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MB Financial, Inc. Reports Loan Growth, Strong Fee Income, And Fourth Quarter Net Income Of $24.0 Million

Stocks in this article: MBFI

The non-GAAP disclosures contained herein should not be viewed as substitutes for the results determined to be in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

A reconciliation of net interest margin on a fully tax equivalent basis to net interest margin is contained in the tables under “Net Interest Margin.” A reconciliation of tangible book value per common share to book value per common share is contained in the “Selected Financial Ratios” table. Reconciliations of core and non-core fee income and other expense to fee income and other expense are contained in the tables under “Results of Operations—Fourth Quarter Results.”

The following table presents a reconciliation of tangible equity to equity (dollars in thousands):

           
12/31/2012 9/30/2012 6/30/2012 3/31/2012 12/31/2011
Stockholders' equity - as reported $ 1,275,770 $ 1,260,830 $ 1,237,751 $ 1,215,430 $ 1,393,027
Less: goodwill 423,369 387,069 387,069 387,069 387,069
Less: other intangible assets, net of tax benefit 19,183 16,728 17,541 18,354 19,171
Tangible equity $ 833,218 $ 857,033 $ 833,141 $ 810,007 $ 986,787
 

The following table presents a reconciliation of tangible assets to total assets (dollars in thousands):

           
12/31/2012 9/30/2012 6/30/2012 3/31/2012 12/31/2011
Total assets - as reported $ 9,575,554 $ 9,463,545 $ 9,489,566 $ 9,671,600 $ 9,833,072
Less: goodwill 423,369 387,069 387,069 387,069 387,069
Less: other intangible assets, net of tax benefit 19,183 16,728 17,541 18,354 19,171
Tangible assets $ 9,133,002 $ 9,059,748 $ 9,084,956 $ 9,266,177 $ 9,426,832
 

The following table presents a reconciliation of tangible common equity to stockholders’ common equity (dollars in thousands):

           
12/31/2012 9/30/2012 6/30/2012 3/31/2012 12/31/2011
Common stockholders' equity - as reported $ 1,275,770 $ 1,260,830 $ 1,237,751 $ 1,215,430 $ 1,198,308
Less: goodwill 423,369 387,069 387,069 387,069 387,069
Less: other intangible assets, net of tax benefit 19,183 16,728 17,541 18,354 19,171
Tangible common equity $ 833,218 $ 857,033 $ 833,141 $ 810,007 $ 792,068
 

The following table presents a reconciliation of average tangible common equity to average common stockholders’ equity (dollars in thousands):

                 
4Q12 3Q12 2Q12 1Q12 4Q11 2012 2011
 
Average common stockholders' equity - as reported $ 1,264,772 $ 1,247,846 $ 1,223,667 $ 1,206,364 $ 1,181,820 $ 1,235,780 $ 1,164,316
Less: average goodwill 387,464 387,069 387,069 387,069 387,069 387,168 387,069
Less: average other intangible assets, net of tax benefit 16,238 17,018 17,903 18,721 19,494 17,465 20,865
Average tangible common equity $ 861,070 $ 843,759 $ 818,695 $ 800,574 $ 775,257 $ 831,147 $ 756,382
 

The following table presents a reconciliation of net cash flow available to common stockholders to net income available to common stockholders (dollars in thousands):

                   
4Q12 3Q12 2Q12 1Q12 4Q11 2012 2011
 
Net income available to common stockholders - as reported $ 24,012 $ 23,133 $ 22,143 $ 17,817 $ 16,847 $ 87,105 $ 28,314
Add: other intangible amortization expense, net of tax benefit 813 813 813 817 917 3,257 3,682
Net cash flow available to common stockholders $ 24,825 $ 23,946 $ 22,956 $ 18,634 $ 17,764 $ 90,362 $ 31,996
 

The following table presents a reconciliation of Tier 1 common capital to Tier 1 capital (dollars in thousands):

             
12/31/2012 9/30/2012 6/30/2012 3/31/2012 12/31/2011
Tier 1 capital - as reported $ 939,087 $ 958,123 $ 941,888 $ 925,089 $ 1,101,538
Less: preferred stock - - - - 194,719
Less: qualifying trust preferred securities 147,500 147,500 153,500 153,500 153,787
Tier 1 common capital $ 791,587 $ 810,623 $ 788,388 $ 771,589 $ 753,032
 

Efficiency Ratio Calculation (Dollars in Thousands)

               
4Q12 3Q12 2Q12 1Q12 4Q11 2012 2011
Other expense $ 71,106 $ 81,165 $ 66,834 $ 67,331 $ 69,433 $ 286,436 $ 269,633
Adjustment for prepayment fees on interest bearing liabilities - 12,682 - - - 12,682 -
Adjustment for impairment charges 1,432 758 - - 594 2,190 1,594

Adjustment for increase (decrease) in market value of assets held in trust for deferred compensation

104   355   (149 ) 501   20   811   (40 )
Other expense - as adjusted $ 69,570   $ 67,370   $ 66,983   $ 66,830   $ 68,819   $ 270,753   $ 268,079  
 
Net interest income $ 69,516 $ 72,075 $ 74,104 $ 77,093 $ 80,245 $ 292,788 $ 325,273
Tax equivalent adjustment 5,360   5,256   5,057   4,756   4,468   20,429   13,188  
Net interest income on a fully tax equivalent basis 74,876 77,331 79,161 81,849 84,713 313,217 338,461

Tax equivalent adjustment on the increase in cash surrender value of life insurance

481 479 468 494 508 1,922 2,357
Plus fee income 36,285 28,553 23,907 22,854 24,451 111,599 109,106
Less net losses on other real estate owned (1,626 ) (3,938 ) (5,441 ) (6,589 ) (5,478 ) (17,594 ) (13,613 )
Less net gains (losses) on investment securities 311 281 (34 ) (3 ) 411 555 640
Less net (losses) gains on sale of other assets (905 ) (12 ) (8 ) (17 ) (87 ) (942 ) 283
Less net gain on sale of loans held for sale - - - - - - 1,790

Less increase (decrease) in market value of assets held in trust for deferred compensation

104   355   (149 ) 501   20   811   (40 )
 
Net interest income plus fee income - as adjusted $ 113,758   $ 109,677   $ 109,168   $ 111,305   $ 114,806   $ 443,908   $ 460,864  
 
Efficiency ratio 61.16 % 61.43 % 61.36 % 60.04 % 59.94 % 60.99 % 58.17 %
 
Efficiency ratio (without adjustments) 67.21 % 80.66 % 68.19 % 67.37 % 66.32 % 70.83 % 62.07 %
 

Annualized Net Other Expense to Average Assets Calculation (Dollars in Thousands)

               
4Q12 3Q12 2Q12 1Q12 4Q11 2012 2011
Other expense $ 71,106 $ 81,165 $ 66,834 $ 67,331 $ 69,433 $ 286,436 $ 269,633
Adjustment for prepayment fees on interest bearing liabilities - 12,682 - - - 12,682 -
Adjustment for impairment charges 1,432 758 - - 594 2,190 1,594

Adjustment for increase (decrease) in market value of assets held in trust for deferred compensation

104   355   (149 ) 501   20   811   (40 )
Non-interest expense - as adjusted 69,570   67,370   66,983   66,830   68,819   270,753   268,079  
 
Fee income 36,285 28,553 23,907 22,854 24,451 111,599 109,106
Less net losses on other real estate owned (1,626 ) (3,938 ) (5,441 ) (6,589 ) (5,478 ) (17,594 ) (13,613 )
Less net gains (losses) on investment securities 311 281 (34 ) (3 ) 411 555 640
Less net (losses) gains on sale of other assets (905 ) (12 ) (8 ) (17 ) (87 ) (942 ) 283
Less net gain on sale of loans held for sale - - - - - - 1,790

Less increase (decrease) in market value of assets held in trust for deferred compensation

104   355   (149 ) 501   20   811   (40 )
Fee income - as adjusted 38,401   31,867   29,539   28,962   29,585   128,769   120,046  

Less tax equivalent adjustment on the increase in cash surrender value of life insurance

481   479   468   494   508   1,922   2,357  
 
Net other expense $ 30,688   $ 35,024   $ 36,976   $ 37,374   $ 38,726   $ 140,062   $ 145,676  
 
Average assets $ 9,461,895 $ 9,516,159 $ 9,478,480 $ 9,736,702 $ 9,856,835 $ 9,547,985 $ 9,956,133
 
Annualized net other expense to average assets 1.29 % 1.46 % 1.57 % 1.54 % 1.56 % 1.47 % 1.46 %
 

Annualized net other expense to average assets (without adjustments)

1.46 % 2.20 % 1.82 % 1.84 % 1.81 % 1.83 % 1.61 %
 

Core Fee Income to Revenues Ratio Calculation (Dollars in Thousands)

             
4Q12 3Q12 2Q12 1Q12 4Q11 2012 2011
Fee income $ 36,285 $ 28,553 $ 23,907 $ 22,854 $ 24,451 $ 111,599 $ 109,106
Less net losses on other real estate owned (1,626 ) (3,938 ) (5,441 ) (6,589 ) (5,478 ) (17,594 ) (13,613 )
Less net gains (losses) on investment securities 311 281 (34 ) (3 ) 411 555 640
Less net (losses) gains on sale of other assets (905 ) (12 ) (8 ) (17 ) (87 ) (942 ) 283
Less net gain on sale of loans held for sale - - - - - - 1,790

Less increase (decrease) in market value of assets held in trust for deferred compensation

104 355 (149 ) 501 20 811 (40 )

Plus tax equivalent adjustment on the increase in cash surrender value of life insurance

481   479   468   494   508   1,922   2,357  
Fee income - as adjusted $ 38,882   $ 32,346   $ 30,007   $ 29,456   $ 30,093   $ 130,691   $ 122,403  
 
Net interest income $ 69,516 $ 72,075 $ 74,104 $ 77,093 $ 80,245 $ 292,788 $ 325,273
Tax equivalent adjustment 5,360   5,256   5,057   4,756   4,468   20,429   13,188  
Net interest income on a fully tax equivalent basis 74,876 77,331 79,161 81,849 84,713 313,217 338,461

Tax equivalent adjustment on the increase in cash surrender value of life insurance

481 479 468 494 508 1,922 2,357
Plus fee income 36,285 28,553 23,907 22,854 24,451 111,599 109,106
Less net losses on other real estate owned (1,626 ) (3,938 ) (5,441 ) (6,589 ) (5,478 ) (17,594 ) (13,613 )
Less net gains (losses) on investment securities 311 281 (34 ) (3 ) 411 555 640
Less net (losses) gains on sale of other assets (905 ) (12 ) (8 ) (17 ) (87 ) (942 ) 283
Less net gain on sale of loans held for sale - - - - - - 1,790

Less increase (decrease) in market value of assets held in trust for deferred compensation

104   355   (149 ) 501   20   811   (40 )
 

Total revenue - as adjusted and on a fully tax equivalent basis

$ 113,758   $ 109,677   $ 109,168   $ 111,305   $ 114,806   $ 443,908   $ 460,864  
Core fee income to revenues ratio 34.18 % 29.49 % 27.49 % 26.46 % 26.21 % 29.44 % 26.56 %
 
Core fee income to revenues ratio (without adjustments) 34.30 % 28.37 % 24.39 % 22.87 % 23.35 % 27.60 % 25.12 %
 

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):

                     
4Q12 4Q11 3Q12
Average Yield/ Average Yield/ Average Yield/
Balance Interest   Rate Balance Interest   Rate Balance Interest   Rate
Interest Earning Assets:
Loans (1) (2) (3):
Commercial related credits
Commercial $ 1,117,323 $ 12,711 4.45 % $ 1,051,065 12,989 4.84 % $ 1,071,538 $ 12,640 4.62 %

Commercial loans collateralized by assignment of lease payments

1,204,431 12,797 4.25 1,102,220 14,167 5.14 1,193,462 13,119 4.40
Real estate commercial 1,766,332 21,636 4.79 1,839,689 25,132 5.35 1,778,414 22,836 5.02
Real estate construction 146,717 1,614 4.30 209,098 2,443 4.57 154,622 1,618 4.09
Total commercial related credits 4,234,803 48,758 4.51 4,202,072 54,731 5.10 4,198,036 50,213 4.68
Other loans
Real estate residential 312,189 3,417 4.38 316,087 3,719 4.71 310,374 3,425 4.41
Home equity 308,854 3,336 4.30 342,011 3,701 4.29 317,854 3,488 4.37
Indirect 207,429 3,061 5.87 188,562 3,080 6.48 202,583 2,984 5.86
Consumer loans 69,554 623 3.56 62,703 482 3.05 69,563 578 3.31
Total other loans 898,026 10,437 4.62 909,363 10,982 4.79 900,374 10,475 4.63
Total loans, excluding covered loans 5,132,829 59,195 4.59 5,111,435 65,713 5.10 5,098,410 60,688 4.74
Covered loans 479,011 5,354 4.45 707,039 10,894 6.11 536,697 7,967 5.91
Total loans 5,611,840 64,549 4.58 5,818,474 76,607 5.22 5,635,107 68,655 4.85
Taxable investment securities 1,508,774 6,371 1.69 1,820,680 11,608 2.55 1,418,549 7,287 2.05

Investment securities exempt from federal income taxes (3)

865,653 11,826 5.46 676,893 9,505 5.62 843,908 11,665 5.53
Other interest earning deposits 361,371 228 0.25 272,762 181 0.26 483,622 312 0.26
Total interest earning assets $ 8,347,638 $ 82,974 3.95 $ 8,588,809 $ 97,901 4.52 $ 8,381,186 $ 87,919 4.17
Non-interest earning assets 1,114,257 1,268,026 1,134,973
Total assets $ 9,461,895 $ 9,856,835 $ 9,516,159
 
Interest Bearing Liabilities:
Core funding:
Money market and NOW accounts $ 2,726,718 $ 1,007 0.15 % $ 2,653,486 $ 1,498 0.22 % $ 2,601,181 $ 1,026 0.16 %
Savings accounts 804,158 144 0.07 751,766 327 0.17 796,229 181 0.09
Certificates of deposit 1,570,147 2,562 0.67 1,971,473 4,294 0.89 1,676,047 2,826 0.70
Customer repurchase agreements 233,532 147 0.25 235,666 151 0.25 211,966 149 0.28
Total core funding 5,334,555 3,860 0.29 5,612,391 6,270 0.44 5,285,423 4,182 0.31
Wholesale funding:
Brokered accounts (includes fee expense) 302,565 2,353 3.09 438,123 3,450 3.12 429,342 3,341 3.10
Other borrowings 286,952 1,885 2.57 431,165 3,468 3.15 392,871 3,065 3.05
Total wholesale funding 589,517 4,238 2.49 869,288 6,918 2.88 822,213 6,406 2.73
Total interest bearing liabilities $ 5,924,072 $ 8,098 0.54 $ 6,481,679 $ 13,188 0.81 $ 6,107,636 $ 10,588 0.69
Non-interest bearing deposits 2,119,632 1,878,049 2,020,762
Other non-interest bearing liabilities 153,419 120,671 139,915
Stockholders' equity 1,264,772 1,376,436 1,247,846
Total liabilities and stockholders' equity $ 9,461,895 $ 9,856,835 $ 9,516,159
Net interest income/interest rate spread (4) $ 74,876   3.41 % $ 84,713   3.71 % $ 77,331   3.48 %
Taxable equivalent adjustment 5,360 4,468 5,256
Net interest income, as reported $ 69,516 $ 80,245 $ 72,075
Net interest margin (5) 3.31 % 3.71 % 3.42 %
Tax equivalent effect 0.26 % 0.20 % 0.25 %

Net interest margin on a fully tax equivalent basis (5)

3.57 % 3.91 % 3.67 %
 
 
(1) Non-accrual loans are included in average loans.
(2) Interest income includes amortization of deferred loan origination fees of $1.0 million, $1.2 million, and $749 thousand for the three months ended December 31, 2012, December 31, 2011, and September 30, 2012, 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.
 

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):

       
2012 2011
Average     Yield/ Average     Yield/
Balance Interest   Rate Balance Interest   Rate
Interest Earning Assets:
Loans (1) (2) (3):
Commercial related credits
Commercial $ 1,080,652 $ 51,051 4.65 % $ 1,108,033 53,813 4.79 %
Commercial loans collateralized by
assignment of lease payments 1,188,022 53,019 4.46 1,041,033 56,453 5.42
Real estate commercial 1,813,421 92,218 5.00 1,968,088 105,342 5.28
Real estate construction 146,660 6,176 4.14 300,288 11,984 3.94
Total commercial related credits 4,228,755 202,464 4.71 4,417,442 227,592 5.08
Other loans
Real estate residential 311,537 14,033 4.50 326,189 15,914 4.88
Home equity 321,031 14,068 4.38 359,972 15,481 4.30
Indirect 197,423 11,926 6.04 181,988 12,034 6.61
Consumer loans 69,638 2,281 3.28 58,205 1,957 3.36
Total other loans 899,629 42,308 4.70 926,354 45,386 4.90
Total loans, excluding covered loans 5,128,384 244,772 4.77 5,343,796 272,978 5.11
Covered loans 562,914 31,582 5.61 755,242 55,706 7.38
Total loans 5,691,298 276,354 4.86 6,099,038 328,684 5.39
Taxable investment securities 1,542,814 33,424 2.17 1,669,971 41,349 2.48
Investment securities exempt from
federal income taxes (3) 815,500 45,094 5.53 460,971 26,562 5.76
Other interest earning deposits 337,325 867 0.26 442,190 1,153 0.26
Total interest earning assets $ 8,386,937 $ 355,739 4.24 $ 8,672,170 $ 397,748 4.59
Non-interest earning assets 1,161,048 1,283,963
Total assets $ 9,547,985 $ 9,956,133
 
Interest Bearing Liabilities:
Core funding:
Money market and NOW accounts $ 2,646,299 $ 4,285 0.16 % $ 2,678,049 $ 7,637 0.29 %
Savings accounts 789,595 786 0.10 732,731 1,379 0.19
Certificates of deposit 1,725,462 12,532 0.76 2,165,541 21,162 0.99
Customer repurchase agreements 210,891 556 0.26 239,896 639 0.27
Total core funding 5,372,247 18,159 0.34 5,816,217 30,817 0.53
Wholesale funding:
Brokered accounts (includes fee expense) 406,908 12,655 3.11 444,895 14,703 3.30
Other borrowings 383,236 11,708 3.00 443,752 13,767 3.06
Total wholesale funding 790,144 24,363 2.70 888,647 28,470 3.03
Total interest bearing liabilities $ 6,162,391 $ 42,522 0.69 $ 6,704,864 $ 59,287 0.88
Non-interest bearing deposits 1,973,666 1,771,918
Other non-interest bearing liabilities 137,302 120,647
Stockholders' equity 1,274,626 1,358,704
Total liabilities and stockholders' equity $ 9,547,985 $ 9,956,133
Net interest income/interest rate spread (4) $ 313,217   3.55 % $ 338,461   3.71 %
Taxable equivalent adjustment 20,429 13,188
Net interest income, as reported $ 292,788 $ 325,273
Net interest margin (5) 3.49 % 3.75 %
Tax equivalent effect 0.24 % 0.15 %
Net interest margin on a fully tax
equivalent basis (5) 3.73 % 3.90 %
 
 
(1) Non-accrual loans are included in average loans.
(2) Interest income includes amortization of deferred loan origination fees of $3.5 million and $4.7 million for the twelve months ended December 31, 2012 and December 31, 2011, 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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