73 | |||||||||
| 6 | Bank of America Corp. (NC) | Bank | 2 | 3,547,889 | 2.72 | |||||||||
| 7 | Citigroup Inc. (NY) | Bank | 44 | 3,510,816 | 2.69 | |||||||||
| 8 | Fifth Third Bancorp (OH) | Bank | 31 | 2,974,299 | 2.28 | |||||||||
| 9 | Corus Bankshares Inc. (IL) | Bank | 14 | 2,052,074 | 1.58 | |||||||||
| 10 | MAF Bancorp Inc. (IL) | Thrift | 16 | 1,857,979 | 1.43 | |||||||||
| 11 | FBOP Corp. (IL) | Bank | 21 | 1,775,536 | 1.36 | |||||||||
| 12 | TCF Financial Corp. (MN) | Bank | 106 | 1,729,965 | 1.33 | |||||||||
| 13 | Taylor Capital Group, Inc. (IL) | Bank | 13 | 1,704,457 | 1.31 | |||||||||
| 14 | U.S. Bancorp (MN) | Bank | 31 | 1,520,386 | 1.17 | |||||||||
| 15 | Popular Inc. (PR) | Bank | 20 | 1,439,372 | 1.10 | |||||||||
| 16 | Superior Holdings Inc. (NV) | Thrift | 12 | 1,434,968 | 1.10 | |||||||||
| 17 | MB Financial, Inc. | Bank | 11 | 1,150,651 | (1) | 0.88 | ||||||||
| 18 | MidCity Financial Corp. | Bank | 19 | 1,074,382 | 0.82 | |||||||||
| 19 | Metropolitan Bank Group, Inc. (IL) | Bank | 37 | 1,045,845 | 0.80 | |||||||||
| 20 | Hershenhorn Bancorp., Inc. (IL) | Bank | 2 | 1,011,863 | 0.78 | |||||||||
| TOTAL | 808 | $ | 102,245,367 | |||||||||||
| 9 | PRO FORMA | Bank | 31 | 2,225,033 | (2) | 1.70 | ||||||||
- (1)
- Pro Forma for the pending acquisition of FSL Holdings, Inc.
- (2)
- In addition to these Cook County offices, the company also has three offices in DuPage County with $147 million of deposits.
Source: SNL Datasource 3.0 as of April 4, 2001.
14
| |
Core Deposits(1) More Than Double
- (1)
- Core deposits exclude term deposits greater than $100,000 and brokered deposits.
- (2)
- Pro Forma including pending acquistion of FSL Holdings, Inc.
Source: SNL Datasource, figures as of 12/31/2000
15
| |
Loan Structure
- (1)
- Pro Forma including the pending acquistions of FSL Holdings, Inc.
Source: SNL Datasource, figures as of 12/31/2000
16
| |
Compelling Economics for Shareholders
- •
- Terms of this Merger-of-Equals enable shareholders of both organizations to participate in upside potential
- •
- Additional cost savings and revenue enhancements
- •
- Market valuation (currently 2 earnings multiples below regional peer group)
- •
- Dividend on common stock
- •
- Payout ratio of at least 25% expected
- •
- New for MB Financial shareholders
- •
- Strong pro forma capital ratios—platform for continued profitable incremental asset growth
- •
- 6% to 10% accretive to MBFI 2002 GAAP EPS. 23% to 28% accretive to MidCity 2002 GAAP EPS.
- •
- $8.2 million in pre-tax expense savings are conservative and attainable
17
| |
Financially Compelling
| ($ in 000's, except per share data) | Year Ended December 31, 2002 | |||
|---|---|---|---|---|
| Earnings Projections | ||||
| MBFI Earnings(1) | $ | 15,300 | ||
| MidCity Financial Earnings(2) | 19,400 | |||
| Expected Cost Savings (tax effected)(3) | 5,324 | |||
| Pro Forma Net Income | $ | 40,024 | ||
Immediate Revenue Enhancements (tax effected)(4) | 1,625 | |||
| Pro Forma Net Income With Immediate Enhancements | $ | 41,649 | ||
Analysis Including Cost Savings Only: | ||||
| MBFI Stand Alone Diluted EPS(5) | $ | 2.12 | ||
| MidCity Financial Stand Alone Diluted EPS(6) | $ | 1.83 | ||
| Pro Forma Diluted EPS(7) | $ | 2.25 | ||
| EPS Accretion/Dilution to MBFI | 6.13 | % | ||
| EPS Accretion/Dilution to MidCity Financial | 22.95 | % | ||
| ROAA | 1.08 | % | ||
| ROE | 13.42 | % | ||
| Efficiency Ratio | 53.68 | % | ||
Analysis Including Revenue Enhancements: | ||||
| Pro Forma Diluted EPS with Immediate Revenue Enhancements(7) | $ | 2.34 | ||
| EPS Accretion to MBFI | 10.38 | % | ||
| EPS Accretion/Dilution to MidCity Financial | 27.87 | % | ||
| ROAA | 1.12 | % | ||
| ROE | 13.96 | % | ||
| Efficiency Ratio | 52.75 | % | ||
- (1)
- Based on IBES estimates
- (2)
- Estimated earnings
- (3)
- Cost savings of $8.19 million are assumed, tax effected at 35% tax rate
- (4)
- Revenue enhancements assume reinvestment of $250 million in securities into commercial lease loans at a 100bp spread over the current securities spread
- (5)
- Calculated using 7,204,515 fully diluted shares
- (6)
- Calculated 10,596,773 fully diluted shares
- (7)
- Calculated using 17,801,288 fully diluted shares
18
| |
Transaction Synergies
($ in 000's)
| Sources of Cost Savings | Pre-Tax Amount | | | |||||
|---|---|---|---|---|---|---|---|---|
| Compensation and Benefits | $ | 4,865 | ||||||
| Backoffice and Administrative | 2,661 | |||||||
| Systems and Facilities | 564 | |||||||
| Other | 100 | |||||||
| Total Cost Savings (pre-tax) | $ | 8,190 | ||||||
| --> | 9.7% of combined overhead | |||||||
| Immediate Revenue Enhancements | ||||||||
| Reinvest Securities Into Lease Loans(1) | $ | 2,500 | ||||||
| Total Cost Savings & Revenue Enhancements (pre-tax) | $ | 10,690 | ||||||
Additional Revenue Enhancement Opportunities:
- •
- BOLI
- •
- Additional securities portfolio reallocation (MidCity currently has a loan to deposit ratio of less than 65%)
- •
- Expand trust services/wealth management
- •
- Balance sheet restructuring
- (1)
- Revenue enhancements assume reinvestment of $250 million in securities into commercial lease loans at a 100bp spread over the current securities spread
19
| |
Comparative Performance
| | For the Year Ended Dec 31, 2000 | Proforma Year Ended(2) | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Performance Measures | MBFI | MidCity | Peers* | 2002 | |||||
| ROAA | 0.84 | % | 0.85 | % | 1.12 | % | 1.08 | % | |
| ROAE | 13.86 | 8.55 | 13.86 | 13.42 | |||||
| Net Interest Margin | 3.62 | 3.69 | 3.82 | 3.58 | |||||
| Efficiency Ratio(1) | 61.14 | 65.03 | 56.30 | 53.68 | |||||
| Leverage Ratio | 7.38 | 9.10 | 8.13 | 8.00 | |||||
| NCOs/Loans | 0.14 | 0.18 | 0.16 | ||||||
- *
- Median peer group value. Peer group includes CBCL, CHFC, BUSE, THFF, FRME, HTLF, IBCP, MBFI, MBTF, MAB, MBHI, MVBI and RBCAA.
- (1)
- (Noninterest expense—intangible amortization)/(net interest income + noninterest income)
- (2)
- Including cost savings only
20
| |
Integration Risk is Low
- •
- Management team has extensive commercial banking experience
- •
- Proven integrators with positive results
- •
- MBFI: 4 acquisitions and 1 in progress
- •
- MidCity: 6 acquisitions
- •
- Similar, conservative credit cultures
- •
- Similar focus on exceptional customer service
- •
- Conservative cost savings assumptions
- •
- Integration expected to be completed by the first quarter of 2002, possibly earlier
21
| |
Summary
- •
- Accretive to GAAP earnings in the first full year of operations (2002)
- •
- $3.3 billion asset bank is exceptionally well positioned in metropolitan Chicago
- •
- Expands the depth of management
- •
- Franchises are complementary
- •
- Enhances capital ratios
- •
- Cost savings are significant and achievable
- •
- Great potential for revenue enhancements
- •
- Low execution risk
- •
- Improves liquidity for shareholders
22
| |
Contribution Analysis
($ in millions)
| | | | Contribution | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| | MBFI(1) | MidCity | MBFI | MidCity | |||||||
| Selected Balance Sheet Items:(2) | |||||||||||
| Securities | $ | 240.4 | $ | 710.1 | 25.3 | % | 74.7 | % | |||
| Net Loans | 1,088.7 | 947.2 | 53.5 | % | 46.5 | % | |||||
| Goodwill and Other Intangibles | 14.5 | 16.7 | 46.5 | % | 53.5 | % | |||||
| Total Assets | 1,458.2 | 1,829.2 | 44.4 | % | 55.6 | % | |||||
Deposits | 1,069.3 | 1,570.1 | 40.5 | % | 59.5 | % | |||||
| Total Equity | 91.7 | 185.6 | 33.1 | % | 66.9 | % | |||||
Tangible Equity | 77.2 | 168.9 | 31.4 | % | 68.6 | % | |||||
Selected Income Statement Items: | |||||||||||
| LTM 12/31/00 Net Income | $ | 11,605 | $ | 15,356 | 43.0 | % | 57.0 | % | |||
| 2001 Net Income | 12,900 | (3) | 18,000 | (4) | 41.7 | % | 58.3 | % | |||
| 2002 Net Income | 15,300 | (3) | 19,400 | (4) | 44.1 | % | 55.9 | % | |||
- (1)
- Pro forma for pending acquisition of FSL Holdings, Inc.
- (2)
- As of December 31, 2000
- (3)
- IBES estimates as of 4/11/01
- (4)
- Estimated Net Income
23
| |
Pro Forma Balance Sheet
($ in 000's except per share amounts)
| | MBFI 12/31/00 | MidCity 12/31/00 | Pro Forma(1) | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Cash & Equivalents | $ | 34,289 | $ | 97,310 | $ | 117,199 | ||||
| Securities | $ | 250,891 | $ | 710,093 | $ | 960,984 | ||||
| Net Loans & Leases | $ | 1,088,670 | $ | 947,188 | $ | 2,035,858 | ||||
| Goodwill and other intangibles | $ | 14,466 | $ | 16,659 | $ | 31,125 | ||||
| Other assets | $ | 69,932 | $ | 57,853 | $ | 127,785 | ||||
| Total Assets | $ | 1,458,248 | $ | 1,829,103 | $ | 3,272,951 | ||||
| Noninterest-bearing Deposits | $ | 157,237 | $ | 277,339 | $ | 434,576 | ||||
| Interest-bearing Deposits | $ | 912,027 | $ | 1,292,792 | $ | 2,204,819 | ||||
| Total Deposits | $ | 1,069,264 | $ | 1,570,131 | $ | 2,639,395 | ||||
Borrowed funds | $ | 256,210 | $ | 57,187 | $ | 313,397 | ||||
| Trust Preferred Securities | $ | 25,000 | $ | 0 | $ | 25,000 | ||||
| Other Liabilities | $ | 16,033 | $ | 16,220 | $ | 32,253 | ||||
| Total Liabilities | $ | 1,366,507 | $ | 1,643,538 | $ | 3,010,045 | ||||
| Common Equity | $ | 91,741 | $ | 185,565 | $ | 262,906 | ||||
| Total Equity | $ | 91,741 | $ | 185,565 | $ | 262,906 | ||||
| Total Liabilities and Equity | $ | 1,458,248 | $ | 1,829,103 | $ | 3,272,951 | ||||
| Book Value per share | $ | 12.99 | $ | 4,033 | $ | 14.89 | ||||
| Tangible Book Value per share | $ | 10.94 | $ | 3,671 | $ | 13.12 | ||||
Equity/Assets | 6.29 | % | 10.15 | % | 7.12 | % | ||||
| Leverage Ratio | 7.38 | % | 9.26 | % | 7.84 | % | ||||
| Total Risk Based Ratio | 9.60 | % | 16.90 | % | 11.68 | % | ||||
- (1)
- Doesn't include MBFI's pending acquisition of FSL Holdings, Inc.
24
| |
Credit Quality
| | MBFI | MidCity | Combined | ||||
|---|---|---|---|---|---|---|---|
| Reserves/NPAs (a) | 241.86 | % | 84.48 | % | 127.14 | % | |
| NPAs/Loans & OREO | 0.54 | % | 1.60 | % | 1.05 | % | |
| Provision/NCOs | 213.10 | % | 294.77 | % | 257.43 | % | |
| NCOs/Loans | 0.14 | % | 0.18 | % | 0.16 | % |
- (a)
- NPAs defined as the sum of impaired loans, OREO, and loans 90 days or more past due and nonaccrual loans not included in the impaired category.
- (b)
- Data is as of and for the year ended December 31, 2000.
25
Additional Information