MB Financial, Inc. Reports Net Income Of $19.7 Million, A Reduction In Non-Performing Loans And Continued 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 2011. The words “MB Financial,” “the Company,” “we,” “our” and “us” refer to MB Financial, Inc. and its consolidated subsidiaries, unless indicated otherwise. We had net income of $19.7 million and net income available to common stockholders of $17.1 million for the third quarter of 2011 compared to a net loss of $2.8 million and a net loss available to common stockholders of $5.4 million for the third quarter of 2010, and a net loss of $7.4 million and a net loss available to common stockholders of $10.0 million for the second quarter of 2011.

Key items for the quarter were as follows:

Credit Quality – Decreased Non-Performing Loans and Non-Performing Assets:
  • Our non-performing loans were $141.0 million or 2.42% of total loans as of September 30, 2011, a decrease of $10.0 million from $151.0 million or 2.54% of total loans at June 30, 2011. Our allowance for loan losses to non-performing loans was 91.23% as of September 30, 2011 compared to 86.12% as of June 30, 2011.
  • Our non-performing assets were $228.7 million or 2.30% of total assets as of September 30, 2011, a decrease of $10.6 million from $239.3 million or 2.40% of total assets as of June 30, 2011.
  • Our allowance for loan losses to total loans was 2.21% as of September 30, 2011 compared to 2.19% as of June 30, 2011.
  • Our provision for credit losses was $11.5 million for the third quarter of 2011, while our net charge-offs were $16.7 million. Our provision for credit losses and net charge-offs for the second quarter of 2011 were $61.3 million and $92.6 million, respectively. Excluding the previously disclosed second quarter 2011 loan sale, our provision for credit losses and net charge-offs for the second quarter of 2011 would have been approximately $11.3 million and $6.0 million, respectively.

Pre-Tax, Pre-Provision Operating Earnings Remain Strong:
  • Pre-tax, pre-provision operating earnings (on a fully tax equivalent basis) were $46.6 million, or 3.00% of risk-weighted assets, for the third quarter of 2011 compared to $50.2 million, or 3.25% of risk-weighted assets, for the second quarter of 2011. Pre-tax, pre-provision operating earnings (on a tax equivalent basis) to average assets decreased to 1.89% for the third quarter of 2011 from 2.02% for the second quarter of 2011.
  • Net interest income on a fully tax equivalent basis decreased $1.4 million compared to the second quarter of 2011 due to a slightly lower level of interest earning assets.
  • Net interest margin on a fully tax equivalent basis was 3.90% for the third quarter of 2011 compared to 3.92% in the third quarter of 2010 and 3.92% in the second quarter of 2011.
  • Core other income was $29.9 million for the third quarter of 2011, a decrease of $1.7 million, or 5.4%, compared to the second quarter of 2011. Core other expense was $67.0 million for the third quarter of 2011, a slight increase from $66.6 million for the second quarter of 2011.

Strong Capital Position:
  • MB Financial Bank significantly exceeds the “Well-Capitalized” threshold established under the regulations of the Office of the Comptroller of the Currency. At September 30, 2011, MB Financial, Inc.’s consolidated total risk-based capital ratio was 19.61%, Tier 1 capital to risk-weighted assets ratio was 17.54% and Tier 1 capital to average asset ratio was 11.59%, compared with 19.18%, 17.11% and 11.16%, respectively, as of June 30, 2011. As of September 30, 2011, total capital was approximately $593.5 million in excess of the “Well-Capitalized” threshold, compared with $569.5 million as of June 30, 2011. Our tangible common equity to tangible assets ratio was 8.06% at September 30, 2011 compared to 7.76% at June 30, 2011.

RESULTS OF OPERATIONS

Third Quarter Results

Net Interest Income

Net interest income on a fully tax equivalent basis decreased $1.4 million from the second quarter of 2011 and decreased by $6.5 million from the third quarter of 2010 to the third quarter of 2011. The decrease from the second quarter of 2011 and from the third quarter of 2010 was due primarily to a decrease in interest earning assets.

Our net interest margin, on a fully tax equivalent basis, was 3.90% for the third quarter of 2011 compared to 3.92% for the second quarter of 2011 and 3.92% for the third quarter of 2010. Our net interest margin, on a fully tax equivalent basis, was 3.90% for the nine months ended September 30, 2011 compared to 3.83% in the nine months ended September 30, 2010. The margin increase from 2010 was due to a decrease in our average cost of funds as a result of an improved deposit mix and downward repricing of interest bearing deposits, as well as a lower level of non-performing loans.

Our non-performing loans reduced net interest margin during the third quarter of 2011, second quarter of 2011 and the third quarter of 2010 by approximately 9 basis points, 15 basis points and 22 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,   September 30,
  2011     2011     2011     2010     2010     2011     2010
Core other income:
Loan service fees $ 2,159 $ 2,812 $ 1,126 $ 1,532 $ 1,659 $ 6,097 $ 4,985
Deposit service fees 9,932 9,023 10,030 9,920 10,705 28,985 29,014
Lease financing, net 6,494 6,861 5,783 7,185 5,022 19,138 14,668
Brokerage fees 1,273 1,615 1,419 1,231 1,407 4,307 3,781
Trust and asset management fees 4,272 4,455 4,431 4,243 3,923 13,158 10,794
Increase in cash surrender value of life insurance 1,014 1,451 968 930 1,209 3,433 2,586
Accretion of FDIC indemnification asset 985 1,339 1,831 3,009 3,602 4,155 6,669
Other operating income   3,761     4,041     3,386     3,857     2,406     11,188     8,147
Total core other income   29,890     31,597     28,974     31,907     29,933     90,461     80,644
 
Non-core other income: (1)
Net gain (loss) on sale of investment securities - 232 (3) (4) 9,482 229 18,652
Net gain on sale of other assets - 13 357 419 299 370 211
Net gain on sale of loans held for sale (A) - 1,790 - - - 1,790 -
Net loss recognized on other real estate owned (A) (2,354) (3,628) (369) (1,656) (3,608) (6,351) (6,855)
Net loss recognized on other real estate owned related to FDIC transactions (A) (764) (1,017) (3) (468) (305) (1,784) (305)
Acquisition related gains - - - - - - 62,649
Increase (decrease) in market value of assets held in trust deferred compensation (A)   (405)     158     187     597     (3)     (60)     (35)
Total non-core other income   (3,523)     (2,452)     169     (1,112)     5,865     (5,806)     74,317
                                       
Total other income $ 26,367   $ 29,145   $ 29,143   $ 30,795   $ 35,798   $ 84,655   $ 154,961

(1) Letter denotes the corresponding line items where these non-core other income items reside in the consolidated statements of income as follows: A – Other operating income.

Core other income decreased by $1.7 million from the second quarter of 2011 to the third quarter of 2011. Loan service fees decreased due to less prepayment and exit fees received on early payoffs during the third quarter of 2011. Deposit fees increased during the third quarter due to changes in retail products offered. Net lease financing income decreased mainly as a result of a decrease in the sales of third party equipment maintenance contracts. The increase in cash surrender value of life insurance was lower due to a death benefit recorded in the second quarter of 2011, while there was no death benefit recorded in the third quarter of 2011. Accretion of indemnification asset decreased as expected due to a corresponding decrease in the indemnification asset balance during the third quarter of 2011.

Core other income increased by $9.8 million from the nine months ended September 30, 2010 to the nine months ended September 30, 2011. Loan service fees increased due to an increase in prepayment and exit fees. Net lease financing increased primarily due to an increase in the sales of third party equipment maintenance contracts. Trust and asset management fees increased primarily due to an increase in assets under management as a result of organic growth and an increase in the market value of assets under management. The increase in cash surrender value of life insurance was higher due to an improvement in overall asset yields. Accretion of indemnification asset decreased as expected due to a corresponding decrease in the indemnification asset balance during the nine months ended September 30, 2011. Non-core other income decreased in the nine months ended September 30, 2011 compared to the nine months ended September 30, 2010 as a result of the acquisition related gains recognized on the Broadway Bank and New Century Bank FDIC-assisted transactions in the second quarter of 2010 and lower gains on sales of investment securities in 2011.

Other Expense (in thousands):

    Three Months Ended   Nine Months Ended
September 30,   June 30,   March 31,   December 31,   September 30, September 30,   September 30,
  2011     2011     2011     2010     2010     2011     2010
Core other expense:
Salaries and employee benefits $ 38,827 $ 37,657 $ 37,588 $ 35,802 $ 37,427 $ 114,072 $ 107,985
Occupancy and equipment expense 9,092 8,483 9,394 7,938 8,800 26,969 26,907
Computer services expense 2,544 2,633 2,510 2,445 2,654 7,687 8,504
Advertising and marketing expense 1,740 1,748 1,719 1,573 1,620 5,207 4,892
Professional and legal expense 1,647 1,853 1,225 1,718 1,637 4,725 4,085
Brokerage fee expense 363 574 483 448 596 1,420 1,478
Telecommunication expense 944 937 935 819 975 2,816 2,847
Other intangibles amortization expense 1,414 1,416 1,425 1,632 1,567 4,255 4,582
FDIC insurance premiums 2,272 3,502 3,428 3,930 3,873 9,202 11,670
Other real estate expense, net 1,181 1,251 398 858 734 2,830 1,836
Other operating expenses   6,989     6,516     6,572     6,855     6,598     20,077     19,410
Total core other expense   67,013     66,570     65,677     64,018     66,481     199,260     194,196
 
Non-core other expense: (1)
Branch impairment charges - - 1,000 - - 1,000 -
Increase (decrease) in market value of assets held in trust for deferred compensation (A)   (405)     158     187     597     (3)     (60)     (35)
Total non-core other expense   (405)     158     1,187     597     (3)     940     (35)
                                       
Total other expense $ 66,608   $ 66,728   $ 66,864   $ 64,615   $ 66,478   $ 200,200   $ 194,161

(1) Letters denote the corresponding line items where these non-core other expense items reside in the consolidated statements of income as follows: A – Salaries and employee benefits.

Core other expense increased by approximately $450 thousand in the third quarter of 2011 compared with the second quarter of 2011. Salaries and employee benefits increased due to an increase in long-term incentives and health insurance expense. Occupancy and equipment expense increased as a result of increased property taxes. FDIC insurance premiums decreased as a result of the change in the assessment computation and the impact of improved credit quality on the computation.

Core other expense increased by $5.1 million from the nine months ended September 30, 2010 to the nine months ended September 30, 2011. Salaries and employee benefits expense increased due to additional employees added during 2010 due to the New Century and Broadway FDIC-assisted transactions, problem loan remediation staff added throughout 2010 and increased leasing commissions on higher leasing revenues. Computer services expense decreased primarily due to conversion expenditures on FDIC assisted transactions completed in 2010. Professional and legal expense increased during the nine months ended September 30, 2011 as a result of higher loan remediation expenses. FDIC insurance premiums decreased due to lower deposits, a change in the assessment computation during the second quarter of 2011, and the impact of improved credit quality on the computation. Other real estate expense increased as a result of more properties in other real estate owned. Non-core other expense was primarily impacted by a $1.0 million fixed asset impairment charge incurred in the first quarter of 2011 caused by our decision to close a branch.

Income Taxes

The Company had income tax expense of $9.0 million for the three months ended September 30, 2011 and a benefit of $2.5 million for the nine months ended September 30, 2011. The three month tax expense and year-to-date tax benefits are calculated based on pre-tax income excluding tax-exempt items. The year-to-date amount also includes a $2 million increase in deferred tax assets as a result of the Illinois corporate income tax rate increase which was enacted and reflected in the first quarter of 2011.

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,
  2011     2011     2011     2010     2010
  % of   % of   % of   % of   % of
  Amount   Total     Amount   Total     Amount   Total     Amount   Total     Amount   Total
Commercial related credits:
Commercial loans $ 1,042,583 18% $ 1,108,295 19% $ 1,154,451 18% $ 1,206,984 18% $ 1,291,115 19%
Commercial loans collateralized by assignment of lease payments (lease loans) 1,067,191 18% 1,031,677 17% 1,038,507 16% 1,053,446 16% 1,019,083 15%
Commercial real estate 1,844,894 32% 1,863,223 32% 2,084,651 33% 2,176,584 33% 2,259,708 33%
Construction real estate 210,206   4% 246,557   4% 356,579   6% 423,339   6% 445,881   6%
Total commercial related credits 4,164,874   72% 4,249,752   72% 4,634,188   73% 4,860,353   73% 5,015,787   73%
Other loans:
Residential real estate 316,305 5% 317,821 5% 335,423 5% 328,482 5% 328,985 5%
Indirect vehicle 189,033 4% 182,536 3% 175,058 3% 175,664 3% 182,091 2%
Home equity 348,934 6% 357,181 6% 371,108 6% 381,662 6% 386,866 6%
Consumer loans 76,025   1% 75,069   1% 74,585   1% 59,320   1% 76,219   1%
Total other loans 930,297   16% 932,607   15% 956,174   15% 945,128   15% 974,161   14%
Gross loans excluding covered loans 5,095,171 88% 5,182,359 87% 5,590,362 88% 5,805,481 88% 5,989,948 87%
Covered loans (1) 718,566   12% 755,670   13% 777,634   12% 812,330   12% 859,038   13%
Total loans $ 5,813,737 100% $ 5,938,029 100% $ 6,367,996 100% $ 6,617,811 100% $ 6,848,986 100%

(1) Covered loans refer to loans we acquired in FDIC-assisted transactions that are subject to loss-sharing agreements with the FDIC.

During the second quarter of 2011, we sold certain performing, sub-performing and non-performing loans. The loans sold had an aggregate carrying amount of $281.6 million prior to the transfer to loans held for sale, which was comprised of $160.8 million in commercial real estate loans, $73.7 million in construction real estate loans, $14.5 million in commercial loans and $32.6 million in residential real estate and home equity loans.

ASSET QUALITY

The following table presents a summary of non-performing assets, excluding loans held for sale, credit-impaired loans that were acquired as part of our FDIC-assisted transactions (see definition of “purchased credit-impaired loans” below) and OREO related to FDIC-assisted transactions, as of the dates indicated (dollar amounts in thousands):
    September 30,   June 30,   March 31,   December 31,   September 30,
  2011     2011     2011     2010     2010
Non-performing loans:
Non-accrual loans(1) $ 140,979 $ 149,905 $ 318,923 $ 362,441 $ 392,477
Loans 90 days or more past due, still accruing interest - 1,121 - 1 115
Total non-performing loans 140,979 151,026 318,923 362,442 392,592
 
OREO 87,469 88,185 80,107 71,476 59,114
Repossessed vehicles 249 55 139 82 321
Total non-performing assets $ 228,697 $ 239,266 $ 399,169 $ 434,000 $ 452,027
 
Total allowance for loan losses (2) 128,610 130,057 178,410 192,217 193,926
Partial charge-offs taken on non-performing loans 50,578 54,424 156,692 163,972 171,549
Allowance for loan losses, including partial charge-offs $ 179,188 $ 184,481 $ 335,102 $ 356,189 $ 365,475
 
Accruing restructured loans(3) $ 34,321 $ 35,037 $ 31,819 $ 22,543 $ 12,226
 
Total non-performing loans to total loans 2.42% 2.54% 5.01% 5.48% 5.73%
Total non-performing assets to total assets 2.30% 2.40% 3.96% 4.21% 4.26%
Allowance for loan losses to non-performing loans 91.23% 86.12% 55.94% 53.03% 49.40%
Allowance for loan losses to non-performing loans,
including partial charge-offs taken(4) 93.54% 89.79% 70.46% 67.66% 64.78%

(1) Includes $36.0 million, $22.5 million, $60.9 million, $47.6 million, and $16.9 million of restructured loans on non-accrual status at September 30, 2011, June 30, 2011, March 31, 2011, December 31, 2010 and September 30, 2010, respectively.

(2) Includes $12.7 million, $13.6 million and $15.6 million for unfunded credit commitments at March 31, 2011, December 31, 2010 and September 30, 2010, respectively.

(3) Accruing restructured loans consists primarily of commercial and commercial real estate loans that have been modified and are performing in accordance with those modified terms.

(4) Calculated by adding partial charge-offs to both the numerator and denominator in the calculation.

The decreases in total non-performing loans and total non-performing assets from March 31, 2011 to June 30, 2011 were primarily due to the sale during the second quarter of 2011 of loans with an aggregate carrying amount of $281.6 million prior to the transfer to loans held for sale, $156.3 million of which were non-performing.

The following table presents a summary of total performing loans greater than 30 days and less than 90 days past due, excluding loans held for sale and credit-impaired loans that were acquired as part of our FDIC-assisted transactions (see definition of “purchased credit-impaired loans” below), as of the dates indicated (dollar amounts in thousands):
  September 30,   June 30,   March 31,   December 31,   September 30,
  2011     2011     2011     2010     2010
 
30 - 59 Days Past Due $ 15,564 $ 10,568 $ 23,912 $ 9,386 $ 19,302
60 - 89 Days Past Due 4,307 4,881 4,049 5,073 6,011
$ 19,871 $ 15,449 $ 27,961 $ 14,459 $ 25,313
 

Approximately $9.2 million of performing loans past due were included among the loans classified as potential problem loans (defined and discussed below) as of September 30, 2011 compared to $1.1 million as of June 30, 2011.

The following table represents a summary of OREO, excluding OREO related to FDIC-assisted transactions (in thousands):

  September 30,   June 30,   March 31,   December 31,   September 30,
2011 2011 2011 2010 2010
 
Balance at the beginning of quarter $ 88,185 $ 80,107 $ 71,476 $ 59,114 $ 43,988
Transfers in at fair value less estimated costs to sell 15,658 15,761 25,167 27,170 21,383
Fair value adjustments (2,524) (3,417) (1,314) (1,562) (3,429)
Net (losses) gains on sales of OREO 170 (212) 945 (94) (179)
Cash received upon disposition (14,020) (4,054) (16,167) (13,152) (2,649)
Balance at the end of quarter $ 87,469 $ 88,185 $ 80,107 $ 71,476 $ 59,114
 

The following table presents data related to non-performing loans, by dollar amount and category at September 30, 2011, excluding loans held for sale and credit-impaired loans that were acquired as part of our FDIC-assisted transactions (dollar amounts in thousands):
  Commercial and   Construction Real Estate   Commercial Real Estate   Consumer  
    Lease Loans   Loans   Loans     Loans     Total Loans
Number of   Number of   Number of  
    Relationships     Amount   Relationships     Amount   Relationships     Amount     Amount     Amount
$10.0 million or more - $ - - $ - - $ - $ - $ -
$5.0 million to $9.9 million 3 20,136 - - 3 23,938 - 44,074
$1.5 million to $4.9 million 4 8,854 - - 13 37,474 - 46,328
Under $1.5 million 37     8,654   5     2,913   54     25,495     13,515     50,577
44   $ 37,644   5   $ 2,913   70   $ 86,907   $ 13,515   $ 140,979
 
Percentage of individual loan category 1.78% 1.39% 4.71% 1.45% 2.42%
 
Specific reserves and partial charge-offs as a percentage of non-performing loans
44% 70% 26%

The following table presents data related to non-performing loans, by dollar amount and category at June 30, 2011, excluding loans held for sale and credit-impaired loans that were acquired as part of our FDIC-assisted transactions (dollar amounts in thousands):
  Commercial and   Construction Real Estate   Commercial Real Estate   Consumer   Total
    Lease Loans   Loans   Loans     Loans     Loans
Number of   Number of   Number of  
    Relationships     Amount   Relationships     Amount   Relationships     Amount     Amount     Amount
$10.0 million or more - $ - - $ - - $ - $ - $ -
$5.0 million to $9.9 million 3 20,950 1 7,708 4 32,325 - 60,983
$1.5 million to $4.9 million - - 3 8,858 11 29,442 - 38,300
Under $1.5 million 34     12,397   3     653   42     25,319     13,374     51,743
37   $ 33,347   7   $ 17,219   57   $ 87,086   $ 13,374   $ 151,026
 
Percentage of individual loan category 1.56% 6.98% 4.67% 1.43% 2.54%
 
Specific reserves and partial charge-offs as a percentage of non-performing loans
46% 57% 25%

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). Potential problem loans carry a higher probability of default and require additional attention by management. The aggregate principal amount of potential problem loans was $179.7 million, or 3.09% of total loans, as of September 30, 2011, compared to $234.8 million, or 3.95% of total loans, as of June 30, 2011. The decrease was primarily due to upgrades and loan payments, as well as some downward migration to non-performing status.

“Purchased credit-impaired loans” refer to certain loans acquired in FDIC-assisted transactions, for which deterioration in credit quality occurred before the acquisition date. Upon acquisition, these loans were recorded at fair value with interest income to be accreted 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.

The following table displays information on commercial real estate loans by risk category and type, excluding covered loans, at September 30, 2011 (dollars in thousands):
    Risk Category    
         
Potential Problem
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(1)
    Amount   Reserved     Amount   Reserved     Amount  

Reserved(1)
 
Church and school $ 3,526 38% $ 680 7% $ 58,587 3% $ 62,793 5%
Healthcare - 0% - 0% 160,111 3% 160,111 3%
Industrial 35,866 31% 67,729 12% 361,102 3% 464,697 7%
Multifamily 8,668 53% 53,479 4% 336,339 3% 398,486 5%
Office 3,058 13% 25,478 12% 155,821 3% 184,357 4%
Other 20,038 5% 8,573 11% 149,272 3% 177,883 4%
Retail 15,751 13% 24,787 12% 356,029 2% 396,567 4%
$ 86,907 26% $ 180,726 10% $ 1,577,261 3% $ 1,844,894 5%

(1) To calculate the percentage of loan balances reserved, partial charge-offs taken on non-performing loans have been added back to both reserves and outstanding balance.

The following table sets forth information for commercial real estate loans by risk category, excluding covered loans, for the past four quarters (dollars in thousands):

  Risk Category    
         
Potential Problem
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(1)
    Amount   Reserved     Amount   Reserved     Amount  

Reserved(1)
 
Total CRE loans as of September 30, 2011 $ 86,907 26% $ 180,726 10% $ 1,577,261 3% $ 1,844,894 5%
 
Total CRE loans as of June 30, 2011 $ 87,086 25% $ 177,203 16% $ 1,598,934 2% $ 1,863,223 4%
 
Total CRE loans as of March 31, 2011 $ 152,754 32% $ 256,368 20% $ 1,675,529 2% $ 2,084,651 7%
 
Total CRE loans as of December 31, 2010 $ 158,864 32% $ 263,829 18% $ 1,753,891 2% $ 2,176,584 7%

(1) To calculate the percentage of loan balances reserved, partial charge-offs taken on non-performing loans have been added back to both reserves and outstanding balance.

The following table sets forth information for construction real estate loans by risk category, excluding covered loans, for the past five quarters (dollars in thousands):

   

Risk Category
   
         
Potential Problem
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(1)
    Amount   Reserved     Amount   Reserved     Amount  

Reserved(1)
 
Total construction loans as of September 30, 2011 $ 2,913 70% $ 16,425 17% $ 190,868 6% $ 210,206 9%
 
Total construction loans as of June 30, 2011 $ 17,219 57% $ 33,010 25% $ 196,328 5% $ 246,557 13%
 
Total construction loans as of March 31, 2011 $ 97,845 47% $ 45,026 19% $ 213,708 3% $ 356,579 23%
 
Total construction loans as of December 31, 2010 $ 122,077 47% $ 64,303 14% $ 236,959 3% $ 423,339 22%
 
Total construction loans as of September 30, 2010 $ 130,422 48% $ 95,256 16% $ 220,203 3% $ 445,881 23%

(1) To calculate the percentage of loan balances reserved, partial charge-offs taken on non-performing loans have been added back to both reserves and outstanding balance.

The decrease in commercial real estate loans and construction real estate loans from March 31, 2011 to June 30, 2011 was primarily due to the sale of loans in the second quarter of 2011, as discussed above.

Below is a reconciliation of the activity in our allowance for loan losses for the periods indicated (dollar amounts in thousands):
      Three Months Ended   Nine Months Ended
September 30,   June 30,   March 31,   December 31,   September 30,   September 30,   September 30,
  2011     2011     2011     2010     2010     2011     2010
Balance at the beginning of period $ 147,107 $ 178,410 $ 192,217 $ 193,926 $ 195,612 $ 192,217 $ 177,072
Provision for credit losses 11,500 61,250 40,000 49,000 65,000 112,750 197,200
Charge-offs:
Commercial loans (3,497) (7,991) (3,151) (9,141) (11,362) (14,639) (48,936)
Commercial loans collateralized by assignment of lease payments (lease loans) - (93) - (43) (418) (93) (1,668)
Commercial real estate loans (7,815) (55,250) (29,775) (27,360) (25,265) (92,840) (52,468)
Construction real estate (6,008) (18,826) (21,094) (17,136) (29,120) (45,928) (77,397)
Residential real estate (141) (8,080) (3,562) (1,363) (1,500) (11,783) (1,963)
Indirect vehicle (611) (553) (718) (968) (503) (1,882) (2,231)
Home equity (1,605) (5,493) (1,907) (1,364) (1,369) (9,005) (3,268)
Consumer loans (475) (344) (544) (428) (600) (1,363) (1,327)
Total charge-offs (20,152) (96,630) (60,751) (57,803) (70,137) (177,533) (189,258)
Recoveries:
Commercial loans 1,413 758 2,565 3,842 1,900 4,736 4,946
Commercial loans collateralized by assignment of lease payments (lease loans) 5 153 66 26 62 224 158
Commercial real estate loans 739 312 1,534 800 907 2,585 1,270
Construction real estate 681 2,364 2,026 1,672 330 5,071 1,498
Residential real estate 7 26 7 127 7 40 57
Indirect vehicle 327 369 325 286 232 1,021 877
Home equity 151 19 48 250 11 218 101
Consumer loans 83 76 373 91 2 532 5
Total recoveries 3,406 4,077 6,944 7,094 3,451 14,427 8,912
             
Total net charge-offs (16,746) (92,553) (53,807) (50,709) (66,686) (163,106) (180,346)
 
Allowance for credit losses 141,861 147,107 178,410 192,217 193,926 141,861 193,926
 
Allowance for unfunded credit commitments (1) (13,251) (17,050) - - - (13,251) -
 
Allowance for loan losses (2) $ 128,610 $ 130,057 $ 178,410 $ 192,217 $ 193,926 $ 128,610 $ 193,926
 
Total loans, excluding loans held for sale $ 5,813,737 $ 5,938,029 $ 6,367,996 $ 6,617,811 $ 6,848,986 $ 5,813,737 $ 6,848,986
Average loans, excluding loans held for sale $ 5,827,181 $ 6,299,990 $ 6,460,508 $ 6,723,840 $ 6,939,415 $ 6,191,268 $ 6,770,550
 
Ratio of allowance for loan losses to total loans,
excluding loans held for sale 2.21% 2.19% 2.80% 2.90% 2.83% 2.21% 2.83%
Ratio of allowance for credit losses to total loans,
excluding loans held for sale, and unfunded credit
commitments 2.40% 2.43% 2.75% 2.85% 2.78% 2.40% 2.78%
Net loan charge-offs to average loans, excluding loans
held for sale (annualized) 1.14% 5.89% 3.38% 2.99% 3.81% 3.52% 3.56%

(1) The reserve for unfunded credit commitments (primarily letters of credit) was reclassified from the allowance for loan losses to other liabilities as of June 30, 2011.

(2) Includes $12.7 million, $13.6 million and $15.6 million for unfunded credit commitments at March 31, 2011, December 31, 2010 and September 30, 2010, respectively.

The activity in the second quarter of 2011 reflects the previously disclosed sale of certain performing, sub-performing and non-performing loans, which resulted in approximately $87 million in charge-offs and an increase in the provision for losses of approximately $50 million.

Our allowance for loan losses is comprised of three elements: a general loss reserve, a specific reserve for impaired loans, and a reserve for smaller-balance homogenous loans. The following table presents these three elements of our allowance for loan losses (in thousands):
  September 30,   June 30,   March 31,   December 31,
  2011     2011     2011     2010
 
General loss reserve $ 102,752 $ 104,002 $ 126,423 $ 126,435
Specific reserve (1) 11,416 12,111 38,054 51,826
Smaller-balance homogenous loans reserve 14,442 13,944 13,933 13,956
Total allowance for loan losses $ 128,610 $ 130,057 $ 178,410 $ 192,217

(1) The specific reserve as of March 31, 2011 and December 31, 2010 includes reserves on unfunded credit commitments of approximately $12.7 million and $13.6 million, respectively. Beginning as of June 30, 2011, reserves on unfunded credit commitments are recorded as liabilities.

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.

INVESTMENT SECURITIES

The following table sets forth the fair value, amortized cost, and total unrealized gain of our investment securities, by type (in thousands):
  At September 30,   At June 30,   At March 31,   At December 31,   At September 30,
  2011     2011     2011     2010     2010
 
Securities available for sale:
Fair value
Government sponsored agencies and enterprises $ 56,007 $ 55,656 $ 56,971 $ 19,434 $ 24,698
States and political subdivisions 394,279 392,670 365,481 364,932 379,675
Mortgage-backed securities 1,421,789 1,424,302 1,279,968 1,197,066 898,837
Corporate bonds 5,899 6,019 6,019 6,140 6,140
Equity securities 10,764 10,435 10,215 10,171 10,315
Total fair value $ 1,888,738 $ 1,889,082 $ 1,718,654 $ 1,597,743 $ 1,319,665
 
Amortized cost
Government sponsored agencies and enterprises $ 53,016 $ 54,423 $ 56,452 $ 18,766 $ 23,826
States and political subdivisions 366,651 371,598 350,851 351,274 355,121
Mortgage-backed securities 1,399,801 1,401,975 1,258,171 1,175,021 887,422
Corporate bonds 5,899 6,019 6,019 6,140 6,140
Equity securities 10,324 10,246 10,169 10,093 10,016
Total amortized cost $ 1,835,691 $ 1,844,261 $ 1,681,662 $ 1,561,294 $ 1,282,525
 
Unrealized gain
Government sponsored agencies and enterprises $ 2,991 $ 1,233 $ 519 $ 668 $ 872
States and political subdivisions 27,628 21,072 14,630 13,658 24,554
Mortgage-backed securities 21,988 22,327 21,797 22,045 11,415
Corporate bonds - - - - -
Equity securities 440 189 46 78 299
Total unrealized gain $ 53,047 $ 44,821 $ 36,992 $ 36,449 $ 37,140
 
Securities held to maturity, at cost:
States and political subdivisions $ 240,839 $ - $ - $ - $ -
Mortgage-backed securities 258,199 230,154 102,206 - -
Total amortized cost $ 499,038 $ 230,154 $ 102,206 $ - $ -

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 securities portfolio. Additionally, more than 99% of our mortgage-backed securities are agency guaranteed.

DEPOSIT MIX

The following table shows the composition of deposits as of the dates indicated (dollars in thousands):
    September 30,   June 30,   March 31,   December 31,   September 30,
  2011     2011     2011     2010     2010
  % of   % of   % of   % of   % of
  Amount   Total     Amount   Total     Amount   Total     Amount   Total     Amount   Total
Low cost deposits:
Noninterest bearing deposits $ 1,803,141 23% $ 1,776,873 23% $ 1,666,868 22% $ 1,691,599 21% $ 1,704,142 20%
Money market and NOW accounts 2,722,162 35% 2,645,953 34% 2,712,314 35% 2,776,181 34% 2,819,731 34%
Savings accounts 751,062   10% 729,222   9% 718,896   10% 697,851   8% 633,975   7%
Total low cost deposits 5,276,365   68% 5,152,048   66% 5,098,078   65% 5,165,631   63% 5,157,848   61%
 
Certificates of deposit:
Certificates of deposit 1,958,643 25% 2,082,393 27% 2,273,447 28% 2,447,005 30% 2,649,759 31%
Public funds - certificates of deposit 42,567 1% 42,422 1% 53,144 1% 72,112 1% 90,754 1%
Brokered deposit accounts 444,332   6% 441,720   6% 467,337   6% 468,210   6% 498,264   6%
Total certificates of deposit 2,445,542   32% 2,566,535   34% 2,793,928   35% 2,987,327   37% 3,238,777   39%
 
Total deposits $ 7,721,907   100% $ 7,718,583   100% $ 7,892,006   100% $ 8,152,958   100% $ 8,396,625   100%

Our deposit mix improved in the quarter, with approximately 68% of deposits in lower cost sources at September 30, 2011, compared to 66% at June 30, 2011 and 61% at September 30, 2010. Our ratio of certificates of deposit to total deposits was 32% at September 30, 2011 compared to 34% at June 30, 2011 and 39% at September 30, 2010. Our ratio of noninterest bearing deposits to total deposits was 23% at September 30, 2011 and at June 30, 2011, up from 20% at September 30, 2010.

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 revenues, 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 FDIC-assisted transactions we previously completed will not be realized; (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 the Dodd-Frank Wall Street Reform and Consumer Protection Act and regulations adopted thereunder, changes in federal and/or state tax laws or interpretations thereof by taxing authorities, changes in laws, rules or regulations applicable to companies that have participated in the TARP Capital Purchase Program of the U.S. Department of the Treasury 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)
 
September 30, June 30, March 31, December 31, September 30,
  2011     2011     2011     2010     2010
ASSETS
Cash and due from banks $ 133,755 $ 129,942 $ 123,794 $ 106,726 $ 131,381
Interest earning deposits with banks   347,055     513,378     504,765     737,433     857,997
Total cash and cash equivalents 480,810 643,320 628,559 844,159 989,378
Investment securities:
Securities available for sale, at fair value 1,888,738 1,889,082 1,718,654 1,597,743 1,319,665
Securities held to maturity, at cost 499,038 230,154 102,206 - -
Non-marketable securities - FHLB and FRB Stock   80,815     80,815     80,186     80,186     78,807
Total investment securities 2,468,591 2,200,051 1,901,046 1,677,929 1,398,472
Loans held for sale - - 11,533 - -
Loans:
Total loans excluding covered loans 5,095,171 5,182,359 5,590,362 5,805,481 5,989,948
Covered loans   718,566     755,670     777,634     812,330     859,038
Total loans 5,813,737 5,938,029 6,367,996 6,617,811 6,848,986
Less allowance for loan losses   128,610     130,057     178,410     192,217     193,926
Net loans 5,685,127 5,807,972 6,189,586 6,425,594 6,655,060
Lease investments, net 133,345 139,391 129,182 126,906 131,324
Premises and equipment, net 211,062 210,901 209,257 210,886 185,064
Cash surrender value of life insurance 124,364 126,938 126,014 125,046 124,116
Goodwill, net 387,069 387,069 387,069 387,069 387,069
Other intangibles, net 30,904 32,318 33,734 35,159 36,791
Other real estate owned 87,469 88,185 80,107 71,476 59,114
Other real estate owned related to FDIC transactions 69,311 69,920 61,461 44,745 63,495
FDIC indemnification asset 94,542 119,837 148,314 215,460 380,342
Other assets   149,767     151,833     165,481     155,935     212,755
Total assets $ 9,922,361   $ 9,977,735   $ 10,071,343   $ 10,320,364   $ 10,622,980
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits:
Noninterest bearing $ 1,803,141 $ 1,776,873 $ 1,666,868 $ 1,691,599 $ 1,704,142
Interest bearing   5,918,766     5,941,710     6,225,138     6,461,359     6,692,483
Total deposits 7,721,907 7,718,583 7,892,006 8,152,958 8,396,625
Short-term borrowings 257,418 235,733 295,180 268,844 282,364
Long-term borrowings 274,378 275,559 275,327 285,073 294,529
Junior subordinated notes issued to capital trusts 158,546 158,554 158,563 158,571 158,579
Accrued expenses and other liabilities   141,490     243,962     100,031     110,132     154,969
Total liabilities   8,553,739     8,632,391     8,721,107     8,975,578     9,287,066
Stockholders' Equity
Preferred stock 194,562 194,407 194,255 194,104 193,956
Common stock 548 546 546 546 540
Additional paid-in capital 730,056 728,244 726,604 725,400 716,294
Retained earnings 411,659 396,081 406,594 402,810 402,754
Accumulated other comprehensive income 32,322 27,322 22,566 22,233 22,655
Treasury stock   (3,010)     (3,771)     (2,845)     (2,828)     (2,806)
Controlling interest stockholders' equity 1,366,137 1,342,829 1,347,720 1,342,265 1,333,393
Noncontrolling interest   2,485     2,515     2,516     2,521     2,521
Total stockholders' equity   1,368,622     1,345,344     1,350,236     1,344,786     1,335,914
Total liabilities and stockholders' equity $ 9,922,361   $ 9,977,735   $ 10,071,343   $ 10,320,364   $ 10,622,980

           
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,
2011   2011   2011   2010   2010   2011   2010
Interest income:
Loans $ 78,046 $ 84,114 $ 87,167 $ 92,701 $ 94,697 $ 249,327 $ 271,783
Investment securities:
Taxable 11,699 10,290 7,752 7,001 11,420 29,741 43,540
Nontaxable 4,299 3,443 3,345 3,367 3,387 11,087 10,218
Federal funds sold - - - - - - 2
Other interest earning accounts 244   258   470   504   248   972   524
Total interest income 94,288   98,105   98,734   103,573   109,752   291,127   326,067
Interest expense:
Deposits 10,207 11,746 13,359 15,598 18,597 35,312 60,252
Short-term borrowings 204 239 217 255 281 660 890
Long-term borrowings & junior subordinated notes 3,461   3,713   2,953   3,065   3,256   10,127   9,808
Total interest expense 13,872   15,698   16,529   18,918   22,134   46,099   70,950
Net interest income 80,416 82,407 82,205 84,655 87,618 245,028 255,117
Provision for credit losses 11,500   61,250   40,000   49,000   65,000   112,750   197,200
Net interest income after provision for credit losses 68,916   21,157   42,205   35,655   22,618   132,278   57,917
Other income:
Loan service fees 2,159 2,812 1,126 1,532 1,659 6,097 4,985
Deposit service fees 9,932 9,023 10,030 9,920 10,705 28,985 29,014
Lease financing, net 6,494 6,861 5,783 7,185 5,022 19,138 14,668
Brokerage fees 1,273 1,615 1,419 1,231 1,407 4,307 3,781
Trust & asset management fees 4,272 4,455 4,431 4,243 3,923 13,158 10,794
Net gain (loss) on sale of investment securities - 232 (3) (4) 9,482 229 18,652
Increase in cash surrender value of life insurance 1,014 1,451 968 930 1,209 3,433 2,586
Net gain (loss) on sale of other assets - 13 357 419 299 370 211
Acquisition related gains - - - - - - 62,649
Accretion of FDIC indemnification asset 985 1,339 1,831 3,009 3,602 4,155 6,669
Other operating income 238   1,344   3,201   2,330   (1,510)   4,783   952
Total other income 26,367   29,145   29,143   30,795   35,798   84,655   154,961
Other expense:
Salaries & employee benefits 38,422 37,815 37,775 36,399 37,424 114,012 107,950
Occupancy & equipment expense 9,092 8,483 9,394 7,938 8,800 26,969 26,907
Computer services expense 2,544 2,633 2,510 2,445 2,654 7,687 8,504
Advertising & marketing expense 1,740 1,748 1,719 1,573 1,620 5,207 4,892
Professional & legal expense 1,647 1,853 1,225 1,718 1,637 4,725 4,085
Brokerage fee expense 363 574 483 448 596 1,420 1,478
Telecommunication expense 944 937 935 819 975 2,816 2,847
Other intangible amortization expense 1,414 1,416 1,425 1,632 1,567 4,255 4,582
FDIC insurance premiums 2,272 3,502 3,428 3,930 3,873 9,202 11,670
Branch impairment charges - - 1,000 - - 1,000 -
Other real estate expense, net 1,181 1,251 398 858 734 2,830 1,836
Other operating expenses 6,989   6,516   6,572   6,855   6,598   20,077   19,410
Total other expense 66,608   66,728   66,864   64,615   66,478   200,200   194,161
Income (loss) before income taxes 28,675 (16,426) 4,484 1,835 (8,062) 16,733 18,717
Income taxes 8,978   (9,060)   (2,460)   (1,358)   (5,253)   (2,542)   1,382
Net income (loss) 19,697 (7,366) 6,944 3,193 (2,809) 19,275 17,335
Preferred stock dividends and discount accretion 2,605   2,602   2,601   2,598   2,597   7,808   7,784
Net income (loss) available to common stockholders $ 17,092   $ (9,968)   $ 4,343   $ 595   $ (5,406)   $ 11,467   $ 9,551
  Three Months Ended   Nine Months Ended
September 30,   June 30,   March 31,   December 31,   September 30,   September 30,   September 30,
  2011     2011     2011     2010     2010     2011     2010
Common share data:
Net income (loss) per basic common share $ 0.36 $ (0.14) $ 0.13 $ 0.06 $ (0.05) $ 0.36 $ 0.33
Impact of preferred stock dividends on basic earnings (loss) per common share (0.04) (0.04) (0.05) (0.05) (0.05) (0.15) (0.15)
Basic earnings (loss) per common share 0.32 (0.18) 0.08 0.01 (0.10) 0.21 0.18
 
Net income (loss) per common share 0.36 (0.14) 0.13 0.06 (0.05) 0.35 0.33
Impact of preferred stock dividends on diluted earnings (loss) per common share (0.05) (0.04) (0.05) (0.05) (0.05) (0.14) (0.15)
Diluted earnings (loss) per common share 0.31 (0.18) 0.08 0.01 (0.10) 0.21 0.18
 
Weighted average common shares outstanding 54,121,156 54,002,979 53,961,176 53,572,157 53,327,219 54,029,023 52,439,130
Diluted weighted average common shares outstanding 54,323,320 54,002,979 54,254,876 53,790,047 53,327,219 54,295,622 52,750,219

 
  Three Months Ended   Nine Months Ended
September 30,   June 30,   March 31,   December 31,   September 30,   September 30,   September 30,
  2011       2011       2011       2010       2010       2011       2010  
Performance Ratios:
Annualized return on average assets 0.80 % (0.30) % 0.28 % 0.12 % (0.10) % 0.26 % 0.22 %
Annualized return on average common equity 5.86 (3.43) 1.53 0.21 (1.86) 1.32 1.13
Annualized cash return on average tangible common equity(1) 9.52 (4.80) 2.88 0.89 (2.34) 2.54 2.33
Net interest rate spread 3.71 3.71 3.68 3.63 3.71 3.70 3.61
Cost of funds(2) 0.66 0.74 0.77 0.83 0.96 0.72 1.05
Efficiency ratio(3) 58.98 57.01 57.71 53.72 55.32 57.89 56.52
Annualized net non-interest expense to average assets(4) 1.50 1.41 1.46 1.22 1.36 1.46 1.44
Pre-tax pre-provision operating earnings to risk-weighted assets(5) 3.00 3.25 2.97 3.23 3.05 3.14 2.86
Pre-tax pre-provision operating earnings to average assets(5) 1.89 2.02 1.91 2.09 2.00 1.94 1.90
Net interest margin 3.74 3.79 3.76 3.72 3.81 3.77 3.72
Tax equivalent effect 0.16 0.13 0.12 0.11 0.11 0.13 0.11
Net interest margin - fully tax equivalent basis(6) 3.90 3.92 3.88 3.83 3.92 3.90 3.83
Asset Quality Ratios:
Non-performing loans(7) to total loans 2.42 % 2.54 % 5.01 % 5.48 % 5.73 % 2.42 % 5.73 %
Non-performing assets(7) to total assets 2.30 2.40 3.96 4.21 4.26 2.30 4.26
Allowance for loan losses to non-performing loans(7) 91.23 86.12 55.94 53.03 49.40 91.23 49.40
Allowance for loan losses to non-performing loans,(7)
including partial charge-offs taken 93.54 89.79 70.46 67.66 64.78 93.54 64.78
Allowance for loan losses to total loans 2.21 2.19 2.80 2.90 2.83 2.21 2.83
Allowance for credit losses to total loans
and unfunded credit commitments 2.40 2.43 2.75 2.85 2.78 2.40 2.78
Net loan charge-offs to average loans (annualized) 1.14 5.89 3.38 2.99 3.81 3.52 3.56
Capital Ratios:
Tangible equity to tangible assets(8) 10.10 % 9.79 % 9.74 % 9.43 % 9.06 % 10.10 % 9.06 %
Tangible common equity to risk weighted assets(9) 12.42 11.97 11.36 10.94 10.46 12.42 10.46
Tangible common equity to tangible assets(10) 8.06 7.76 7.73 7.47 7.16 8.06 7.16
Book value per common share(11) $ 21.48 $ 21.14 $ 21.24 $ 21.14 $ 21.22 $ 21.48 $ 21.22
Less: goodwill and other intangible assets, net of tax
benefit, per common share 7.45 7.49 7.52 7.53 7.64 7.45 7.64
Tangible book value per common share(12) 14.03 13.64 13.73 13.60 13.58 14.03 13.58
 
Total capital (to risk-weighted assets) 19.61 % 19.18 % 18.33 % 17.75 % 17.10 % 19.61 % 17.10 %
Tier 1 capital (to risk-weighted assets) 17.54 17.11 16.31 15.75 15.12 17.54 15.12
Tier 1 capital (to average assets) 11.59 11.16 11.00 10.66 10.38 11.59 10.38
Tier 1 common capital (to risk-weighted assets) 11.90 11.50 11.01 10.61 10.14 11.90 10.14
(1) Net cash flow available to common stockholders (net income available to common stockholders, plus other intangibles amortization expense, net of tax benefit) divided by 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 non-core items divided by the sum of net interest income on a fully tax equivalent basis and total other income less non-core items.
(4) Equals total other expense excluding non-core items less total other income excluding non-core items divided by average assets.
(5) Equals net income before taxes, on a fully tax equivalent basis, excluding loan loss provision expense, non-core other income items, and non-core other expense items divided by risk-weighted assets or average assets.
(6) Represents net interest income, on a fully tax equivalent basis assuming a 35% tax rate, as a percentage of average interest earning assets.
(7) Non-performing loans excludes purchased credit-impaired loans and loans held for sale. Non-performing assets excludes purchased credit-impaired loans, loans held for sale, and other real estate owned related to FDIC transactions.
(8) 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.
(9) Equals total ending common stockholders’ equity less goodwill and other intangibles, net of tax benefit, divided by total risk weighted assets.
(10) 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.
(11) Equals total ending common stockholders’ equity divided by common shares outstanding.
(12) 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 pre-tax, pre-provision operating earnings; core other income, core other expense, non-core other income and non-core other expense; net interest income on a fully tax equivalent basis, net interest margin on a fully tax equivalent basis; the addition of partial charge-offs to the allowance for loan losses and to the numerator and the denominator in the ratio of the allowance for loan losses to non-performing loans; efficiency ratio, ratio of annualized net non-interest expense to average assets, ratio of pre-tax, pre-provision operating earnings to risk-weighted assets and ratio of pre-tax, pre-provision operating earnings to average assets, with net gains and losses on securities available for sale, net gains and losses on sale of other assets, net gains and losses on other real estate owned, net gain on sale of loans held for sale, acquisition related gains and increase (decrease) in market value of assets held in trust for deferred compensation excluded from the non-interest income components of these ratios, and impairment charges and increase (decrease) in market value of assets held in trust for deferred compensation excluded from the non-interest expense components of these ratios; ratios of tangible equity to tangible assets, tangible common equity to risk weighted assets, tangible common equity to tangible assets and Tier 1 common capital to risk-weighted assets; tangible book value per common share; and annualized cash return on average tangible common equity. Our management uses these non-GAAP measures, together with the related GAAP measures, in its analysis of our performance and in making business decisions. Management also uses these measures for peer comparisons.

Management believes that pre-tax, pre-provision operating earnings are a useful measure in assessing our core operating performance, particularly during times of economic stress. In recent periods, our results of operations have been negatively impacted by adverse economic conditions, as seen in our elevated levels of loan charge-offs and provision for credit losses. Management believes that measuring earnings before the impact of the provision for loan losses makes our financial data more comparable between reporting periods so that investors can better understand our operating performance trends. Management also believes that this is a standard figure used in the banking industry to measure performance.

Management believes that core and non-core other income and other expense are useful in assessing our core operating performance and in understanding the primary drivers of our other income and other expense when comparing periods.

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 believes that the addition of partial charge-offs to the allowance for loan losses and to the numerator and the denominator in the ratio of allowance for loan losses to non-performing loans may be useful to investors because it reflects what our loan loss reserve levels would have been had the partial charge-offs not been taken.

Management also believes that by excluding net gains and losses on securities available for sale, net gains and losses on sale of other assets, net gains and losses on other real estate owned, net gain on sale of loans held for sale, acquisition-related gains and increase (decrease) in market value of assets held in trust for deferred compensation from the non-interest income components, and excluding impairment changes and increase (decrease) in market value of assets held in trust for deferred compensation from the non-interest expense components, of the efficiency ratio, the ratio of annualized net non-interest expense to average assets, the ratio of pre-tax, pre-provision operating earnings to risk-weighted assets and the ratio of pre-tax, pre-provision operating earnings to average assets, these ratios better reflect our core operating performance, as the excluded items do not pertain to our core business operations and their exclusion makes these ratios more meaningful when comparing our operating results from period to period.

In addition, management believes that presenting the ratio of Tier 1 common equity to risk weighted assets is useful for assessing our capital strength and for peer comparison purposes. The other measures exclude the acquisition-related goodwill and other intangible assets, net of tax benefit, in determining tangible assets, tangible equity, tangible common equity and average tangible common equity and exclude other intangible amortization expense, net of tax benefit, in determining net cash flow available to common stockholders. Management believes the presentation of these other financial measures excluding the impact of such items provides useful supplemental information that is helpful in understanding our financial results, as they provide a method to assess management’s success in utilizing our tangible capital as well as our capital strength. Management also believes that providing measures that exclude balances of acquisition-related goodwill and other intangible assets, which are subjective components of valuation, facilitates the comparison of our performance with the performance of our peers. In addition, management believes that these are standard financial measures used in the banking industry to evaluate performance.

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

The following table presents a reconciliation of tangible equity to equity (in thousands):
    September 30,   June 30,   March 31,   December 31,   September 30,
  2011     2011     2011     2010     2010
Stockholders' equity - as reported $ 1,368,622 $ 1,345,344 $ 1,350,236 $ 1,344,786 $ 1,335,914
Less: goodwill 387,069 387,069 387,069 387,069 387,069
Less: other intangible, net of tax benefit 20,088 21,007 21,927 22,853 23,914
Tangible equity $ 961,465 $ 937,268 $ 941,240 $ 934,864 $ 924,931
 

The following table presents a reconciliation of tangible assets to total assets (in thousands):
  September 30,   June 30,   March 31,   December 31,   September 30,
  2011     2011     2011     2010     2010
Total assets - as reported $ 9,922,361 $ 9,977,735 $ 10,071,343 $ 10,320,364 $ 10,622,980
Less: goodwill 387,069 387,069 387,069 387,069 387,069
Less: other intangible, net of tax benefit 20,088 21,007 21,927 22,853 23,914
Tangible assets $ 9,515,204 $ 9,569,659 $ 9,662,347 $ 9,910,442 $ 10,211,997
 

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,
  2011     2011     2011     2010     2010
Common stockholders' equity - as reported $ 1,174,060 $ 1,150,937 $ 1,155,981 $ 1,150,682 $ 1,141,958
Less: goodwill 387,069 387,069 387,069 387,069 387,069
Less: other intangible, net of tax benefit 20,088 21,007 21,927 22,853 23,914
Tangible common equity $ 766,903 $ 742,861 $ 746,985 $ 740,760 $ 730,975
 

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,
  2011     2011     2011     2010     2010     2011     2010
Average common stockholders' equity - as reported $ 1,158,119 $ 1,165,022 $ 1,152,119 $ 1,147,581 $ 1,152,058 $ 1,158,417 $ 1,131,013
Less: average goodwill 387,069 387,069 387,069 387,069 387,069 387,069 388,074
Less: average other intangible assets, net of tax benefit 20,414 21,331 22,254 23,236 22,596 21,326 23,126
Average tangible common equity $ 750,636 $ 756,622 $ 742,796 $ 737,276 $ 742,393 $ 750,022 $ 719,813
 

The following table presents a reconciliation of net cash flow available to common stockholders to net income (loss) 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,
  2011     2011     2011     2010     2010     2011     2010
 
Net income (loss) available to common stockholders - as reported $ 17,092 $ (9,968) $ 4,343 $ 595 $ (5,406) $ 11,467 $ 9,551
Add: other intangible amortization expense, net of tax benefit 919 920 926 1,062 1,018 2,766 2,978
Net cash flow available to common stockholders $ 18,011 $ (9,048) $ 5,269 $ 1,657 $ (4,388) $ 14,233 $ 12,529
 

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,
  2011     2011     2011     2010     2010     2011     2010
Non-interest expense $ 66,608 $ 66,728 $ 66,864 $ 64,615 $ 66,478 $ 200,200 $ 194,161
Adjustment for impairment charges - - 1,000 - - 1,000 -
Adjustment for increase (decrease) in market value of assets held in trust for deferred compensation (405) 158 187 597 (3) (60) (35)
Non-interest expense - as adjusted $ 67,013 $ 66,570 $ 65,677 $ 64,018 $ 66,481 $ 199,260 $ 194,196
 
Net interest income $ 80,416 $ 82,407 $ 82,205 $ 84,655 $ 87,618 $ 245,028 $ 255,117
Tax equivalent adjustment 3,320 2,775 2,625 2,609 2,614 8,720 7,849
Net interest income on a fully tax equivalent basis 83,736 85,182 84,830 87,264 90,232 253,748 262,966
Plus other income 26,367 29,145 29,143 30,795 35,798 84,655 154,961
Less net (losses) gains on other real estate owned (3,118) (4,645) (372) (2,124) (3,913) (8,135) (7,160)
Less net (losses) gains on securities available for sale - 232 (3) (4) 9,482 229 18,652
Less net gains (losses) on sale of other assets - 13 357 419 299 370 211
Less net gain on sale of loans held for sale - 1,790 - - - 1,790 -
Less acquisition related gains - - - - - - 62,649
Less increase (decrease) in market value of assets held in trust for deferred compensation (405) 158 187 597 (3) (60) (35)
 
Net interest income plus non-interest income - as adjusted $ 113,626 $ 116,779 $ 113,804 $ 119,171 $ 120,165 $ 344,209 $ 343,610
 
Efficiency ratio 58.98% 57.01% 57.71% 53.72% 55.32% 57.89% 56.52%
 
Efficiency ratio (without adjustments) 62.38% 59.82% 60.05% 55.97% 53.86% 60.72% 47.35%
 

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,
  2011     2011     2011     2010     2010     2011     2010
Non-interest expense $ 66,608 $ 66,728 $ 66,864 $ 64,615 $ 66,478 $ 200,200 $ 194,161
Adjustment for impairment charges - - 1,000 - - 1,000 -
Adjustment for increase (decrease) in market value of
assets held in trust for deferred compensation (405) 158 187 597 (3) (60) (35)
Non-interest expense - as adjusted 67,013 66,570 65,677 64,018 66,481 199,260 194,196
 
Other income 26,367 29,145 29,143 30,795 35,798 84,655 154,961
Less net (losses) gains on other real estate owned (3,118) (4,645) (372) (2,124) (3,913) (8,135) (7,160)
Less net (losses) gains on securities available for sale - 232 (3) (4) 9,482 229 18,652
Less net gains (loss) on sale of other assets - 13 357 419 299 370 211
Less net gain on sale of loans held for sale - 1,790 - - - 1,790 -
Less acquisition related gains - - - - - - 62,649
Less increase (decrease) in market value of assets
held in trust for deferred compensation (405) 158 187 597 (3) (60) (35)
Other income - as adjusted 29,890 31,597 28,974 31,907 29,933 90,461 80,644
 
Net non-interest expense $ 37,123 $ 34,973 $ 36,703 $ 32,111 $ 36,548 $ 108,799 $ 113,552
 
Average assets $ 9,807,561 $ 9,966,898 $ 10,198,626 $ 10,452,626 $ 10,634,556 $ 9,989,596 $ 10,524,024
 
Annualized net non-interest expense to average assets 1.50% 1.41% 1.46% 1.22% 1.36% 1.46% 1.44%
 
Annualized net non-interest expense to average assets
(without adjustments) 1.63% 1.51% 1.50% 1.28% 1.14% 1.55% 0.50%
 

Calculation of Pre-Tax, Pre-Provision Operating Earnings (Dollars in Thousands)
    Three Months Ended   Nine Months Ended
September 30,   June 30,   March 31,   December 31,   September 30,   September 30,   September 30,
  2011     2011     2011     2010     2010     2011     2010
Income (loss) before income taxes $ 28,675 $ (16,426) $ 4,484 $ 1,835 $ (8,062) $ 16,733 $ 18,717
Provision for credit losses 11,500 61,250 40,000 49,000 65,000 112,750 197,200
Pre-tax, pre-provision earnings 40,175 44,824 44,484 50,835 56,938 129,483 215,917
 
Tax equivalent adjustment 3,320 2,775 2,625 2,609 2,614 8,720 7,849
Pre-tax, pre-provision earnings on a fully tax equivalent basis 43,495 47,599 47,109 53,444 59,552 138,203 223,766
 
Non-core other income
Net (losses) gains on other real estate owned (3,118) (4,645) (372) (2,124) (3,913) (8,135) (7,160)
Net (losses) gains on securities available for sale - 232 (3) (4) 9,482 229 18,652
Net gain (loss) on sale of other assets - 13 357 419 299 370 211
Net gain on sale of loans held for sale - 1,790 - - - 1,790 -
Acquisition related gains - - - - - - 62,649
Increase (decrease) in market value of assets held in
trust for deferred compensation (405) 158 187 597 (3) (60) (35)
Total non-core other income (3,523) (2,452) 169 (1,112) 5,865 (5,806) 74,317
 
Non-core other expense
Impairment charges - - 1,000 - - 1,000 -
Increase (decrease) in market value of assets held in
trust for deferred compensation (405) 158 187 597 (3) (60) (35)
Total non-core other expense (405) 158 1,187 597 (3) 940 (35)
Pre-tax, pre-provision operating earnings $ 46,613 $ 50,209 $ 48,127 $ 55,153 $ 53,684 $ 144,949 $ 149,414
 
Risk-weighted assets $ 6,174,508 $ 6,203,587 $ 6,577,477 $ 6,772,761 $ 6,985,940 $ 6,174,508 $ 6,985,940
 
Average Assets $ 9,807,561 $ 9,966,898 $ 10,198,626 $ 10,452,626 $ 10,634,556 $ 9,989,596 $ 10,524,024
 
 
Annualized pre-tax, pre-provision operating earnings to
risk-weighted assets 3.00% 3.25% 2.97% 3.23% 3.05% 3.14% 2.86%
Annualized pre-tax, pre-provision operating earnings to
risk-weighted assets (without adjustments) 2.58% 2.90% 2.74% 2.98% 3.23% 2.80% 4.13%
 
Annualized pre-tax, pre-provision operating earnings to
average assets 1.89% 2.02% 1.91% 2.09% 2.00% 1.94% 1.90%
 
Annualized pre-tax, pre-provision operating earnings to
average assets (without adjustments) 1.63% 1.80% 1.77% 1.93% 2.12% 1.73% 2.74%

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 the allowance for loan losses including partial charge-offs to the allowance for loan losses, and the ratio of the allowance for loan losses to non-performing loans including partial charge-offs to the same ratio without the addition of partial charge-offs, are contained in the first table under “Asset Quality.” Reconciliations of core and non-core other income and other expense to other income and other expense are contained in the tables under “Results of Operations—Third Quarter Results.”

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,
2011   2010   2011
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 $ 1,070,852 $ 12,915 4.78% $ 1,307,155 16,933 5.14% $ 1,147,173 $ 13,578 4.75%
Commercial loans collateralized by assignment
of lease payments 1,015,925 13,694 5.39 989,412 14,706 5.95 1,041,311 14,502 5.57
Real estate commercial 1,845,988 25,230 5.35 2,316,143 30,706 5.19 2,051,711 26,745 5.16
Real estate construction 238,396 2,233 3.67 500,644 4,452 3.48 349,367 3,789 4.29
Total commercial related credits 4,171,161 54,072 5.07 5,113,354 66,797 5.11 4,589,562 58,614 5.05
Other loans
Real estate residential 317,050 3,739 4.72 327,686 4,126 5.04 339,048 3,989 4.71
Home equity 354,131 3,828 4.29 389,996 4,284 4.36 367,829 3,949 4.31
Indirect 185,850 2,968 6.34 182,268 3,192 6.95 178,978 3,046 6.83
Consumer loans 56,257 439 3.10 58,166 500 3.41 56,356 436 3.10
Total other loans 913,288 10,974 4.77 958,116 12,102 5.01 942,211 11,420 4.86
Total loans, excluding covered loans 5,084,449 65,046 5.08 6,071,470 78,899 5.16 5,531,773 70,034 5.08
Covered loans 742,732 14,004 7.48 867,945 16,590 7.58 768,127 15,003 7.83
Total loans 5,827,181 79,050 5.38 6,939,415 95,489 5.46 6,299,900 85,037 5.41
 
Taxable investment securities 1,869,961 11,699 2.50 1,450,608 11,420 3.15 1,668,406 10,290 2.47
Investment securities exempt from federal income taxes (3) 456,777 6,614 5.67 355,288 5,210 5.74 357,828 5,297 5.86
Federal funds sold - - 0.00 - - 0.00 - - 0.00
Other interest earning deposits 365,723 244 0.26 377,555 248 0.26 389,311 257 0.26
Total interest earning assets $ 8,519,642 $ 97,607 4.55 $ 9,122,866 $ 112,367 4.89 $ 8,715,445 $ 100,881 4.64
Non-interest earning assets 1,287,919 1,511,690 1,251,453
Total assets $ 9,807,561 $ 10,634,556 $ 9,966,898
 
Interest Bearing Liabilities:
Core funding:
Money market and NOW accounts $ 2,656,490 $ 1,731 0.26% $ 2,789,046 $ 4,022 0.57% $ 2,676,663 $ 1,922 0.29%
Savings accounts 742,334 320 0.17 623,555 469 0.30 725,810 312 0.17
Certificate of deposit 2,006,293 4,706 0.93 2,740,219 9,546 1.38 2,173,951 5,522 1.02
Customer repurchase agreements 218,928 146 0.26 260,469 243 0.37 242,939 155 0.26
Total core funding 5,624,045 6,903 0.49 6,413,289 14,280 0.88 5,819,363 7,911 0.55
Whole sale funding:
Public funds 42,263 53 0.50 80,339 132 0.65 45,219 67 0.59
Brokered accounts (includes fee expense) 412,714 3,396 3.26 485,676 4,427 3.62 462,003 3,924 3.41
Other borrowings 442,066 3,519 3.11 462,936 3,296 2.79 461,653 3,796 3.25
Total wholesale funding 897,043 6,968 3.08 1,028,951 7,855 3.03 968,875 7,787 3.22
Total interest bearing liabilities $ 6,521,088 $ 13,871 0.84 $ 7,442,240 $ 22,135 1.18 $ 6,788,238 $ 15,698 0.93
Non-interest bearing deposits 1,810,501 1,673,259 1,724,429
Other non-interest bearing liabilities 123,391 173,139 94,976
Stockholders' equity 1,352,581 1,345,918 1,359,255
Total liabilities and stockholders' equity $ 9,807,561 $ 10,634,556 $ 9,966,898
Net interest income/interest rate spread (4) $ 83,736   3.71% $ 90,232   3.71% $ 85,183   3.71%
Taxable equivalent adjustment 3,320 2,614 2,775
Net interest income, as reported $ 80,416 $ 87,618 $ 82,408
Net interest margin (5) 3.74% 3.81% 3.79%
Tax equivalent effect 0.16% 0.11% 0.13%
Net interest margin on a fully equivalent basis (5) 3.90% 3.92% 3.92%
(1) Non-accrual loans are included in average loans.
(2) Interest income includes amortization of deferred loan origination fees of $972 thousand, $1.3 million, and $1.1 million for the three months ended September 30, 2011, June 30, 2011, and September 30 2010, 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,
2011   2010
Average     Yield/   Average     Yield/
  Balance     Interest   Rate     Balance     Interest   Rate
Interest Earning Assets:
Loans (1) (2) (3):
Commercial related credits
Commercial $ 1,127,230 $ 40,824 4.84% $ 1,351,436 $ 51,068 5.05%
Commercial loans collateralized by assignment
of lease payments 1,020,414 42,286 5.53 969,035 44,145 6.07
Real estate commercial 2,011,356 80,210 5.26 2,382,228 95,262 5.27
Real estate construction 331,019 9,541 3.80 548,405 13,616 3.27
Total commercial related credits 4,490,019 172,861 5.08 5,251,104 204,091 5.13
Other loans
Real estate residential 329,594 12,195 4.93 310,645 12,355 5.30
Home equity 366,026 11,780 4.30 397,182 13,083 4.40
Indirect 179,772 8,954 6.66 180,808 9,532 7.05
Consumer loans 56,689 1,475 3.48 59,214 1,576 3.56
Total other loans 932,081 34,404 4.93 947,849 36,546 5.16
Total loans, excluding covered loans 5,422,100 207,265 5.11 6,198,953 240,637 5.19
Covered loans 771,486 44,812 7.77 571,596 33,494 7.83
Total loans 6,193,586 252,077 5.44 6,770,549 274,131 5.41
 
Taxable investment securities 1,619,182 29,741 2.45 1,791,504 43,540 3.24
Investment securities exempt from federal income taxes (3) 388,208 17,057 5.79 358,026 15,720 5.79
Federal funds sold - - 0.00 471 2 0.56
Other interest earning deposits 499,286 972 0.26 252,301 524 0.28
Total interest earning assets $ 8,700,262 $ 299,847 4.61 $ 9,172,851 $ 333,917 4.87
Non-interest earning assets 1,289,334 1,351,173
Total assets $ 9,989,596 $ 10,524,024
 
Interest Bearing Liabilities:
Core funding:
Money market and NOW accounts $ 2,686,327 $ 6,139 0.31% $ 2,747,977 $ 11,556 0.67%
Savings accounts 726,316 1,052 0.19 606,326 1,406 0.31
Certificate of deposit 2,179,748 16,646 1.02 2,830,191 32,999 1.56
Customer repurchase agreements 241,322 488 0.27 254,396 741 0.39
Total core funding 5,833,713 24,325 0.56 6,438,890 46,702 0.97
Whole sale funding:
Public funds 51,193 222 0.58 95,210 476 0.67
Brokered accounts (includes fee expense) 447,178 11,253 3.36 494,643 13,815 3.73
Other borrowings 447,993 10,299 3.03 480,471 9,958 2.73
Total wholesale funding 946,364 21,774 3.08 1,070,324 24,249 3.03
Total interest bearing liabilities $ 6,780,077 $ 46,099 0.91 $ 7,509,214 $ 70,951 1.26
Non-interest bearing deposits 1,736,152 1,560,914
Other non-interest bearing liabilities 120,639 129,163
Stockholders' equity 1,352,728 1,324,733
Total liabilities and stockholders' equity $ 9,989,596 $ 10,524,024
Net interest income/interest rate spread (4) $ 253,748   3.70% $ 262,966   3.61%
Taxable equivalent adjustment 8,720 7,849
Net interest income, as reported $ 245,028 $ 255,117
Net interest margin (5) 3.77% 3.72%
Tax equivalent effect 0.13% 0.11%
Net interest margin on a fully equivalent basis (5) 3.90% 3.83%
(1) Non-accrual loans are included in average loans.
(2) Interest income includes amortization of deferred loan origination fees of $3.5 million and $3.6 million for the nine months ended September 30, 2011, and September 30 2010, 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.

Copyright Business Wire 2010

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