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21.10.2009 12:00:00
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MB Financial, Inc. Reports Net Income, Strong Liquidity and Strong Capital Position
MB Financial, Inc. (NASDAQ: MBFI), the holding company for MB Financial Bank, N.A ("the Bank” or "MB Financial Bank”), announced today third quarter results for 2009. The words "MB Financial,” "the Company,” "we,” "our” and "us” refer to MB Financial, Inc. and its wholly owned subsidiaries, unless indicated otherwise. We had net income of $7.4 million for the third quarter of 2009 compared to net income of $13.2 million in the third quarter of 2008, and net income of $4.3 million for the second quarter of 2009.
Mitchell Feiger, President and Chief Executive Officer of the Company said, "During the quarter we were pleased to complete two FDIC assisted acquisitions as well as a $201 million common stock capital raise. These transactions further enhance our strong liquidity and capital position, and position us for continued growth.”
Key items for the quarter were as follows:
Significant Transactions During the Quarter:
- On August 10, 2009, the Company sold its merchant card processing business. The Company recognized a pre-tax gain resulting from the sale of the merchant card processing business of $10.2 million in the third quarter of 2009. The Company also entered into a revenue sharing agreement with the purchaser to offer merchant card processing services to our bank customers on a going forward basis. In accordance with U.S. GAAP, the results of operations from the Company’s merchant card processing business are reflected in the Company’s statements of income as "discontinued operations.” We expect that the impact of the sale of our merchant card processing business on our future earnings per share and operating results will be immaterial.
- On September 4, 2009, MB Financial Bank assumed $136 million of in-market deposits of Oak Forest, Illinois-based InBank, and acquired loans of approximately $100 million, net of a $55.8 million discount, in a transaction facilitated by the FDIC. This transaction generated a pre-tax gain of $10.2 million, based on preliminary estimates.
- On September 11, 2009, MB Financial Bank assumed $6.5 billion in deposits of Chicago-based Corus Bank ("Corus”) in a transaction facilitated by the Federal Deposit Insurance Corporation (FDIC). For additional information regarding Corus deposits see "Funding Mix and Liquidity” section below.
- On September 17, 2009, the Company announced that it completed a public offering of its common stock by issuing 12,578,125 shares of common stock for aggregate gross proceeds of $201.3 million. The net proceeds to the Company after deducting underwriting discounts and commissions and estimated offering expenses are expected to be approximately $190.9 million. With the proceeds from this offering and the proceeds received by the Company from issuances pursuant to its Dividend Reinvestment and Stock Purchase Plan, the Company has received aggregate gross proceeds from "Qualified Equity Offerings” in excess of the $196.0 million aggregate liquidation preference amount of its Series A preferred stock issued under the U.S. Treasury Department’s Capital Purchase Program. As a result, the number of shares of the Company’s common stock underlying the warrant issued to the Treasury under the Capital Purchase Program has been reduced by 50%, from 1,012,048 shares to 506,024 shares.
Acquisitions Further Enhanced Our Strong Liquidity Position:
- Our loan to deposit ratio was approximately 57% as of September 30, 2009, compared to 103% as of June 30, 2009 and 96% as of December 31, 2008. We expect that this ratio will increase as out-of-market Corus related deposits are redeemed and run-off, but will remain well below historical levels. At September 30, 2009, the Company had approximately $1.9 billion remaining in out-of-market deposits assumed in the Corus transaction. Excluding the approximately $1.9 billion of out-of-market deposits, our loan to deposit ratio as of September 30, 2009 was 68%. We define "out-of-market” deposits as deposits held by customers who do not reside in zip codes inside or adjacent to our branch footprint.
- Our percentage of core funding to total funding increased from 73% at September 30, 2008 to 89% at September 30, 2009, which includes the approximately $1.9 billion in out-of-market assumed Corus deposits in core funding.
Capital Raise Further Enhanced Our Strong Capital Position:
- MB Financial Bank continues to significantly exceed the "Well-Capitalized” threshold established under the regulations of the Office of the Comptroller of the Currency. At September 30, 2009, MB Financial, Inc.’s total risk-based capital ratio was 15.36%, Tier 1 capital to risk-weighted assets ratio was 13.42%, Tier 1 capital to average asset ratio was 10.60% and Tier 1 common capital to risk-weighted assets was 8.72%, compared to 13.89%, 11.88%, 9.55%, and 6.66%, respectively, at June 30, 2009. Our common stock capital raise significantly increased our capital position. As of September 30, 2009, total capital was approximately $396.1 million in excess of the 10% "Well-Capitalized” threshold.
- Our tangible common equity to risk weighted assets ratio was 9.01% at September 30, 2009, compared to 6.79% at June 30, 2009. At September 30, 2009, we consider our tangible common equity to risk weighted assets ratio to be more meaningful than our tangible common equity to tangible assets ratio, due to the large amount of out-of-market deposits and corresponding interest earning assets (in the form of cash on deposit with the Federal Reserve) that were outstanding as of September 30, 2009.
Credit Quality – Increased Reserves, Strong Loss Reserve Coverage Ratios, Increased Loan Charge-Offs:
- Our provision for loan losses was $45.0 million for the third quarter of 2009, while our net charge-offs were $37.1 million. For the second quarter of 2009, our provision for loan losses and net charge-offs were $27.1 million and $25.0 million, respectively.
- Our non-performing loans to total loans increased to 4.41% as of September 30, 2009, compared to 3.54% as of June 30, 2009. The percentage of the allowance for loan losses to non-performing loans decreased from 79.65% as of June 30, 2009 to 66.02% as of September 30, 2009.
- Our non-performing assets to total assets decreased to 2.19% as of September 30, 2009, compared to 2.92% as of June 30, 2009. The decrease was primarily a result of the significant increase to total assets as a result of the Corus transaction.
- Our potential problem loans to total loans decreased to 3.94% as of September 30, 2009, compared to 4.05% as of June 30, 2009.
- We increased our allowance for loan losses to total loans to 2.91% as of September 30, 2009, compared to 2.82% as of June 30, 2009.
For purposes of the second and third bullet points above, non-performing loans and non-performing assets exclude loans held for sale and certain purchased credit-impaired loans that we acquired in the InBank transaction, as well as credit-impaired loans that we acquired in the Heritage Community Bank transaction (an FDIC-assisted transaction completed in the first quarter of 2009). These purchased credit-impaired loans are accounted for on a pool basis, and the pools are considered to be performing. Additionally, non-performing assets excludes other real estate owned related to FDIC transactions.
RESULTS OF OPERATIONS
Third Quarter Results
Net Interest Income
Net interest income on a tax equivalent basis increased $1.4 million from the second quarter of 2009 to the third quarter of 2009. Our net interest margin, on fully tax equivalent basis, decreased from 3.21% in the second quarter of 2009 to 2.85% in the third quarter of 2009. Our assumption of Corus deposits and acquisition of interest earning Corus assets negatively impacted our net interest margin by approximately 60 basis points or $2.3 million. Excluding the Corus transaction, our net interest margin on a fully tax equivalent basis would have been approximately 3.45%, or 24 basis points greater than for the second quarter of 2009. At September 30, 2009, we had approximately $2.5 billion of excess interest earning deposits with banks (cash on deposit at the Federal Reserve). We expect to utilize this excess cash to clear the outstanding redemption checks issued for the out-of-market CDs assumed in the Corus transaction, and to fund anticipated withdrawals of out-of-market Corus money market accounts, as well as some in-market run-off of previously higher rate deposits assumed in the Corus and InBank transactions.
Our non-performing loans negatively impacted our net interest margin during the third quarter of 2009, the second quarter of 2009 and the third quarter of 2008 by approximately 17 basis points, 20 basis points and 10 basis points, respectively.
See the supplemental net interest margin table for further detail.
Other Income (in thousands):
| Three Months Ended | Nine Months Ended | ||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | September 30, | ||||||||||
| 2009 | 2009 | 2009 | 2008 | 2008 | 2009 | 2008 | |||||||||
| Core other income: | |||||||||||||||
| Loan service fees | $ 1,565 | $ 1,782 | $ 1,843 | $ 1,850 | $ 2,385 | $ 5,190 | $ 7,330 | ||||||||
| Deposit service fees | 7,912 | 6,978 | 6,399 | 7,478 | 7,330 | 21,289 | 20,747 | ||||||||
| Lease financing, net | 3,937 | 4,473 | 4,319 | 4,604 | 4,533 | 12,729 | 12,369 | ||||||||
| Brokerage fees | 1,004 | 1,252 | 1,078 | 968 | 1,177 | 3,334 | 3,349 | ||||||||
| Trust and asset management fees | 3,169 | 3,262 | 2,815 | 2,784 | 3,276 | 9,246 | 9,085 | ||||||||
| Increase in cash surrender value of life insurance | 664 | 670 | 456 | 570 | 1,995 | 1,790 | 4,729 | ||||||||
| Other operating income | 2,078 | 1,851 | 2,323 | 1,442 | 1,553 | 6,252 | 4,719 | ||||||||
| Total core other income | 20,329 | 20,268 | 19,233 | 19,696 | 22,249 | 59,830 | 62,328 | ||||||||
| Non-core other income(1) | |||||||||||||||
| Net gain on sale of investment securities | 3 | 4,093 | 9,694 | 24 | - | 13,790 | 1,106 | ||||||||
| Net gain (loss) on sale of other assets | 12 | (38) | 1 | (874) | 26 | (25) | (230) | ||||||||
| Acquisition related gains | 10,222 | - | - | - | - | 10,222 | - | ||||||||
| Increase (decrease) in market value of assets held in | |||||||||||||||
| trust for deferred compensation(A) | 334 | 602 | (526) | (1,243) | (395) | 410 | (415) | ||||||||
| Total non-core other income | 10,571 | 4,657 | 9,169 | (2,093) | (369) | 24,397 | 461 | ||||||||
| Total other income(2) | $ 30,900 | $ 24,925 | $ 28,402 | $ 17,603 | $ 21,880 | $ 84,227 | $ 62,789 | ||||||||
(1) Letters denote the corresponding line items where these non-core other income items reside in the consolidated statements of income as follows: A – Other operating income.
(2) During the third quarter of 2009, the Company sold its merchant card processing business. In accordance with U.S. GAAP, the results of operations from the Company’s merchant card processing business are reflected in the Company’s statements of income as discontinued operations. Therefore, income from this business is excluded from the table above.
Core other income remained consistent with the second quarter of 2009. Core deposit service fees increased during the quarter primarily due an increase in commercial deposit fees mostly due to the Corus transaction, and increases in NSF and overdraft fees as a result of changes in customer behavior. Non-core other income was impacted by a $10.2 million gain recorded on the InBank transaction as a result of assets acquired exceeding liabilities assumed, based on preliminary estimates.
Core other income decreased by $2.5 million for the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008. Core loan service fees decreased, primarily due to a decrease in letter of credit and prepayment fees. The decrease in cash surrender value of life insurance was primarily due to a decrease in overall interest rates from the nine months ended September 30, 2008 to the nine months ended September 30, 2009, and $1.4 million of death benefits on bank owned life insurance policies that we recognized during the nine months ended September 30, 2008. Core other operating income increased primarily due to an increase in gains recognized on the sale of loans and other real estate owned during the nine months ended September 30, 2009. As in the three-month period, non-core other income also was impacted during the nine months ended September 30, 2009 by the $10.2 million gain generated by the InBank transaction, as well a net gain on sale of investment securities of $13.8 million compared with a net gain on sale of investment securities of $1.1 million during the nine months ended September 30, 2008.
Other Expense (in thousands):
| Three Months Ended | Nine Months Ended | ||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | September 30, | ||||||||||
| 2009 | 2009 | 2009 | 2008 | 2008 | 2009 | 2008 | |||||||||
| Core other expense: | |||||||||||||||
| Salaries and employee benefits | $ 30,862 | $ 28,586 | $ 27,405 | $ 25,300 | $ 29,534 | $ 86,853 | $ 85,193 | ||||||||
| Occupancy and equipment expense | 7,803 | 7,151 | 7,682 | 7,298 | 7,107 | 22,636 | 21,574 | ||||||||
| Computer services expense | 2,829 | 2,013 | 2,287 | 1,973 | 1,840 | 7,129 | 5,419 | ||||||||
| Advertising and marketing expense | 1,296 | 892 | 1,314 | 903 | 1,451 | 3,502 | 4,186 | ||||||||
| Professional and legal expense | 1,126 | 1,120 | 969 | 1,117 | 884 | 3,215 | 1,993 | ||||||||
| Brokerage fee expense | 478 | 575 | 393 | 476 | 564 | 1,446 | 1,453 | ||||||||
| Telecommunication expense | 812 | 744 | 750 | 664 | 620 | 2,306 | 2,154 | ||||||||
| Other intangibles amortization expense | 966 | 997 | 878 | 913 | 913 | 2,841 | 2,641 | ||||||||
| FDIC insurance premiums | 3,206 | 2,939 | 2,668 | 1,188 | 292 | 8,813 | 689 | ||||||||
| Other operating expenses | 5,446 | 5,039 | 5,192 | 5,422 | 4,963 | 15,677 | 14,492 | ||||||||
| Total core other expense | 54,824 | 50,056 | 49,538 | 45,254 | 48,168 | 154,418 | 139,794 | ||||||||
| Non-core other expense (1) | |||||||||||||||
| FDIC special assessment(A) | - | 3,850 | - | - | - | 3,850 | - | ||||||||
| Impairment charges | 4,000 | - | - | - | - | 4,000 | - | ||||||||
| Increase in market value of assets held in | |||||||||||||||
| trust for deferred compensation(B) | 334 | 602 | (526) | (1,243) | (395) | 410 | (415) | ||||||||
| Total non-core other expense | 4,334 | 4,452 | (526) | (1,243) | (395) | 8,260 | (415) | ||||||||
| Total other expense(2) | $ 59,158 | $ 54,508 | $ 49,012 | $ 44,011 | $ 47,773 | $ 162,678 | $ 139,379 | ||||||||
(1) Letters denote the corresponding line items where these non-core other expense items reside in the consolidated statements of income as follows: A – FDIC insurance premiums, B – Salaries and employee benefits.
(2) During the third quarter of 2009, the Company sold its merchant card processing business. In accordance with U.S. GAAP, the results of operations from the Company’s merchant card processing business are reflected in the Company’s statements of income as discontinued operations. Therefore, expenses from this business are excluded from the table above.
Core other expense increased $4.8 million from the second quarter of 2009 to the third quarter of 2009. Our InBank and Corus Bank transactions increased core salaries and employee benefits expense, core occupancy and equipment expense, core computer services expense, and core FDIC insurance premiums by approximately $1.4 million, $384 thousand, $765 thousand and $520 thousand, respectively. Additionally, salaries and employee benefits expense increased from the second quarter of 2009 due to one additional day during the third quarter compared to the second quarter and annual hourly employee pay increases during the third quarter. Non-core other expense was impacted by an impairment charge related to certain branch facilities. During the third quarter of 2009, the Company conducted an impairment review of branch office locations to be consolidated due to the Company’s recent acquisitions. As a result, the Company recognized a $4.0 million impairment charge related to three branches in the third quarter of 2009.
Core other expense increased $14.6 million for the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008, primarily due to an $8.1 million increase in FDIC insurance premiums. This was due to our FDIC credits being fully utilized during the fourth quarter of 2008 combined with the FDIC increasing its assessment rate during the nine months ended September 30, 2009. Our Heritage Community Bank, InBank and Corus Bank transactions increased core salaries and employee benefits expense, core occupancy and equipment expense, and core computer services expense by approximately $2.4 million, $808 thousand and $1.2 million, respectively. Professional and legal expense increased primarily due to loan collection costs during the nine months ended September 30, 2009. As in the three-month period, non-core other expense also was impacted during the nine months ended September 30, 2009 by the $4.0 million impairment charge relating to the consolidation of the three branch offices.
Income Taxes
In the third quarter of 2009, the Company increased the amount of benefit recognized with respect to certain previously identified uncertain tax positions as a result of certain developments in pending tax audits. The increase in recognized tax benefit resulted in a $7.8 million increase in income tax benefit in the third quarter of 2009.
LOAN PORTFOLIO
The following table sets forth the composition of the loan portfolio, excluding loans held for sale, as of the dates indicated (dollars in thousands):
| September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||||||||
| 2009 | 2009 | 2009 | 2008 | 2008 | |||||||||||||||||
| % of | % of | % of | % of | % of | |||||||||||||||||
| Amount | Total | Amount | Total | Amount | Total | Amount | Total | Amount | Total | ||||||||||||
| Commercial related credits: | |||||||||||||||||||||
| Commercial loans | $ 1,422,989 | 22% | $ 1,411,520 | 22% | $ 1,507,616 | 23% | $ 1,522,380 | 24% | $ 1,510,620 | 25% | |||||||||||
| Commercial loans collateralized by assign- | |||||||||||||||||||||
| ment of lease payments (lease loans) | 881,963 | 13% | 853,981 | 13% | 738,527 | 12% | 649,918 | 11% | 609,101 | 10% | |||||||||||
| Commercial real estate | 2,446,909 | 38% | 2,420,227 | 38% | 2,359,868 | 37% | 2,353,261 | 38% | 2,275,183 | 37% | |||||||||||
| Construction real estate | 697,232 | 11% | 722,399 | 11% | 764,876 | 12% | 757,900 | 12% | 756,694 | 12% | |||||||||||
| Total commercial related credits | 5,449,093 | 84% | 5,408,127 | 84% | 5,370,887 | 84% | 5,283,459 | 85% | 5,151,598 | 84% | |||||||||||
| Other loans: | |||||||||||||||||||||
| Residential real estate | 291,889 | 4% | 273,196 | 4% | 287,256 | 5% | 295,336 | 5% | 300,223 | 5% | |||||||||||
| Indirect motorcycle | 159,273 | 2% | 160,364 | 2% | 157,081 | 2% | 153,277 | 2% | 155,045 | 3% | |||||||||||
| Indirect automobile | 26,226 | 1% | 29,341 | 1% | 32,731 | 1% | 35,950 | 1% | 38,844 | 1% | |||||||||||
| Home equity | 408,184 | 7% | 409,147 | 6% | 411,527 | 6% | 401,029 | 6% | 383,399 | 6% | |||||||||||
| Consumer loans | 66,600 | 1% | 61,385 | 1% | 56,654 | 1% | 59,512 | 1% | 66,938 | 1% | |||||||||||
| Total other loans | 952,172 | 15% | 933,433 | 14% | 945,249 | 15% | 945,104 | 15% | 944,449 | 16% | |||||||||||
| Gross loans excluding covered loans | 6,401,265 | 99% | 6,341,560 | 98% | 6,316,136 | 99% | 6,228,563 | 100% | 6,096,047 | 100% | |||||||||||
| Covered loans (1) | 91,230 | 1% | 96,629 | 2% | 91,586 | 1% | - | - | - | - | |||||||||||
| Gross loans | 6,492,495 | 100% | 6,438,189 | 100% | 6,407,722 | 100% | 6,228,563 | 100% | 6,096,047 | 100% | |||||||||||
| Allowance for loan losses | (189,232) | (181,356) | (179,273) | (144,001) | (88,863) | ||||||||||||||||
| Net loans | $ 6,303,263 | $ 6,256,833 | $ 6,228,449 | $ 6,084,562 | $ 6,007,184 | ||||||||||||||||
(1) Covered loans refer to loans we acquired during the first quarter of 2009 in the Heritage Community Bank transaction that are subject to a loss-sharing agreement with the FDIC.
Total loans grew by 3% on an annualized basis from the second quarter of 2009 to the third quarter of 2009, and 7% from September 30, 2008.
The following table sets forth the composition of construction real estate loans by geographic location, excluding covered loans and loans held for sale, as of September 30, 2009 (dollars in thousands):
| Geographical Location | |||||||||||||||||
| Suburban Illinois | |||||||||||||||||
| Chicago | and Northwest Indiana | Other States | Total | ||||||||||||||
| % of Total | % of Total | % of Total | % of Total | ||||||||||||||
| Amount | Loans | Amount | Loans | Amount | Loans | Amount | Loans | ||||||||||
| Residential construction related credits | |||||||||||||||||
| Unimproved land | $ - | - | $ 9,451 | 0.1% | $ 3,885 | 0.0% | $ 13,336 | 0.1% | |||||||||
| Improved lots and single family construction | 39,448 | 0.6% | 91,552 | 1.4% | 7,599 | 0.1% | 138,599 | 2.1% | |||||||||
| Condominiums | 100,378 | 1.5% | 52,108 | 0.8% | 2,835 | 0.0% | 155,321 | 2.3% | |||||||||
| Apartments | 28,983 | 0.4% | 11,941 | 0.2% | 280 | 0.0% | 41,204 | 0.6% | |||||||||
| Townhomes | 5,141 | 0.1% | 27,716 | 0.4% | 7,661 | 0.1% | 40,518 | 0.6% | |||||||||
| Total residential construction related credits | 173,950 | 2.6% | 192,768 | 2.9% | 22,260 | 0.2% | 388,978 | 5.9% | |||||||||
| Commercial construction related credits | |||||||||||||||||
| Unimproved land | $ - | 0.0% | $ 2,487 | 0.0% | $ - | - | $ 2,487 | 0.0% | |||||||||
| Improved lots and construction | 7,769 | 0.1% | 56,452 | 0.9% | - | - | 64,221 | 1.0% | |||||||||
| Industrial | 7,500 | 0.1% | 12,701 | 0.2% | 11,475 | 0.2% | 31,676 | 0.5% | |||||||||
| Office, retail and hotel | 14,832 | 0.2% | 91,587 | 1.4% | 21,255 | 0.3% | 127,674 | 1.9% | |||||||||
| Schools | 16,000 | 0.2% | 17,700 | 0.3% | - | - | 33,700 | 0.5% | |||||||||
| Medical | - | - | 15,000 | 0.00 | 15,405 | 0.2% | 30,405 | 0.4% | |||||||||
| Total commercial construction related credits | 46,101 | 0.6% | 195,927 | 3.0% | 48,135 | 0.7% | 290,163 | 4.5% | |||||||||
| Total construction loans, excluding loans acquired | |||||||||||||||||
| in the InBank transaction | $ 220,051 | 3.2% | $ 388,695 | 5.9% | $ 70,395 | 0.9% | $ 679,141 | 10.4% | |||||||||
| Construction loans acquired in the InBank transaction | 18,091 | 0.3% | |||||||||||||||
| Total construction loans | $ 697,232 | 10.7% | |||||||||||||||
The following table sets forth the composition of construction real estate loans by risk category, excluding covered loans and loans held for sale, as of September 30, 2009 (dollars in thousands):
| Risk Category | |||||||||||||||||
| Potential Problem and | |||||||||||||||||
| Non-Performing | and Other Watch | ||||||||||||||||
| Loans (NPLs) | List Loans | Pass Loans | Total | ||||||||||||||
| % of Loan | % of Loan | % of Loan | % of Loan | ||||||||||||||
| Balance | Balance | Balance | Balance | ||||||||||||||
| Amount | Reserved | Amount | Reserved | Amount | Reserved | Amount | Reserved | ||||||||||
| Residential construction related credits | |||||||||||||||||
| Unimproved land | $ 6,151 | 44% | $ 3,364 | 2% | $ 3,821 | 1% | $ 13,336 | 21% | |||||||||
| Improved lots and single family construction | 64,357 | 31% | 36,748 | 7% | 37,494 | 1% | 138,599 | 16% | |||||||||
| Condominiums | 52,039 | 24% | 46,904 | 5% | 56,378 | 1% | 155,321 | 10% | |||||||||
| Apartments | 4,140 | 31% | 12,986 | 6% | 24,078 | 1% | 41,204 | 6% | |||||||||
| Townhomes | 26,706 | 37% | 2,038 | 2% | 11,774 | 1% | 40,518 | 25% | |||||||||
| Total residential construction related credits | 153,393 | 30% | 102,040 | 6% | 133,545 | 1% | 388,978 | 14% | |||||||||
| Commercial construction related credits | |||||||||||||||||
| Unimproved land | $ 1,493 | 40% | $ - | - | $ 994 | 1% | $ 2,487 | 24% | |||||||||
| Improved lots and construction | 22,897 | 19% | 9,370 | 6% | 31,954 | 1% | 64,221 | 8% | |||||||||
| Industrial | 1,875 | - | 8,640 | 6% | 21,161 | 2% | 31,676 | 3% | |||||||||
| Office, retail and hotel | 23,686 | 34% | 25,161 | 7% | 78,827 | 1% | 127,674 | 9% | |||||||||
| Schools | - | - | - | - | 33,700 | 2% | 33,700 | 2% | |||||||||
| Medical | - | - | - | - | 30,405 | 4% | 30,405 | 4% | |||||||||
| Total commercial construction related credits | 49,951 | 26% | 43,171 | 7% | 197,041 | 2% | 290,163 | 7% | |||||||||
| Total construction loans, excluding loans acquired | |||||||||||||||||
| in the InBank acquisition | $ 203,344 | 29% | $ 145,211 | 6% | $ 330,586 | 1% | $ 679,141 | 11% | |||||||||
| Construction loans acquired in the InBank acquisition(1) | 18,091 | 0% | |||||||||||||||
| Total construction loans | $ 697,232 | 11% | |||||||||||||||
(1) Net of loan discount of $9.6 million.
After factoring in partial charge-offs taken on non-performing residential construction loans, the percentage of loan balance reserved increases from 30% to 35%. Factoring in partial charge-offs taken on non-performing construction loans in total, the percentage of loan balance reserved increases from 29% to 34%.
ASSET QUALITY
The following table presents a summary of total performing loans, excluding covered loans and loans held for sale, greater than 30 days and less than 90 days past due as of the dates indicated (dollars in thousands):
| September 30, | June 30, | March 31, | December 31, | September 30, | ||||||
| 2009 | 2009 | 2009 | 2008 | 2008 | ||||||
| 30 - 59 Days Past Due | $ 35,943 | $ 15,574 | $ 21,600 | $ 14,372 | $ 22,583 | |||||
| 60 - 89 Days Past Due | 15,109 | 4,838 | 4,809 | 8,575 | 14,043 | |||||
| $ 51,052 | $ 20,412 | $ 26,409 | $ 22,947 | $ 36,626 |
Approximately $22.6 million of performing loans past due are classified as potential problem loans (defined below) as of September 30, 2009, compared to $5.1 million as of June 30, 2009.
The following table presents a summary of non-performing assets, excluding loans held for sale, as of the dates indicated (dollar amounts in thousands):
| September 30, | June 30, | March 31, | December 31, | September 30, | ||||||
| 2009 | 2009 | 2009 | 2008 | 2008 | ||||||
| Non-performing loans: | ||||||||||
| Non-accrual loans (1) | $ 286,623 | $ 227,681 | $ 229,537 | $ 145,936 | $ 115,716 | |||||
| Loans 90 days or more past due, still accruing interest | - | - | - | - | 1,490 | |||||
| Total non-performing loans | 286,623 | 227,681 | 229,537 | 145,936 | 117,206 | |||||
| Other real estate owned (2) | 22,612 | 17,111 | 2,500 | 4,366 | 3,821 | |||||
| Repossessed vehicles | 271 | 203 | 245 | 356 | 108 | |||||
| Total non-performing assets | $ 309,506 | $ 244,995 | $ 232,282 | $ 150,658 | $ 121,135 | |||||
| Specific allowance on non-performing loans | $ 83,650 | $ 77,186 | $ 81,540 | $ 52,112 | $ 30,357 | |||||
| Partial charge-offs taken on non-performing loans | 46,258 | 30,995 | 23,706 | 17,429 | 13,477 | |||||
| Total specific allowance and partial charge-offs taken | ||||||||||
| on non-performing loans | $ 129,908 | $ 108,181 | $ 105,246 | $ 69,541 | $ 43,834 | |||||
| Specific allowance and partial charge-offs taken as a | ||||||||||
| percentage of non-performing loans plus partial | ||||||||||
| charge-offs taken | 39.03% | 41.82% | 41.56% | 42.57% | 33.54% | |||||
| Total non-performing loans to total loans | 4.41% | 3.54% | 3.58% | 2.34% | 1.92% | |||||
| Total non-performing assets to total assets | 2.19% | 2.92% | 2.57% | 1.71% | 1.45% | |||||
| Allowance for loan losses to non-performing loans(1) | 66.02% | 79.65% | 78.10% | 98.67% | 75.82% | |||||
| Allowance for loan losses to non-performing loans, | ||||||||||
| including partial charge-offs taken(1) | 70.74% | 82.09% | 80.15% | 98.82% | 78.31% | |||||
(1) Excludes purchased credit-impaired loans that were acquired as part of our InBank and Heritage Community Bank transactions. See definition of "purchased credit-impaired loans” below.
(2) Excludes other real estate owned that is related to FDIC transactions.
Although management believes that adequate specific and general loan loss allowances have been established, actual losses are dependent upon future events and, as such, further additions to the level of specific and general loan loss allowances may become necessary.
At September 30, 2009, the composition of other real estate owned was primarily improved lots and single family construction projects.
The following table presents data related to non-performing loans, by dollar amount and category at September 30, 2009 (dollar amounts in thousands):
| Commercial and Lease | Construction Real Estate | Commercial Real Estate | Consumer | ||||||||||||
| Loans | Loans | Loans | Loans | Total Loans | |||||||||||
| Number of | Number of | Number of | |||||||||||||
| Borrowers | Amount | Borrowers | Amount | Borrowers | Amount | Amount | Amount | ||||||||
| $10.0 million or more | - | $ - | 5 | $ 81,073 | 1 | $ 10,297 | $ - | $ 91,370 | |||||||
| $5.0 million to $9.9 million | - | - | 9 | 68,237 | 1 | 7,216 | - | 75,453 | |||||||
| $1.5 million to $4.9 million | 2 | 6,002 | 15 | 41,065 | 5 | 12,688 | 1,703 | 61,458 | |||||||
| Under $1.5 million | 38 | 11,894 | 21 | 12,969 | 48 | 18,227 | 15,252 | 58,342 | |||||||
| 40 | $ 17,896 | 50 | $ 203,344 | 55 | $ 48,428 | $ 16,955 | $ 286,623 | ||||||||
| Percentage of individual loan category | 0.78% | 29.16% | 1.98% | 1.78% | 4.41% | ||||||||||
The following table presents data related to non-performing loans, by dollar amount and category at June 30, 2009 (dollar amounts in thousands):
| Commercial and Lease | Construction Real Estate | Commercial Real Estate | Consumer | ||||||||||||
| Loans | Loans | Loans | Loans | Total Loans | |||||||||||
| Number of | Number of | Number of | |||||||||||||
| Borrowers | Amount | Borrowers | Amount | Borrowers | Amount | Amount | Amount | ||||||||
| $10.0 million or more | - | $ - | 2 | $ 32,456 | 1 | $ 13,627 | $ - | $ 46,083 | |||||||
| $5.0 million to $9.9 million | 1 | 7,530 | 8 | 60,824 | - | - | - | 68,354 | |||||||
| $1.5 million to $4.9 million | 6 | 18,571 | 12 | 42,950 | 2 | 6,103 | 1,875 | 69,499 | |||||||
| Under $1.5 million | 29 | 10,086 | 15 | 11,220 | 33 | 10,558 | 11,881 | 43,745 | |||||||
| 36 | $ 36,187 | 37 | $ 147,450 | 36 | $ 30,288 | $ 13,756 | $ 227,681 | ||||||||
| Percentage of individual loan category | 1.60% | 20.41% | 1.25% | 1.47% | 3.54% | ||||||||||
The increase in non-performing loans from the second quarter of 2009 to the third quarter of 2009 was primarily due to non-performing construction real estate loans and non-performing commercial real estate loans. Non-performing commercial real estate loans increased primarily due to three credits migrating to non-performing loans from potential problem loans. Non-performing construction real estate loans increased primarily due to four credits migrating to non-performing loans from potential problem loans. Additions to non-performing loans were partially offset by paydowns, and charge-offs during the third quarter.
We define potential problem loans as performing loans rated substandard that do not meet the definition of a non-performing loan (See "Asset Quality” section above for non-performing loans). We do not necessarily expect to realize losses on potential problem loans, but we recognize potential problem loans carry a higher probability of default and require additional attention by management. The aggregate principal amount of potential problem loans was $255.6 million, or 3.94% of total loans, as of September 30, 2009, compared to $261.0 million, or 4.05% of total loans, as of June 30, 2009.
"Purchased credit-impaired loans” refer to certain loans acquired in the InBank and Heritage Community Bank transactions, discussed above, for which deterioration in credit quality occurred before the Company’s acquisition date. Upon acquisition, these loans were recorded at fair value and accrete interest income over the estimated life of the loan when cash flows are reasonably estimable, even if the underlying loans are contractually past due. Acquisition fair value incorporates the Company’s estimate, as of the acquisition date, of credit losses over the remaining life of the portfolio. No allowance for loan losses has been recorded for these loans.
Below is a reconciliation of the activity in our allowance for loan losses for the periods indicated (dollar amounts in thousands):
| Three Months Ended | |||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | |||||||
| 2009 | 2009 | 2009 | 2008 | 2008 | |||||||
| Balance at the beginning of period | $ 181,356 | $ 179,273 | $ 144,001 | $ 88,863 | $ 82,544 | ||||||
| Provision for loan losses | 45,000 | 27,100 | 89,700 | 72,581 | 18,400 | ||||||
| Charge-offs: | |||||||||||
| Commercial loans | (20,037) | (6,636) | (10,548) | (1,914) | (6,231) | ||||||
| Commercial loans collateralized by assignment | |||||||||||
| of lease payments (lease loans) | (269) | (1,385) | (3,420) | (440) | (482) | ||||||
| Commercial real estate loans | (2,006) | (817) | (24,190) | (7,076) | (2,292) | ||||||
| Construction real estate | (14,914) | (14,743) | (14,697) | (7,144) | (2,110) | ||||||
| Residential real estate | (290) | (358) | (178) | (117) | (315) | ||||||
| Indirect vehicle | (937) | (759) | (1,065) | (615) | (499) | ||||||
| Home equity | (650) | (953) | (604) | (503) | (628) | ||||||
| Consumer loans | (358) | (132) | (155) | (216) | (167) | ||||||
| Total charge-offs | (39,461) | (25,783) | (54,857) | (18,025) | (12,724) | ||||||
| Recoveries: | |||||||||||
| Commercial loans | 71 | 45 | 31 | 354 | 132 | ||||||
| Commercial loans collateralized by assignment | |||||||||||
| of lease payments (lease loans) | - | - | - | 67 | - | ||||||
| Commercial real estate loans | 5 | 5 | 18 | - | 257 | ||||||
| Construction real estate | 2,042 | 511 | 250 | - | 40 | ||||||
| Residential real estate | 9 | 28 | 3 | 17 | 1 | ||||||
| Indirect vehicle | 194 | 151 | 111 | 116 | 152 | ||||||
| Home equity | 13 | 20 | 11 | 17 | 48 | ||||||
| Consumer loans | 3 | 6 | 5 | 11 | 13 | ||||||
| Total recoveries | 2,337 | 766 | 429 | 582 | 643 | ||||||
| Total net charge-offs | (37,124) | (25,017) | (54,428) | (17,443) | (12,081) | ||||||
| Balance | $ 189,232 | $ 181,356 | $ 179,273 | $ 144,001 | $ 88,863 | ||||||
| Total loans excluding loans held for sale | $ 6,492,495 | $ 6,438,189 | $ 6,407,722 | $ 6,228,563 | $ 6,096,047 | ||||||
| Average loans, excluding loans held for sale | $ 6,452,094 | $ 6,441,050 | $ 6,307,496 | $ 6,166,152 | $ 6,026,179 | ||||||
| Ratio of allowance for loan losses to total loans, excluding loans held for sale | 2.91% | 2.82% | 2.80% | 2.31% | 1.46% | ||||||
| Net loan charge-offs to average loans, excluding loans held for sale (annualized) | 2.28% | 1.54% | 3.42% | 1.13% | 0.80% | ||||||
INVESTMENT SECURITIES AVAILABLE FOR SALE
The following table sets forth the fair value, amortized cost, and total unrealized gain (loss) of our investment securities available for sale, by type (in thousands):
| At September 30, | At June 30, | At March 31, | At December 31, | At September 30, | |||||||
| 2009 | 2009 | 2009 | 2008 | 2008 | |||||||
| Fair Value | |||||||||||
| U.S. Treasury securities | $ - | $ - | $ 11,545 | $ - | $ - | ||||||
| Government sponsored agencies and enterprises | 323,969 | 51,088 | 108,227 | 179,373 | 209,350 | ||||||
| Bank notes issued through the TLGP(1) | 1,578,174 | - | - | - | - | ||||||
| States and political subdivisions | 396,124 | 394,343 | 424,541 | 427,986 | 430,120 | ||||||
| Mortgage-backed securities | 1,636,275 | 428,962 | 539,953 | 690,298 | 569,947 | ||||||
| Corporate bonds | 56,599 | 6,370 | 30,726 | 34,565 | 6,990 | ||||||
| Equity securities | 3,839 | 3,707 | 3,681 | 3,607 | 3,524 | ||||||
| Debt securities issued by foreign governments | - | 250 | 302 | 301 | 298 | ||||||
| Total fair value | $ 3,994,980 | $ 884,720 | $ 1,118,975 | $ 1,336,130 | $ 1,220,229 | ||||||
| Amortized cost | |||||||||||
| U.S. Treasury securities | $ - | $ - | $ 11,546 | $ - | $ - | ||||||
| Government sponsored agencies and enterprises | 322,620 | 49,753 | 105,354 | 171,385 | 206,429 | ||||||
| Bank notes issued through the TLGP(1) | 1,578,203 | - | - | - | - | ||||||
| States and political subdivisions | 372,772 | 389,041 | 416,329 | 417,595 | 428,610 | ||||||
| Mortgage-backed securities | 1,625,378 | 421,172 | 531,547 | 682,692 | 568,054 | ||||||
| Corporate bonds | 56,655 | 6,370 | 31,487 | 34,546 | 7,764 | ||||||
| Equity securities | 3,742 | 3,668 | 3,631 | 3,595 | 3,557 | ||||||
| Debt securities issued by foreign governments | - | 250 | 302 | 301 | 301 | ||||||
| Total amortized cost | $ 3,959,370 | $ 870,254 | $ 1,100,196 | $ 1,310,114 | $ 1,214,715 | ||||||
| Unrealized gain (loss) | |||||||||||
| U.S. Treasury securities | $ - | $ - | $ (1) | $ - | $ - | ||||||
| Government sponsored agencies and enterprises | 1,349 | 1,335 | 2,873 | 7,988 | 2,921 | ||||||
| Bank notes issued through the TLGP(1) | (29) | - | - | - | - | ||||||
| States and political subdivisions | 23,352 | 5,302 | 8,212 | 10,391 | 1,510 | ||||||
| Mortgage-backed securities | 10,897 | 7,790 | 8,406 | 7,606 | 1,893 | ||||||
| Corporate bonds | (56) | - | (761) | 19 | (774) | ||||||
| Equity securities | 97 | 39 | 50 | 12 | (33) | ||||||
| Debt securities issued by foreign governments | - | - | - | - | (3) | ||||||
| Total unrealized gain | $ 35,610 | $ 14,466 | $ 18,779 | $ 26,016 | $ 5,514 | ||||||
(1) Represents bank notes that are guaranteed by the FDIC under the Temporary Liquidity Guarantee Program (TLGP).
The increase in government sponsored agencies and the addition of bank notes issued through the TLGP was a result of the acquisition of certain assets of Corus. A majority of these investment securities are expected to be sold to fund the redemption/run-off of the remaining out-of-market Corus certificates of deposit and money market accounts. The increase in mortgage-backed securities was a result of deploying cash acquired in the Corus transaction.
We do not have any meaningful direct or indirect holdings of subprime residential mortgage loans, home equity lines of credit, or any Fannie Mae or Freddie Mac preferred or common equity securities in our investment portfolio. Additionally, more than 99% of our mortgage-backed securities are agency guaranteed.
We have maintained our disciplined investment management philosophy and have avoided the types of problem securities that have caused many financial institutions to incur large losses.
FUNDING MIX AND LIQUIDITY
The following table shows the composition of our core and wholesale funding resources as of the dates indicated (dollars in thousands):
| September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||||||||||
| 2009 | 2009 | 2009 | 2008 | 2008 | ||||||||||||||||||
| % of | % of | % of | % of | % of | ||||||||||||||||||
| Amount | Total | Amount | Total | Amount | Total | Amount | Total | Amount | Total | |||||||||||||
| Core funding: | ||||||||||||||||||||||
| Non-interest bearing deposits | $ 2,925,714 | 24% | $ 1,152,274 | 16% | $ 1,018,849 | 13% | $ 960,117 | 13% | $ 935,153 | 13% | ||||||||||||
| Money market and NOW accounts | 3,269,505 | 26% | 1,531,149 | 21% | 1,762,340 | 22% | 1,465,436 | 19% | 1,326,474 | 18% | ||||||||||||
| Savings accounts | 570,974 | 5% | 447,670 | 6% | 440,326 | 6% | 367,684 | 5% | 375,567 | 5% | ||||||||||||
| Certificates of deposit | 3,968,177 | 32% | 2,383,717 | 33% | 2,690,087 | 33% | 2,604,565 | 34% | 2,523,198 | 34% | ||||||||||||
| Customer repurchase agreements | 236,162 | 2% | 248,494 | 4% | 273,718 | 4% | 282,831 | 4% | 260,087 | 3% | ||||||||||||
| Total core funding | 10,970,532 | 89% | 5,763,304 | 80% | 6,185,320 | 78% | 5,680,633 | 75% | 5,420,479 | 73% | ||||||||||||
| Wholesale funding: | ||||||||||||||||||||||
| Public funds deposits | 112,554 | 1% | 107,752 | 1% | 166,501 | 2% | 232,994 | 3% | 211,250 | 3% | ||||||||||||
| Brokered deposit accounts | 583,143 | 5% | 610,963 | 8% | 818,604 | 10% | 864,775 | 11% | 997,767 | 13% | ||||||||||||
| Other short-term borrowings | 200,842 | 2% | 251,773 | 4% | 200,780 | 3% | 205,787 | 2% | 125,000 | 2% | ||||||||||||
| Long-term borrowings | 291,315 | 2% | 301,691 | 4% | 312,246 | 4% | 421,466 | 6% | 429,548 | 6% | ||||||||||||
| Subordinated debt | 50,000 | 0% | 50,000 | 1% | 50,000 | 1% | 50,000 | 1% | 50,000 | 1% | ||||||||||||
| Junior subordinated notes issued | ||||||||||||||||||||||
| to capital trusts | 158,712 | 1% | 158,748 | 2% | 158,784 | 2% | 158,824 | 2% | 158,872 | 2% | ||||||||||||
| Total wholesale funding | 1,396,566 | 11% | 1,480,927 | 20% | 1,706,915 | 22% | 1,933,846 | 25% | 1,972,437 | 27% | ||||||||||||
| Total funding | $ 12,367,098 | 100% | $ 7,244,231 | 100% | $ 7,892,235 | 100% | $ 7,614,479 | 100% | $ 7,392,916 | 100% | ||||||||||||
The increase in deposit balances from June 30, 2009 to September 30, 2009 was primarily a result of assuming the deposits of Corus and InBank. The following table presents by deposit category, the amounts of deposits assumed in the Corus transaction as of the dates indicated (dollar amounts in thousands):
| September 11, | September 30, | October 19, | ||||
| 2009 | 2009 | 2009 | ||||
| Non-interest bearing deposits | $ 367,414 | $ 1,699,913 | $ 502,798 | |||
| NOW and money market accounts | 1,536,315 | 1,407,440 | 1,301,227 | |||
| Savings deposits | 132,407 | 96,813 | 96,380 | |||
| Certificates of deposit | 4,440,320 | 1,641,898 | 1,448,137 | |||
| Contractual balance of deposits acquired | $ 6,476,456 | $ 4,846,064 | $ 3,348,542 |
Shortly after the transaction closing on September 11, 2009, we issued checks to almost all out-of-market Corus certificate of deposit holders of approximately $2.4 billion for the redemption of these deposits. Approximately $1.0 billion of the holders cashed their redemption checks prior to September 30, 2009, with an additional $1.2 billion cashed through October 19, 2009. Interest rates on some in-market Corus certificates of deposits were reduced shortly after the transaction closing, resulting in additional run-off of certificates of deposit. Additionally, interest rates on out-of-market Corus money market accounts were reduced to 5 basis points in September 2009. Run-off of these accounts through October 16, 2009 has been approximately $200 million. We estimate that an additional $300 million in out-of-market Corus money market accounts will run-off during the fourth quarter of 2009.
FORWARD-LOOKING STATEMENTS
When used in this press release and in reports filed with or furnished to the Securities and Exchange Commission, in press releases or other public stockholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases "believe,” "will,” "should,” "will likely result,” "are expected to,” "will continue” "is anticipated,” "estimate,” "project,” "plans,” or similar expressions are intended to identify "forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date made. These statements may relate to our future financial performance, strategic plans or objectives, revenues or earnings projections, or other financial items. By their nature, these statements are subject to numerous uncertainties that could cause actual results to differ materially from those anticipated in the statements.
Important factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to, the following: (1) expected cost savings, synergies and other benefits from our merger and acquisition activities might not be realized within the anticipated time frames or at all, and costs or difficulties relating to integration matters, including but not limited to customer and employee retention, might be greater than expected; (2) the possibility that the expected benefits of the Corus Bank and InBank transactions will not be realized, whether because of the possibility that the planned run-off of deposits and balance sheet shrinkage following the Corus Bank transaction might not occur under the time frames we anticipate or at all, or due to other factors; (3) the credit risks of lending activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses, which could necessitate additional provisions for loan losses, resulting both from loans we originate and loans we acquire from other financial institutions; (4) results of examinations by the Office of Comptroller of Currency and other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our allowance for loan losses or write-down assets; (5) competitive pressures among depository institutions; (6) interest rate movements and their impact on customer behavior and net interest margin; (7) the impact of repricing and competitors’ pricing initiatives on loan and deposit products; (8) fluctuations in real estate values; (9) the ability to adapt successfully to technological changes to meet customers’ needs and developments in the market place; (10) our ability to realize the residual values of our direct finance, leveraged, and operating leases; (11) our ability to access cost-effective funding; (12) changes in financial markets; (13) changes in economic conditions in general and in the Chicago metropolitan area in particular; (14) the costs, effects and outcomes of litigation; (15) new legislation or regulatory changes, including but not limited to changes in federal and/or state tax laws or interpretations thereof by taxing authorities and other governmental initiatives affecting the financial services industry; (16) changes in accounting principles, policies or guidelines; (17) our future acquisitions of other depository institutions or lines of business; and (18) future goodwill impairment due to changes in our business, changes in market conditions, or other factors.
We do not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date on which the forward-looking statement is made.
TABLES TO FOLLOW
| MB FINANCIAL, INC. & SUBSIDIARIES | |||||||||||
| CONSOLIDATED BALANCE SHEETS (Unaudited) | |||||||||||
| As of the dates indicated | |||||||||||
| (Amounts in thousands, except per share data) | |||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | |||||||
| 2009 | 2009 | 2009 | 2008 | 2008 | |||||||
| ASSETS | |||||||||||
| Cash and due from banks | $ 125,010 | $ 103,276 | $ 108,416 | $ 79,824 | $ 118,191 | ||||||
| Interest earning deposits with banks | 2,549,562 | 13,440 | 416,404 | 261,834 | 6,043 | ||||||
| Total cash and cash equivalents | 2,674,572 | 116,716 | 524,820 | 341,658 | 124,234 | ||||||
| Investment securities: | |||||||||||
| Securities available for sale, at fair value | 3,994,980 | 884,720 | 1,118,975 | 1,336,130 | 1,220,229 | ||||||
| Non-marketable securities - FHLB and FRB Stock | 70,031 | 66,994 | 65,752 | 64,246 | 63,913 | ||||||
| Total investment securities | 4,065,011 | 951,714 | 1,184,727 | 1,400,376 | 1,284,142 | ||||||
| Loans held for sale | 6,250 | 4,008 | 18,406 | - | - | ||||||
| Loans: | |||||||||||
| Total loans excluding covered loans | 6,401,265 | 6,341,560 | 6,316,136 | 6,228,563 | 6,096,047 | ||||||
| Covered loans(1) | 91,230 | 96,629 | 91,586 | - | - | ||||||
| Total loans | 6,492,495 | 6,438,189 | 6,407,722 | 6,228,563 | 6,096,047 | ||||||
| Less allowance for loan loss | 189,232 | 181,356 | 179,273 | 144,001 | 88,863 | ||||||
| Net loans | 6,303,263 | 6,256,833 | 6,228,449 | 6,084,562 | 6,007,184 | ||||||
| Lease investments, net | 135,201 | 114,570 | 117,648 | 125,034 | 117,474 | ||||||
| Premises and equipment, net | 178,586 | 184,129 | 185,941 | 186,474 | 185,556 | ||||||
| Cash surrender value of life insurance | 121,278 | 120,614 | 119,943 | 119,526 | 120,481 | ||||||
| Goodwill, net | 387,069 | 387,069 | 387,069 | 387,069 | 387,069 | ||||||
| Other intangibles, net | 39,357 | 25,996 | 26,993 | 25,776 | 26,689 | ||||||
| Other real estate owned | 22,612 | 17,111 | 2,500 | 4,366 | 3,821 | ||||||
| Other real estate owned related to FDIC transactions | 7,695 | 1,891 | 1,197 | - | - | ||||||
| FDIC indemnification asset(1) | 31,353 | 43,162 | 65,565 | - | - | ||||||
| Other assets | 162,965 | 178,252 | 161,874 | 144,922 | 101,959 | ||||||
| Total assets | $ 14,135,212 | $ 8,402,065 | $ 9,025,132 | $ 8,819,763 | $ 8,358,609 | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
| Liabilities | |||||||||||
| Deposits: | |||||||||||
| Noninterest bearing | $ 2,925,714 | $ 1,152,274 | $ 1,018,849 | $ 960,117 | $ 935,153 | ||||||
| Interest bearing | 8,504,353 | 5,081,251 | 5,877,859 | 5,535,454 | 5,434,256 | ||||||
| Total deposits | 11,430,067 | 6,233,525 | 6,896,708 | 6,495,571 | 6,369,409 | ||||||
| Short-term borrowings | 437,004 | 500,267 | 474,498 | 488,619 | 385,087 | ||||||
| Long-term borrowings | 341,315 | 351,691 | 362,246 | 471,466 | 479,548 | ||||||
| Junior subordinated notes issued to capital trusts | 158,712 | 158,748 | 158,784 | 158,824 | 158,872 | ||||||
| Investment securities purchased but not yet settled | 348,632 | - | 2,031 | 27,218 | - | ||||||
| Accrued expenses and other liabilities | 147,605 | 108,451 | 96,283 | 109,241 | 76,172 | ||||||
| Total liabilities | 12,863,335 | 7,352,682 | 7,990,550 | 7,750,939 | 7,469,088 | ||||||
| Stockholders' Equity | |||||||||||
| Preferred stock | 193,381 | 193,242 | 193,105 | 193,025 | - | ||||||
| Common stock | 507 | 375 | 375 | 375 | 375 | ||||||
| Additional paid-in capital | 648,230 | 447,770 | 446,909 | 445,692 | 443,380 | ||||||
| Retained earnings | 408,048 | 419,373 | 450,983 | 495,505 | 527,453 | ||||||
| Accumulated other comprehensive income | 21,723 | 8,824 | 11,456 | 16,910 | 3,584 | ||||||
| Treasury stock | (2,603) | (22,795) | (70,831) | (85,312) | (87,866) | ||||||
| Controlling interest stockholders' equity | 1,269,286 | 1,046,789 | 1,031,997 | 1,066,195 | 886,926 | ||||||
| Noncontrolling interest | 2,591 | 2,594 | 2,585 | 2,629 | 2,595 | ||||||
| Total stockholders' equity | 1,271,877 | 1,049,383 | 1,034,582 | 1,068,824 | 889,521 | ||||||
| Total liabilities and stockholders' equity | $ 14,135,212 | $ 8,402,065 | $ 9,025,132 | $ 8,819,763 | $ 8,358,609 | ||||||
| (1) | "Covered loans” and "FDIC indemnification asset” refer to assets MB Financial Bank acquired during the first quarter of 2009 in a loss-share transaction facilitated by the Federal Deposit Insurance Corporation. The "FDIC indemnification asset” represents amounts the Company expects to collect from the FDIC under the loss-share agreement. |
| MB FINANCIAL, INC. & SUBSIDIARIES | ||||||||||||||||
| CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||
| (Amounts in thousands, except per share data) | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Three months ended | Nine months ended | |||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | September 30, | September 30, | ||||||||||
| 2009 | 2009 | 2009 | 2008 | 2008 | 2009 | 2008 | ||||||||||
| Interest income: | ||||||||||||||||
| Loans | $ 82,820 | $ 82,941 | $ 81,494 | $ 87,474 | $ 88,266 | $ 247,255 | $ 269,601 | |||||||||
| Investment securities available for sale: | ||||||||||||||||
| Taxable | 6,444 | 6,978 | 10,316 | 9,927 | 10,569 | 23,738 | 30,541 | |||||||||
| Nontaxable | 3,585 | 3,796 | 3,875 | 3,944 | 3,977 | 11,256 | 11,558 | |||||||||
| Federal funds sold | - | - | - | 2 | 165 | - | 274 | |||||||||
| Other interest bearing accounts | 760 | 149 | 130 | 188 | 84 | 1,039 | 279 | |||||||||
| Total interest income | 93,609 | 93,864 | 95,815 | 101,535 | 103,061 | 283,288 | 312,253 | |||||||||
| Interest expense: | ||||||||||||||||
| Deposits | 27,662 | 28,977 | 33,579 | 38,996 | 37,216 | 90,218 | 112,374 | |||||||||
| Short-term borrowings | 1,222 | 1,256 | 1,546 | 1,406 | 2,966 | 4,024 | 16,184 | |||||||||
| Long-term borrowings & junior subordinated notes | 3,791 | 4,242 | 4,662 | 6,387 | 6,273 | 12,695 | 17,553 | |||||||||
| Total interest expense | 32,675 | 34,475 | 39,787 | 46,789 | 46,455 | 106,937 | 146,111 | |||||||||
| Net interest income | 60,934 | 59,389 | 56,028 | 54,746 | 56,606 | 176,351 | 166,142 | |||||||||
| Provision for loan losses | 45,000 | 27,100 | 89,700 | 72,581 | 18,400 | 161,800 | 53,140 | |||||||||
| Net interest income (loss) after provision for loan losses | 15,934 | 32,289 | (33,672) | (17,835) | 38,206 | 14,551 | 113,002 | |||||||||
| Other income: | ||||||||||||||||
| Loan service fees | 1,565 | 1,782 | 1,843 | 1,850 | 2,385 | 5,190 | 7,330 | |||||||||
| Deposit service fees | 7,912 | 6,978 | 6,399 | 7,478 | 7,330 | 21,289 | 20,747 | |||||||||
| Lease financing, net | 3,937 | 4,473 | 4,319 | 4,604 | 4,533 | 12,729 | 12,369 | |||||||||
| Brokerage fees | 1,004 | 1,252 | 1,078 | 968 | 1,177 | 3,334 | 3,349 | |||||||||
| Trust & asset management fees | 3,169 | 3,262 | 2,815 | 2,784 | 3,276 | 9,246 | 9,085 | |||||||||
| Net gain on sale of investment securities | 3 | 4,093 | 9,694 | 24 | - | 13,790 | 1,106 | |||||||||
| Increase in cash surrender value of life insurance | 664 | 670 | 456 | 570 | 1,995 | 1,790 | 4,729 | |||||||||
| Net gain (loss) on sale of other assets | 12 | (38) | 1 | (874) | 26 | (25) | (230) | |||||||||
| Acquisition related gains | 10,222 | - | - | - | - | 10,222 | - | |||||||||
| Other operating income | 2,412 | 2,453 | 1,797 | 199 | 1,158 | 6,662 | 4,304 | |||||||||
| Total other income | 30,900 | 24,925 | 28,402 | 17,603 | 21,880 | 84,227 | 62,789 | |||||||||
| Other expense: | ||||||||||||||||
| Salaries & employee benefits | 31,196 | 29,188 | 26,879 | 24,057 | 29,139 | 87,263 | 84,778 | |||||||||
| Occupancy & equipment expense | 7,803 | 7,151 | 7,682 | 7,298 | 7,107 | 22,636 | 21,574 | |||||||||
| Computer services expense | 2,829 | 2,013 | 2,287 | 1,973 | 1,840 | 7,129 | 5,419 | |||||||||
| Advertising & marketing expense | 1,296 | 892 | 1,314 | 903 | 1,451 | 3,502 | 4,186 | |||||||||
| Professional & legal expense | 1,126 | 1,120 | 969 | 1,117 | 884 | 3,215 | 1,993 | |||||||||
| Brokerage fee expense | 478 | 575 | 393 | 476 | 564 | 1,446 | 1,453 | |||||||||
| Telecommunication expense | 812 | 744 | 750 | 664 | 620 | 2,306 | 2,154 | |||||||||
| Other intangible amortization expense | 966 | 997 | 878 | 913 | 913 | 2,841 | 2,641 | |||||||||
| FDIC insurance premiums | 3,206 | 6,789 | 2,668 | 1,188 | 292 | 12,663 | 689 | |||||||||
| Impairment charges | 4,000 | - | - | - | - | 4,000 | - | |||||||||
| Other operating expenses | 5,446 | 5,039 | 5,192 | 5,422 | 4,963 | 15,677 | 14,492 | |||||||||
| Total other expense | 59,158 | 54,508 | 49,012 | 44,011 | 47,773 | 162,678 | 139,379 | |||||||||
| Income (loss) before income taxes | (12,324) | 2,706 | (54,282) | (44,243) | 12,313 | (63,900) | 36,412 | |||||||||
| Income tax benefit | (15,183) | (1,480) | (26,025) | (19,374) | (743) | (42,688) | (4,181) | |||||||||
| Income (loss) from continuing operations | 2,859 | 4,186 | (28,257) | (24,869) | 13,056 | (21,212) | 40,593 | |||||||||
| Income from discontinued operations, net of tax | 4,585 | 129 | 152 | 48 | 98 | 4,866 | 392 | |||||||||
| Net income (loss) | 7,444 | 4,315 | (28,105) | (24,821) | 13,154 | (16,346) | 40,985 | |||||||||
| Preferred stock dividends and discount accretion | 2,589 | 2,587 | 2,531 | 789 | - | 7,707 | - | |||||||||
| Net income (loss) available to common shareholders | $ 4,855 | $ 1,728 | $ (30,636) | $ (25,610) | $ 13,154 | $ (24,053) | $ 40,985 | |||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | September 30, | September 30, | ||||||||||
| 2009 | 2009 | 2009 | 2008 | 2008 | 2009 | 2008 | ||||||||||
| Common share data: | ||||||||||||||||
| Basic earnings (loss) per common share from continuing operations | $ 0.07 | $ 0.12 | $ (0.81) | $ (0.72) | $ 0.38 | $ (0.58) | $ 1.17 | |||||||||
| Basic earnings (loss) per common share from discontinued operations | $ 0.12 | $ 0.00 | $ 0.00 | $ 0.00 | $ 0.00 | $ 0.13 | $ 0.01 | |||||||||
| Impact of preferred stock dividends on basic earnings (loss) per common share | $ (0.07) | $ (0.07) | $ (0.07) | $ (0.02) | $ 0.00 | $ (0.21) | $ 0.00 | |||||||||
| Basis earnings (loss) per common share | $ 0.12 | $ 0.05 | $ (0.88) | $ (0.74) | $ 0.38 | $ (0.65) | $ 1.18 | |||||||||
| Diluted earnings (loss) per common share from continuing operations | $ 0.07 | $ 0.12 | $ (0.81) | $ (0.72) | $ 0.38 | $ (0.57) | $ 1.16 | |||||||||
| Diluted earnings (loss) per common share from discontinued operations | $ 0.12 | $ 0.00 | $ 0.00 | $ 0.00 | $ 0.00 | $ 0.13 | $ 0.01 | |||||||||
| Impact of preferred stock dividends on diluted earnings (loss) per common share | $ (0.07) | $ (0.07) | $ (0.07) | $ (0.02) | $ 0.00 | $ (0.21) | $ 0.00 | |||||||||
| Diluted earnings (loss) per common share | $ 0.12 | $ 0.05 | $ (0.88) | $ (0.74) | $ 0.38 | $ (0.65) | $ 1.17 | |||||||||
| Weighted average common shares outstanding | 39,104,894 | 35,726,879 | 34,914,012 | 34,777,651 | 34,732,633 | 36,597,280 | 34,682,065 | |||||||||
| Diluted weighted average common shares outstanding | 39,299,168 | 35,876,483 | 35,053,352 | 35,164,585 | 35,074,297 | 36,751,738 | 35,060,745 | |||||||||
| Three months ended | Nine months ended | |||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | September 30, | September 30, | ||||||||||
| 2009 | 2009 | 2009 | 2008 | 2008 | 2009 | 2008 | ||||||||||
| Performance Ratios: | ||||||||||||||||
| Annualized return on average assets | 0.30% | 0.20% | (1.30%) | (1.15%) | 0.63% | (0.24%) | 0.67% | |||||||||
| Annualized return on average common equity | 2.13 | 0.81 | (14.01) | (11.38) | 5.91 | (3.65) | 6.22 | |||||||||
| Annualized cash return on average tangible common equity(1) | 4.33 | 2.12 | (25.25) | (20.14) | 11.31 | (6.21) | 11.86 | |||||||||
| Net interest rate spread | 2.51 | 2.82 | 2.64 | 2.63 | 2.82 | 2.66 | 2.82 | |||||||||
| Cost of funds(2) | 1.50 | 1.83 | 2.12 | 2.47 | 2.50 | 1.80 | 2.72 | |||||||||
| Efficiency ratio(3) | 62.79 | 61.24 | 63.42 | 58.74 | 58.92 | 62.48 | 59.28 | |||||||||
| Annualized net non-interest expense to average assets(4) | 1.14 | 1.37 | 1.40 | 1.28 | 1.23 | 1.30 | 1.28 | |||||||||
| Net interest margin | 2.74 | 3.05 | 2.88 | 2.86 | 3.04 | 2.89 | 3.08 | |||||||||
| Tax equivalent effect | 0.11 | 0.13 | 0.13 | 0.14 | 0.14 | 0.13 | 0.14 | |||||||||
| Net interest margin - fully tax equivalent basis(5) | 2.85 | 3.18 | 3.01 | 3.00 | 3.18 | 3.02 | 3.22 | |||||||||
| Asset Quality Ratios: | ||||||||||||||||
| Non-performing loans(6) to total loans | 4.41% | 3.54% | 3.58% | 2.34% | 1.92% | 4.41% | 1.92% | |||||||||
| Non-performing assets(6) to total assets | 2.19 | 2.92 | 2.57 | 1.71 | 1.45 | 2.19 | 1.45 | |||||||||
| Allowance for loan losses to non-performing loans(6) | 66.02 | 79.65 | 78.10 | 98.67 | 75.82 | 66.02 | 75.82 | |||||||||
| Allowance for loan losses to total loans | 2.91 | 2.82 | 2.80 | 2.31 | 1.46 | 2.91 | 1.46 | |||||||||
| Net loan charge-offs to average loans (annualized) | 2.28 | 1.54 | 3.42 | 1.13 | 0.80 | 2.43 | 0.67 | |||||||||
| Capital Ratios: | ||||||||||||||||
| Tangible equity to assets(7) | 6.26% | 8.07% | 7.31% | 7.90% | 6.10% | 6.26% | 6.10% | |||||||||
| Tangible common equity to risk weighted assets(8) | 9.01 | 6.79 | 6.49 | 7.10 | 7.36 | 9.01 | 7.36 | |||||||||
| Tangible common equity to assets(9) | 4.85 | 5.65 | 5.07 | 5.65 | 6.10 | 4.85 | 6.10 | |||||||||
| Book value per common share(10) | $21.48 | $23.30 | $23.82 | $25.17 | $25.51 | $21.48 | $25.51 | |||||||||
| Less: goodwill and other intangible assets, net of tax | ||||||||||||||||
| benefit, per common share | 8.22 | 10.99 | 11.45 | 11.56 | 11.60 | 8.22 | 11.60 | |||||||||
| Tangible book value per share(11) | 13.26 | 12.30 | 12.37 | 13.61 | 13.91 | 13.26 | 13.91 | |||||||||
| Total capital (to risk-weighted assets) | 15.36% | 13.89% | 13.48% | 14.07% | 11.65% | 15.36% | 11.65% | |||||||||
| Tier 1 capital (to risk-weighted assets) | 13.42 | 11.88 | 11.48 | 12.06 | 9.64 | 13.42 | 9.64 | |||||||||
| Tier 1 capital (to average assets) | 10.60 | 9.55 | 9.25 | 9.85 | 8.00 | 10.60 | 8.00 | |||||||||
| Tier 1 common capital (to risk-weighted assets) | 8.72 | 6.66 | 6.32 | 6.85 | 7.30 | 8.72 | 7.30 | |||||||||
| (1) | Net cash flow available to common stockholders (net income available to common stockholders or net income, as appropriate, plus other intangibles amortization expense, net of tax benefit) / Average tangible common equity (average common equity less average goodwill and average other intangibles, net of tax benefit). | |
| (2) | Equals total interest expense divided by the sum of average interest bearing liabilities and noninterest bearing deposits. | |
| (3) | Equals total other expense excluding FDIC special assessment divided by the sum of net interest income on a fully tax equivalent basis and total other income less net gains (losses) on securities available for sale. | |
| (4) | Equals total other expense excluding FDIC special assessment less total other income excluding net gains (losses) on securities available for sale divided by average assets. | |
| (5) | Represents net interest income, on a fully tax equivalent basis assuming a 35% tax rate, as a percentage of average interest earning assets. | |
| (6) | Excludes purchased credit-impaired loans and loans held for sale. Non-performing assets excludes other real estate owned related to FDIC transactions. | |
| (7) | 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. | |
| (8) | Equals total ending common stockholders’ equity less goodwill and other intangibles, net of tax benefit, divided by total risk weighted assets. | |
| (9) | 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. | |
| (10) | Equals total ending common stockholders’ equity divided by common shares outstanding. | |
| (11) | 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 net interest income on a fully tax equivalent basis, net interest margin on a fully tax equivalent basis; efficiency ratio and ratio of annualized net non-interest expense to average assets, with net gains and losses on securities available for sale excluded from the non-interest income components and the FDIC special assessment expense excluded from the non-interest expense components of these ratios; ratios of tangible equity to assets, tangible common equity to risk weighted assets and tangible common equity to assets ratio; tangible book value per common share; and annualized cash return on average tangible common equity. Our management uses these non-GAAP measures in its analysis of our performance. The tax equivalent adjustment to net interest income recognizes the income tax savings when comparing taxable and tax-exempt assets and assumes a 35% tax rate. Management believes that it is a standard practice in the banking industry to present net interest income and net interest margin on a fully tax equivalent basis, and accordingly believes that providing these measures may be useful for peer comparison purposes. Management also believes that by excluding net gains and losses on securities available for sale from the non-interest income component and excluding the FDIC special assessment expense from other non-interest expense of the efficiency ratio and the ratio of annualized net non-interest expense to average assets, these ratios better reflect our core operating performance. The other measures exclude the ending balances of acquisition-related goodwill and other intangible assets, net of tax benefit, in determining tangible stockholders’ equity. Management believes the presentation of these other financial measures excluding the impact of such items provides useful supplemental information that is helpful in understanding our financial results, as they provide a method to assess management’s success in utilizing our tangible capital. These disclosures should not be viewed as substitutes for the results determined to be in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.
The following table presents a reconciliation of tangible equity to equity (in thousands):
| September 30, | June 30, | March 31, | December 31, | September 30, | |||||||
| 2009 | 2009 | 2009 | 2008 | 2008 | |||||||
| Stockholders' equity - as reported | $ 1,271,877 | $ 1,049,383 | $ 1,034,582 | $ 1,068,824 | $ 889,521 | ||||||
| Less: goodwill | 387,069 | 387,069 | 387,069 | 387,069 | 387,069 | ||||||
| Less: other intangible, net of tax benefit | 25,582 | 16,897 | 17,545 | 16,754 | 17,348 | ||||||
| Tangible equity | $ 859,226 | $ 645,417 | $ 629,968 | $ 665,001 | $ 485,104 | ||||||
The following table presents a reconciliation of tangible common equity to stockholders’ common equity (in thousands):
| September 30, | June 30, | March 31, | December 31, | September 30, | |||||||
| 2009 | 2009 | 2009 | 2008 | 2008 | |||||||
| Common stockholders' equity - as reported | $ 1,078,496 | $ 856,141 | $ 841,477 | $ 875,799 | $ 889,521 | ||||||
| Less: goodwill | 387,069 | 387,069 | 387,069 | 387,069 | 387,069 | ||||||
| Less: other intangible, net of tax benefit | 25,582 | 16,897 | 17,545 | 16,754 | 17,348 | ||||||
| Tangible common equity | $ 665,845 | $ 452,175 | $ 436,863 | $ 471,976 | $ 485,104 | ||||||
The following table presents a reconciliation of average tangible common equity to average common stockholders’ equity (in thousands):
| Three months ended | Nine months ended | |||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | September 30, | September 30, | ||||||||||
| 2009 | 2009 | 2009 | 2008 | 2008 | 2009 | 2008 | ||||||||||
| Average common stockholders' equity - as reported | $ 905,897 | $ 853,782 | $ 886,740 | $ 898,246 | $ 888,206 | $ 882,200 | $ 881,594 | |||||||||
| Less: average goodwill | 387,069 | 387,069 | 387,069 | 387,069 | 387,069 | 387,069 | 383,676 | |||||||||
|
Less: average other intangible assets, net of tax benefit |
16,630 | 17,186 | 16,872 | 16,999 | 17,582 | 16,897 | 17,068 | |||||||||
| Average tangible common equity | $ 502,198 | $ 449,527 | $ 482,799 | $ 494,178 | $ 483,555 | $ 478,234 | $ 480,850 | |||||||||
The following table presents a reconciliation of net cash flow available to common stockholders to net (loss) income available to common stockholders (in thousands):
| Three months ended | Nine months ended | |||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | September 30, | September 30, | ||||||||||
| 2009 | 2009 | 2009 | 2008 | 2008 | 2009 | 2008 | ||||||||||
|
Net (loss) income available to common shareholders - as reported |
$ 4,855 | $ 1,728 | $ (30,636) | $ (25,610) | $ 13,154 | $ (24,053) | $ 40,985 | |||||||||
|
Add: other intangible amortization expense, net of tax benefit |
628 | 648 | 571 | 593 | 593 | 1,847 | 1,717 | |||||||||
| Net cash flow available to common shareholders | $ 5,483 | $ 2,376 | $ (30,065) | $ (25,017) | $ 13,747 | $ (22,206) | $ 42,702 | |||||||||
Efficiency Ratio Calculation (Dollars in Thousands)
| Three months ended | Nine months ended | |||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | September 30, | September 30, | ||||||||||
| 2009 | 2009 | 2009 | 2008 | 2008 | 2009 | 2008 | ||||||||||
| Non-interest expense | $ 59,158 | $ 54,508 | $ 49,012 | $ 44,011 | $ 47,773 | $ 162,678 | $ 139,379 | |||||||||
| Adjustment for FDIC special assessment | - | 3,850 | - | - | - | 3,850 | - | |||||||||
| Non-interest expense - as adjusted | $ 59,158 | $ 50,658 | $ 49,012 | $ 44,011 | $ 47,773 | $ 158,828 | $ 139,379 | |||||||||
| Net interest income | $ 60,934 | $ 59,389 | $ 56,028 | $ 54,746 | $ 56,606 | $ 176,351 | $ 166,142 | |||||||||
| Tax equivalent adjustment | 2,383 | 2,496 | 2,551 | 2,606 | 2,596 | 7,430 | 7,284 | |||||||||
| Net interest income on a fully tax equivalent basis | 63,317 | 61,885 | 58,579 | 57,352 | 59,202 | 183,781 | 173,426 | |||||||||
| Plus other income | 30,900 | 24,925 | 28,402 | 17,603 | 21,880 | 84,227 | 62,789 | |||||||||
| Less net gains (losses) on securities available for sale | 3 | 4,093 | 9,694 | 24 | - | 13,790 | 1,106 | |||||||||
|
Net interest income plus non-interest income - as adjusted |
$ 94,214 | $ 82,717 | $ 77,287 | $ 74,931 | $ 81,082 | $ 254,218 | $ 235,109 | |||||||||
| Efficiency ratio | 62.79% | 61.24% | 63.42% | 58.74% | 58.92% | 62.48% | 59.28% | |||||||||
| Efficiency ratio (without adjustments) | 64.42% | 64.65% | 58.05% | 60.83% | 60.87% | 62.43% | 60.88% | |||||||||
Annualized Net Non-interest Expense to Average Assets Calculation (Dollars in Thousands)
| Three months ended | Nine months ended | |||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | September 30, | September 30, | ||||||||||
| 2009 | 2009 | 2009 | 2008 | 2008 | 2009 | 2008 | ||||||||||
| Non-interest expense | $ 59,158 | $ 54,508 | $ 49,012 | $ 44,011 | $ 47,773 | $ 162,678 | $ 139,379 | |||||||||
| Adjustment for FDIC special assessment | - | 3,850 | - | - | - | 3,850 | - | |||||||||
| Non-interest expense - as adjusted | 59,158 | 50,658 | 49,012 | 44,011 | 47,773 | 158,828 | 139,379 | |||||||||
| Other income | 30,900 | 24,925 | 28,402 | 17,603 | 21,880 | 84,227 | 62,789 | |||||||||
| Less net gains on securities available for sale | 3 | 4,093 | 9,694 | 24 | - | 13,790 | 1,106 | |||||||||
| Other income - as adjusted | 30,897 | 20,832 | 18,708 | 17,579 | 21,880 | 70,437 | 61,683 | |||||||||
| Net non-interest expense | $ 28,261 | $ 29,826 | $ 30,304 | $ 26,432 | $ 25,893 | $ 88,391 | $ 77,696 | |||||||||
| Average assets | 9,795,125 | 8,701,857 | 8,792,275 | 8,240,344 | 8,357,985 | 9,100,092 | 8,134,395 | |||||||||
| Annualized net non-interest expense to average assets | 1.14% | 1.37% | 1.40% | 1.28% | 1.23% | 1.30% | 1.28% | |||||||||
|
Annualized net non-interest expense to average assets (without adjustments) |
1.14% | 1.36% | 0.95% | 1.27% | 1.23% | 1.15% | 1.26% | |||||||||
A reconciliation of net interest margin on a fully tax equivalent basis to net interest margin is contained in the tables under "Net Interest Margin.” A reconciliation of tangible book value per common share to book value per common share is contained in the "Selected Financial Ratios” table.
NET INTEREST MARGIN
The following table presents, for the periods indicated, the total dollar amount of interest income from average interest earning assets and the resultant yields, as well as the interest expense on average interest bearing liabilities, and the resultant costs, expressed both in dollars and rates (dollars in thousands):
| Three Months Ended September 30, | Three Months Ended June 30, | ||||||||||||||||||
| 2009 | 2008 | 2009 | |||||||||||||||||
| Average | Yield/ | Average | Yield/ | Average | Yield/ | ||||||||||||||
| Balance | Interest | Rate | Balance | Interest | Rate | Balance | Interest | Rate | |||||||||||
| Interest Earning Assets: | |||||||||||||||||||
| Loans (1) (2): | |||||||||||||||||||
| Commercial related credits | |||||||||||||||||||
| Commercial | $ 1,345,899 | $ 15,993 | 4.65% | $ 1,409,936 | $ 20,377 | 5.66% | $ 1,375,433 | $ 15,867 | 4.56% | ||||||||||
| Commercial - nontaxable (3) | 80,486 | 1,293 | 6.29 | 70,868 | 1,299 | 7.17 | 79,166 | 1,290 | 6.45 | ||||||||||
| Commercial loans collateralized by assignment | |||||||||||||||||||
| of lease payments | 847,667 | 12,769 | 6.03 | 600,345 | 9,971 | 6.64 | 812,494 | 12,660 | 6.23 | ||||||||||
| Real estate commercial | 2,436,157 | 32,926 | 5.29 | 2,247,768 | 34,022 | 5.92 | 2,373,304 | 32,029 | 5.34 | ||||||||||
| Real estate construction | 712,937 | 6,251 | 3.43 | 768,467 | 10,044 | 5.11 | 771,269 | 7,100 | 3.64 | ||||||||||
| Total commercial related credits | 5,423,146 | 69,232 | 5.00 | 5,097,384 | 75,713 | 5.81 | 5,411,666 | 68,946 | 5.04 | ||||||||||
| Other loans | |||||||||||||||||||
| Real estate residential | 282,523 | 3,904 | 5.53 | 322,421 | 4,748 | 5.89 | 279,863 | 3,938 | 5.63 | ||||||||||
| Home equity | 407,728 | 4,526 | 4.40 | 360,618 | 4,305 | 4.75 | 410,626 | 4,509 | 4.40 | ||||||||||
| Indirect | 188,300 | 3,225 | 6.79 | 191,533 | 3,413 | 7.09 | 190,010 | 3,210 | 6.78 | ||||||||||
| Consumer loans | 56,841 | 571 | 3.99 | 54,223 | 542 | 3.98 | 56,246 | 576 | 4.11 | ||||||||||
| Total other loans | 935,392 | 12,226 | 5.19 | 928,795 | 13,008 | 5.57 | 936,745 | 12,233 | 5.24 | ||||||||||
| Total loans, excluding covered loans | 6,358,538 | 81,458 | 5.08 | 6,026,179 | 88,721 | 5.86 | 6,348,411 | 81,179 | 5.13 | ||||||||||
| Covered loans | 93,556 | 1,814 | 7.69 | - | - | - | 92,639 | 2,214 | 9.59 | ||||||||||
| Total loans | 6,452,094 | 83,272 | 5.12 | 6,026,179 | 88,721 | 5.86 | 6,441,050 | 83,393 | 5.19 | ||||||||||
| Taxable investment securities | 1,032,410 | 6,444 | 2.50 | 911,034 | 10,569 | 4.64 | 695,449 | 6,978 | 4.01 | ||||||||||
| Investment securities exempt from federal income taxes (3) | 379,056 | 5,516 | 5.69 | 425,120 | 6,118 | 5.63 | 405,748 | 5,840 | 5.69 | ||||||||||
| Federal funds sold | - | - | 0.00 | 32,420 | 165 | 1.99 | - | - | 0.00 | ||||||||||
| Other interest bearing deposits | 965,276 | 760 | 0.31 | 16,065 | 84 | 2.08 | 197,218 | 149 | 0.30 | ||||||||||
| Total interest earning assets | $ 8,828,836 | 95,992 | 4.31 | $ 7,410,818 | 105,657 | 5.67 | $ 7,739,465 | 96,360 | 4.99 | ||||||||||
| Non-interest earning assets | 966,289 | 947,167 | 962,392 | ||||||||||||||||
| Total assets | $ 9,795,125 | $ 8,357,985 | $ 8,701,857 | ||||||||||||||||
| Interest Bearing Liabilities: | |||||||||||||||||||
| Core funding: | |||||||||||||||||||
| Money market and NOW accounts | $ 2,118,024 | $ 4,461 | 0.84% | $ 1,285,293 | $ 5,492 | 1.70% | $ 1,691,868 | $ 3,841 | 0.91% | ||||||||||
| Savings accounts | 477,048 | 447 | 0.37 | 384,059 | 270 | 0.28 | 447,392 | 461 | 0.41 | ||||||||||
| Certificate of deposit | 3,019,701 | 17,422 | 2.29 | 2,485,198 | 20,789 | 3.33 | 2,488,905 | 17,334 | 2.79 | ||||||||||
| Customer repurchase agreements | 226,972 | 293 | 0.51 | 271,718 | 977 | 1.43 | 277,896 | 336 | 0.48 | ||||||||||
| Total core funding | 5,841,745 | 22,623 | 1.54 | 4,426,268 | 27,528 | 2.47 | 4,906,061 | 21,972 | 1.80 | ||||||||||
| Whole sale funding: | |||||||||||||||||||
| Public funds | 102,119 | 314 | 1.22 | 207,389 | 1,514 | 2.90 | 133,362 | 513 | 1.54 | ||||||||||
| Brokered accounts (includes fee expense) | 566,071 | 5,019 | 3.52 | 947,462 | 9,151 | 3.84 | 728,378 | 6,828 | 3.76 | ||||||||||
| Other short-term borrowings | 201,643 | 929 | 1.83 | 269,795 | 1,989 | 2.93 | 202,137 | 920 | 1.83 | ||||||||||
| Long-term borrowings | 504,218 | 3,790 | 2.94 | 640,096 | 6,273 | 3.83 | 514,810 | 4,242 | 3.26 | ||||||||||
| Total wholesale funding | 1,374,051 | 10,052 | 2.91 | 2,064,742 | 18,927 | 3.65 | 1,578,687 | 12,503 | 3.18 | ||||||||||
| Total interest bearing liabilities | $ 7,215,796 | $ 32,675 | 1.80 | $ 6,491,010 | $ 46,455 | 2.85 | $ 6,484,748 | $ 34,475 | 2.13 | ||||||||||
| Non-interest bearing deposits | 1,445,937 | 904,571 | 1,074,567 | ||||||||||||||||
| Other non-interest bearing liabilities | 34,182 | 76,763 | 95,592 | ||||||||||||||||
| Stockholders' equity | 1,099,210 | 885,641 | 1,046,950 | ||||||||||||||||
| Total liabilities and stockholders' equity | $ 9,795,125 | $ 8,357,985 | $ 8,701,857 | ||||||||||||||||
| Net interest income/interest rate spread (4) | $ 63,317 | 2.51% | $ 59,202 | 2.82% | $ 61,885 | 2.86% | |||||||||||||
| Taxable equivalent adjustment | 2,383 | 2,596 | 2,496 | ||||||||||||||||
| Net interest income, as reported | $ 60,934 | $ 56,606 | $ 59,389 | ||||||||||||||||
| Net interest margin (5) | 2.74% | 3.04% | 3.08% | ||||||||||||||||
| Tax equivalent effect | 0.11% | 0.14% | 0.13% | ||||||||||||||||
| Net interest margin on a fully equivalent basis (5) | 2.85% | 3.18% | 3.21% | ||||||||||||||||
| (1) | Non-accrual loans are included in average loans. | |
| (2) | Interest income includes amortization of deferred loan origination fees of $1.2 million, $1.8 million and $1.4 million for the three months ended September 30, 2009, September 30, 2008, and June 30, 2009, respectively. | |
| (3) | Non-taxable loan and investment income is presented on a fully tax equivalent basis assuming a 35% tax rate. | |
| (4) | Interest rate spread represents the difference between the average yield on interest earning assets and the average cost of interest bearing liabilities and is presented on a fully tax equivalent basis. | |
| (5) | Net interest margin represents net interest income as a percentage of average interest earning assets. |
The following table presents, for the periods indicated, the total dollar amount of interest income from average interest earning assets and the resultant yields, as well as the interest expense on average interest bearing liabilities, and the resultant costs, expressed both in dollars and rates (dollars in thousands):
| Nine Months Ended September 30, | |||||||||||||
| 2009 | 2008 | ||||||||||||
| Average | Yield/ | Average | Yield/ | ||||||||||
| Balance | Interest | Rate | Balance | Interest | Rate | ||||||||
| Interest Earning Assets: | |||||||||||||
| Loans (1) (2): | |||||||||||||
| Commercial related credits | |||||||||||||
| Commercial | $ 1,385,503 | $ 48,820 | 4.65% | $ 1,377,257 | $ 62,503 | 5.96% | |||||||
| Commercial - nontaxable (3) | 80,039 | 3,911 | 6.44 | 54,746 | 3,031 | 7.27 | |||||||
| Commercial loans collateralized by assignment | |||||||||||||
| of lease payments | 780,442 | 36,306 | 6.20 | 577,574 | 28,906 | 6.67 | |||||||
| Real estate commercial | 2,390,861 | 96,913 | 5.35 | 2,132,481 | 99,584 | 6.14 | |||||||
| Real estate construction | 751,192 | 21,287 | 3.74 | 800,095 | 35,178 | 5.78 | |||||||
| Total commercial related credits | 5,388,037 | 207,237 | 5.07 | 4,942,153 | 229,202 | 6.09 | |||||||
| Other loans | |||||||||||||
| Real estate residential | 284,962 | 11,962 | 5.60 | 358,061 | 15,900 | 5.92 | |||||||
| Home equity | 408,046 | 13,451 | 4.41 | 353,897 | 13,660 | 5.16 | |||||||
| Indirect | 189,091 | 9,562 | 6.76 | 173,064 | 9,836 | 7.59 | |||||||
| Consumer loans | 57,721 | 1,755 | 4.07 | 53,710 | 2,064 | 5.13 | |||||||
| Total other loans | 939,820 | 36,730 | 5.23 | 938,732 | 41,460 | 5.90 | |||||||
| Total loans, excluding covered assets | 6,327,857 | 243,967 | 5.15 | 5,880,885 | 270,662 | 6.15 | |||||||
| Covered assets | 72,886 | 4,656 | 8.54 | - | - | - | |||||||
| Total loans | 6,400,743 | 248,623 | 5.19 | 5,880,885 | 270,662 | 6.15 | |||||||
| Taxable investment securities | 891,142 | 23,738 | 3.55 | 872,679 | 30,541 | 4.67 | |||||||
| Investment securities exempt from federal income taxes (3) | 398,897 | 17,318 | 5.73 | 411,954 | 17,781 | 5.67 | |||||||
| Federal funds sold | - | - | - | 16,907 | 274 | 2.13 | |||||||
| Other interest bearing deposits | 455,354 | 1,039 | 0.31 | 16,597 | 279 | 2.25 | |||||||
| Total interest earning assets | $ 8,146,136 | $ 290,718 | 4.77 | $ 7,199,022 | $ 319,537 | 5.93 | |||||||
| Non-interest earning assets | 953,956 | 935,373 | |||||||||||
| Total assets | $ 9,100,092 | $ 8,134,395 | |||||||||||
| Interest Bearing Liabilities: | |||||||||||||
| Core funding: | |||||||||||||
| Money market and NOW accounts | $ 1,778,656 | $ 12,250 | 0.92% | $ 1,249,186 | $ 16,857 | 1.80% | |||||||
| Savings accounts | 439,674 | 1,222 | 0.37 | 388,217 | 982 | 0.34 | |||||||
| Certificate of deposit | 2,720,074 | 55,191 | 2.71 | 2,335,131 | 66,334 | 3.79 | |||||||
| Customer repurchase agreements | 257,289 | 879 | 0.46 | 299,030 | 3,840 | 1.72 | |||||||
| Total core funding | 5,195,693 | 69,542 | 1.79 | 4,271,564 | 88,013 | 2.75 | |||||||
| Whole sale funding: | |||||||||||||
| Public funds | 144,769 | 1,770 | 1.63 | 245,240 | 6,483 | 3.53 | |||||||
| Brokered accounts (includes fee expense) | 708,372 | 19,786 | 3.73 | 733,991 | 21,718 | 3.95 | |||||||
| Other short-term borrowings | 222,838 | 3,145 | 1.89 | 468,784 | 12,344 | 3.52 | |||||||
| Long-term borrowings | 518,288 | 12,694 | 3.23 | 563,311 | 17,553 | 4.09 | |||||||
| Total wholesale funding | 1,594,267 | 37,395 | 3.14 | 2,011,326 | 58,098 | 3.86 | |||||||
| Total interest bearing liabilities | $ 6,789,960 | $ 106,937 | 2.11 | $ 6,282,890 | $ 146,111 | 3.11 | |||||||
| Non-interest bearing deposits | 1,162,003 | 883,131 | |||||||||||
| Other non-interest bearing liabilities | 73,456 | 88,243 | |||||||||||
| Stockholders' equity | 1,074,673 | 880,131 | |||||||||||
| Total liabilities and stockholders' equity | $ 9,100,092 | $ 8,134,395 | |||||||||||
| Net interest income/interest rate spread (4) | $ 183,781 | 2.66% | $ 173,426 | 2.82% | |||||||||
| Taxable equivalent adjustment | 7,430 | 7,284 | |||||||||||
| Net interest income, as reported | $ 176,351 | $ 166,142 | |||||||||||
| Net interest margin (5) | 2.89% | 3.08% | |||||||||||
| Tax equivalent effect | 0.13% | 0.14% | |||||||||||
| Net interest margin on a fully equivalent basis (5) | 3.02% | 3.22% | |||||||||||
|
(1) |
Non-accrual loans are included in average loans. | |
| (2) | Interest income includes amortization of deferred loan origination fees of $3.9 million and $5.3 million for the nine months ended September 30, 2009, and September 30, 2008, respectively. | |
| (3) | Non-taxable loan and investment income is presented on a fully tax equivalent basis assuming a 35% tax rate. | |
| (4) | Interest rate spread represents the difference between the average yield on interest earning assets and the average cost of interest bearing liabilities and is presented on a fully tax equivalent basis. | |
| (5) | Net interest margin represents net interest income as a percentage of average interest earning assets. |
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