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MB Financial, Inc. (NASDAQ: MBFI), the holding company for MB Financial Bank, N.A., today announced 2014 first quarter net income of $20.0 million.
Key items include:
Net Interest Margin Increased:
Fully taxable equivalent net interest margin was 3.64% for the first quarter of 2014 compared to 3.50% for the prior quarter and 3.59% for the first quarter of 2013.
The increase from the fourth quarter of 2013 was due to lower cash balances held during the first quarter of 2014 (approximately ten basis points of net interest margin improvement) as well as higher yields on taxable investment securities (approximately five basis points of net interest margin improvement).
The increase from the first quarter of 2013 was due to a lower cost of funds and improved taxable investment securities yields, partially offset by lower loan yields.
Fee Income Declined and Non-interest Expense Improved from the Prior Quarter:
Capital markets and international banking fees, treasury management fees and trust and asset management fees all increased from the prior quarter.
Leasing revenues declined due to lower equipment remarketing gains and lower fees from the sale of third-party equipment maintenance contracts.
Core non-interest expense improved from the prior quarter due to lower salaries and employee benefits expense, lower computer services expense, lower professional and legal expense and a reduction in expenses related to the clawback liability under loss sharing agreements with the FDIC.
Credit Quality Metrics:
Our provision for credit losses remained low at approximately $1.2 million for the quarter, but increased from a negative provision of $3.0 million in the prior quarter.
Non-performing loans increased during the quarter compared to the first and fourth quarters of 2013 due to a $22.7 million relationship being placed on non-accrual status during the first quarter of 2014.
Potential problem loan balances improved from year end and a year ago by $10.8 million and $46.7 million, respectively.
Other real estate owned balances improved from year end and a year ago by $2.4 million and $10.5 million, respectively.
Included in other operating expenses was a $2.0 million write-off of an investment in low-income housing funds that invested in real estate projects. We view this write-off as a credit cost due to the nature of the investment. See below for additional details.
Balance Sheet Activity - Average Loans and Average Deposits Increased, Low Cost Deposit Flows Strong:
Average loans, excluding covered loans, increased approximately $71 million (+1.3%) from the fourth quarter and approximately $142 million (+2.7%) from the first quarter one year ago. Loans, excluding covered loans, at the end of the quarter increased $88 million (+1.7%) from a year ago but decreased $82 million (-1.5%) from year end.
Average low cost deposit flows were strong, increasing approximately $76 million (+1.3%) during the first quarter. Low cost deposits at the end of the first quarter increased $161 million (+2.7%) from year end. We typically see low cost deposit outflows during the first quarter. Stable low cost deposits decrease our reliance on wholesale funding sources and allow us to maintain a lower cost of funds.
We continue to maintain robust capital and liquidity ratios and are positioned well for completion of our pending merger with Taylor Capital Group, Inc. Cash and interest bearing deposits at our holding company totaled approximately $140 million as of March 31, 2014.
Taylor Capital Group, Inc. Pending Merger Update:
The stockholders of both MB Financial and Taylor Capital approved the merger agreement in the first quarter of 2014. The completion of the merger remains subject to regulatory approvals and the satisfaction of customary closing conditions.