MB Financial, Inc. (NASDAQ: MBFI), the holding company for MB Financial
Bank, N.A., announced today second quarter results for 2008. The words "MB
Financial,” "the
Company,” "we,” "our” and "us”
refer to MB Financial, Inc. and its wholly owned subsidiaries, unless
indicated otherwise. We had net income from continuing operations of
$22.0 million for the second quarter of 2008 compared to $19.6 million
for the second quarter of 2007, and $5.8 million for the first quarter
of 2008. Fully diluted earnings per share from continuing operations for
the second quarter of 2008 were $0.63 per share as compared to $0.53 per
share for the second quarter of 2007, and $0.17 per share for the first
quarter of 2008. Income was positively impacted by a $7.3 million, or
$0.21 per diluted share, adjustment related to the removal of valuation
allowances on certain state tax net operating loss carryforwards and an
adjustment of state tax contingency reserves.
Key items for the quarter were as follows: Strong Balance Sheet Growth Continues
Strong commercial loan growth continued in the second quarter.
Commercial related loans increased by 18% compared to the second
quarter of 2007 and 16% annualized on a linked quarter basis driven by
strong commercial and commercial real estate loan growth. Furthermore,
we are continuing to see better credit spreads on our new and renewed
loans.
Our non-interest bearing deposits grew by 15% annualized on a linked
quarter basis. Total core funding grew by 9% annualized on a linked
quarter basis.
We have hired a total of 32 commercial and private bankers from the
third quarter of 2007 through the second quarter of 2008. Salary and
employee benefit expenses related to new bankers were approximately
$1.6 million in the second quarter of 2008, up from $500 thousand in
the first quarter of 2008.
Positive Operating Leverage
Net interest income on a tax equivalent basis increased by $4.4
million, or 8.0% from the second quarter of 2007, and $3.0 million, or
21.9% annualized on a linked quarter basis. The net interest margin on
a fully tax equivalent basis increased three basis points from the
first quarter of 2008 and decreased six basis points from the second
quarter of 2007.
Fee income growth continues to be good. Core fee income increased by
$2.7 million or 12% compared to the second quarter of 2007. This
increase was driven by robust growth in trust and asset management
fees, resulting from our Cedar Hill Associates, LLC (Cedar Hill)
acquisition, and strong deposit service and loan fees.
On April 18, 2008, we purchased an 80% interest in Cedar Hill, an
asset management firm located in Chicago, Illinois, with approximately
$960 million in assets under management. Cedar Hill complements and
expands our wealth management product offerings and revenues.
Credit Quality
During the second quarter we experienced a $42.7 million increase in
non-performing loans resulting primarily from the migration of
potential problem loans to non-performing loans during the second
quarter and a $47.8 million decrease in potential problem loans.
The allowance for loan losses to total loans was 1.38% as of June 30,
2008.
Our provision for loan losses was $12.2 million for the second
quarter, while our net charge-offs were $8.4 million. Approximately
85% of second quarter charge-offs were reserved as of March 31, 2008.
Therefore, approximately $1.4 million of the second quarter provision
related to charge-offs this quarter, $8.4 million of the provision
related to the downgrade of credits to non-performing status, and the
remainder of the provision related to normal migration of risk ratings
and loan growth within the portfolio.
Strong Capital Position
Our quarterly dividend of $0.18 per share was approved this week and
remained consistent with prior quarters.
We have 666,730 shares that remain available for purchase under our
stock repurchase program. We have not repurchased any outstanding
shares in the open market or in privately negotiated transactions
during this year, and we do not intend to repurchase any outstanding
shares at this time. This is a reflection of the strong growth
opportunities in our market.
MB Financial Bank, N.A., continues to significantly exceed all of its
capital requirements and remains "Well-Capitalized”
under the regulations of the Office of the Comptroller of the
Currency. At June 30, 2008, our total risk-based capital ratio was
11.60%, Tier 1 capital to risk-weighted assets ratio was 9.59% and
Tier 1 capital to average asset ratio was 8.08%.
RESULTS OF OPERATIONS Second Quarter Results Net Interest Income
Net interest income on a tax equivalent basis increased $3.0 million
from the first quarter of 2008 to the second quarter of 2008. The
increase in net interest income was primarily due to a $305.3 million
increase in average interest earning assets and a three basis point
increase in the net interest margin on a fully tax equivalent basis.
See the supplemental net interest margin table for further detail.
Other Income (in thousands)
Three Months Ended June 30,
March 31,
December 31,
September 30,
June 30, 2008
2008
2007
2007
2007
Core other income:
Loan service fees
$2,475
$2,470
$2,080
$1,253
$1,388
Deposit service fees
6,889
6,530
6,635
6,501
5,624
Lease financing, net
3,969
3,867
4,155
3,952
3,744
Brokerage fees
1,187
985
1,399
2,067
2,716
Trust and asset management fees
3,589
2,220
2,101
2,490
2,666
Increase in cash surrender value of life insurance
1,128
1,606
1,225
1,288
1,269
Merchant card processing
4,644
4,530
4,293
4,131
4,045
Other operating income
1,580
1,605
1,282
1,507
1,303
Total core other income
25,461
23,813
23,170
23,189
22,755
Non-core other income (1):
Gain on sale of third party brokerage business (A)
-
-
447
-
500
Gain on sale of artwork (C)
-
-
733
-
1,634
Gain on sale of properties (C)
-
-
-
-
7,439
Net gain (loss) on sale of other assets (C)
50
(306
)
(10
)
293
(14
)
Net gain (loss) on sale of investment securities
1
1,105
(1,529
)
(114
)
(2,077
)
Increase (decrease) in market value of assets held in
trust for deferred compensation (B)
55
(75
)
170
(109
)
483
Total non-core other income
106
724
(189
)
70
7,965
Total other income
$25,567
$24,537
$22,981
$23,259
$30,720
(1) Letters denote the corresponding line items where these non-core
other income items reside in the consolidated statements of income as
follows: A – Brokerage fees, B –
Other Operating Income, and C – Net gain
(loss) on sale of other assets.
Core other income has grown steadily over the past year. Core other
income increased by 12% compared to the second quarter of 2007, driven
by higher amounts of loan service, deposit service, and trust and asset
management fees.
Core deposit service fees increased primarily due to an increase in
treasury management fees. Core trust and asset management fees increased
primarily due to the acquisition of Cedar Hill during the second quarter
of 2008. The decrease in cash surrender value of life insurance from the
first quarter of 2008 to the second quarter of 2008 was primarily due to
a $436 thousand death benefit on a bank owned life insurance policy that
we recognized during the first quarter of 2008.
Core loan service fees increased from the second quarter of 2007 to the
second quarter of 2008, primarily due to an increase in prepayment fees
recognized during the second quarter of 2008 compared to the second
quarter of 2007. Core deposit service fees increased from the second
quarter of 2007 to the second quarter of 2008, primarily due to an
increase in treasury management fees. The decrease in core brokerage fee
income from the second quarter of 2007 to the second quarter of 2008 was
mostly due to the sale of our third party brokerage business during the
second quarter of 2007, and conversion of customer accounts to the
purchaser’s platform in third quarter. This
decrease was offset by a corresponding reduction in brokerage expense.
Other Expense (in thousands)
Three Months Ended June 30,
March 31,
December 31,
September 30,
June 30, 2008
2008
2007
2007
2007
Core other expense:
Salaries and employee benefits
$29,052
$26,859
$26,571
$27,273
$25,951
Occupancy and equipment expense
6,967
7,525
7,239
6,928
7,054
Computer services expense
2,030
1,916
1,949
1,846
1,857
Advertising and marketing expense
1,504
1,316
962
1,214
1,444
Professional and legal expense
803
306
862
593
656
Brokerage fee expense
470
419
620
1,152
1,582
Telecommunication expense
774
762
757
681
689
Other intangibles amortization expense
913
815
871
874
878
Merchant card processing
4,069
3,926
3,815
3,487
3,474
Other operating expenses
5,489
4,797
5,156
4,888
4,805
Total core other expense
52,071
48,641
48,802
48,936
48,390
Non-core other expense (1):
Vision severance payments (E)
-
-
-
-
200
Executive separation agreement expense (E)
-
-
5,908
-
-
Contribution to MB Financial Charitable Foundation (F)
-
-
1,500
-
3,000
Unamortized issuance costs related to redemption of
trust preferred securities (G)
-
-
1,914
-
-
Rent expense (H)
-
-
494
-
-
Visa litigation expense (F)
-
(342
)
342
-
-
Increase in market value of assets held in trust for
deferred compensation (E)
55
(75
)
170
(109
)
483
Total non-core other expense
55
(417
)
10,328
(109
)
3,683
Total other expense
$52,126
$48,224
$59,130
$48,827
$52,073
(1) Letters denote the corresponding line items where the non-core other
expense items reside in the consolidated statements of income as
follows: E – Salaries and employee benefits,
F – Other Operating Expenses, G –
Professional and legal expense and H –Occupancy
and equipment expense.
Salaries and employee benefits expense increased from the second quarter
of 2007 to the second quarter of 2008, as we hired 32 bankers from the
end of the third quarter of 2007 through the second quarter of 2008.
Included in salaries and employee benefits expense for the second
quarter is approximately $1.6 million (including salaries, signing bonus
and recruiting fees) related to the addition of these bankers.
Approximately $1.0 million of the increase in salaries and employee
benefits expense from the first quarter of 2008 to the second quarter of
2008 was due to the additional bankers, as many of these bankers were
hired around the end of the first quarter of 2008. In addition, the
acquisition of Cedar Hill increased salary and employee benefits
expense, other expenses and intangible amortization by approximately
$800 thousand, $200 thousand and $100 thousand, respectively, during the
second quarter of 2008. As noted earlier, the decrease in our core
business brokerage fee expense from the second quarter of 2007 to the
second quarter of 2008 was primarily due to the sale of our third party
brokerage business during the second quarter of 2007.
Income Taxes
Income tax expense from continuing operations for the three months ended
June 30, 2008, decreased $6.1 million to a $4.7 million tax benefit
compared to $1.4 million tax expense for the three months ended March
31, 2008. The decrease in income tax expense was primarily due to a $7.3
million adjustment due to the removal of valuation allowances on state
net operating loss carryforwards and an adjustment of state tax
contingency reserves. Not including these adjustments and a $300
thousand adjustment to our tax contingency reserves in the first quarter
of 2008, our effective tax rate was 17.6% for the six months ended June
30, 2008. Our effective tax rate may be in the range of 15% to 20% for
the remainder of 2008 depending on pre-tax income, and we expect our
effective tax rate to increase in 2009.
LOAN PORTFOLIO
The following table sets forth the composition of the loan portfolio as
of the dates indicated (dollars in thousands):
June 30,
March 31,
December 31,
September 30,
June 30, 2008
2008
2007
2007
2007 Amount
% of Total
Amount
% of Total
Amount
% of Total
Amount
% of Total
Amount
% of Total
Commercial related credits:
Commercial loans
$ 1,450,822
25
%
$ 1,433,114
25
%
$ 1,323,455
24
%
$ 1,261,995
23
%
$ 1,161,268
22
%
Commercial loans colla-teralized by
assignment of lease payments (lease loans)
596,148
10
%
581,502
10
%
553,138
10
%
453,340
8
%
437,581
8
%
Commercial real estate (1)
2,234,848
37
%
2,048,123
35
%
1,994,312
36
%
1,915,845
36
%
1,819,388
36
%
Construction real estate
795,506
13
%
822,312
14
%
825,216
14
%
849,914
16
%
884,560
17
%
Total commercial related credits
5,077,324
85
%
4,885,051
84
%
4,696,121
84
%
4,481,094
83
%
4,302,797
83
%
Other loans:
Residential real estate (1)
328,469
5
%
379,279
6
%
372,787
6
%
362,963
7
%
354,763
6
%
Indirect vehicle
185,083
3
%
162,348
3
%
146,311
3
%
142,827
3
%
131,308
3
%
Home equity
356,314
6
%
347,752
6
%
347,676
6
%
344,116
6
%
348,336
7
%
Consumer loans
53,792
1
%
54,671
1
%
52,732
1
%
51,532
1
%
52,302
1
%
Total other loans
923,658
15
%
944,050
16
%
919,506
16
%
901,438
17
%
886,709
17
%
Gross loans
6,000,982
100
%
5,829,101
100
%
5,615,627
100
%
5,382,532
100
%
5,189,506
100
%
Allowance for loan losses
(82,544
)
(78,764
)
(65,103
)
(61,122
)
(59,058
)
Net loans
$ 5,918,438
$ 5,750,337
$ 5,550,524
$ 5,321,410
$ 5,130,448
(1) During the third quarter of 2007, multifamily residential real
estate loans were reclassified from residential real estate loans to
commercial real estate loans. Prior periods have been reclassified to
conform to the current period’s presentation.
Commercial related credits increased by 16% on an annualized basis from
March 31, 2008 to June 30, 2008 and by 18% from June 30, 2007. In the
second quarter of 2008 we securitized $50.9 million of residential real
estate loans and hold those securities in our investment portfolio.
Including the securitized loans, total loans grew by 15% on an
annualized basis from the first quarter of 2008 to the second quarter of
2008, and 17% from June 30, 2007. The strong growth in commercial
related credits was due to new and existing customer demand.
ASSET QUALITY
The following table presents a summary of total performing loans greater
than 30 days and less than 90 days past due as of the dates indicated
(dollars in thousands):
June 30,2008
March 31,2008
December 31,2007
September 30,2007
June 30,2007
30 - 59 Days Past Due
$ 21,117
$ 17,330
$ 18,619
$ 9,266
$ 6,851
60 - 89 Days Past Due
7,188
11,318
6,351
4,078
9,477
$ 28,305
$ 28,648
$ 24,970
$ 13,344
$ 16,328
The following table presents a summary of non-performing assets as of
the dates indicated (dollar amounts in thousands):
June 30, 2008
March 31, 2008
December 31, 2007
September 30, 2007
June 30, 2007
Non-performing loans:
Non-accrual loans (1)
$ 91,972
$ 46,666
$ 24,459
$ 23,901
$ 21,799
Loans 90 days or more past due, still accruing interest
1,627
4,218
-
-
-
Total non-performing loans
93,599
50,884
24,459
23,901
21,799
Other real estate owned
1,499
1,770
1,120
566
111
Repossessed vehicles
81
225
179
288
188
Total non-performing assets
$ 95,179
$ 52,879
$ 25,758
$ 24,755
$ 22,098
Total non-performing loans to total loans
1.56
%
0.87
%
0.44
%
0.44
%
0.42
%
Allowance for loan losses to non-performing loans
88.19
%
154.79
%
266.17
%
255.73
%
270.92
%
Total non-performing assets to total assets
1.13
%
0.65
%
0.33
%
0.31
%
0.28
%
(1) There were no restructured loans in any period presented.
The following table presents data related to non-performing loans by
Dollar amount and category at June 30, 2008 (dollar amounts in
thousands):
Commercial andLease Loans
Construction RealEstate Loans
Commercial RealEstate Loans
ConsumerLoans
TotalLoans Dollar Range Number ofBorrowers
Amount
Number ofBorrowers
Amount
Number ofBorrowers
Amount
Amount
Amount
$5.0 million or more
-
$ -
5
$ 42,517
1
$ 5,406
$ -
$ 47,923
$3.0 million to $4.9 million
-
-
1
4,000
1
3,037
-
7,037
$1.5 million to $2.9 million
-
-
4
8,997
2
3,516
-
12,513
Under $1.5 million
15
4,495
3
2,027
24
12,017
7,587
26,126
15
$ 4,495
13
$ 57,541
28
$ 23,976
$ 7,587
$ 93,599
Percent of loan category
0.22
%
7.23
%
1.07
%
0.82
%
1.56
%
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.
We define potential problem loans as performing loans rated substandard
or doubtful, that do not meet the definition of a non-performing loan
(See "Asset Quality”
section above for non-performing loans). We do not necessarily expect to
realize losses on potential problem loans, but we recognize potential
problem loans carry a higher probability of default and require
additional attention by management. The aggregate principal amounts of
potential problem loans declined by $47.8 million to $75.2 million, or
1.25% of total loans as of June 30, 2008, and were approximately $123.0
million, or 2.11% of total loans as of March 31, 2008. The decrease in
potential problem loans was primarily due to three construction real
estate relationships migrating from potential problem to non-performing
loan status.
Among other changes strengthening our credit control and monitoring
processes that were implemented during 2008, we enhanced our controls
with respect to certain loan monitoring requirements. The enhancements
consisted of a requirement that third party field audits are sent by the
auditor directly to credit management. In addition, credit management
independently monitors whether all required field audits have been
received and reviewed. The total outstanding balance on the three
commercial loans identified as new potential problem loans in the first
quarter press release decreased $3.8 million to $38.7 million in the
second quarter from the first quarter of 2008. We feel we are adequately
reserved on these loans as of June 30, 2008. No additional loans with
similar characteristics have been identified.
The following table presents data related to potential problem loans by
dollar amount and category at June 30, 2008 (dollar amounts in
thousands):
Commercial andLease Loans
Construction RealEstate Loans
Commercial RealEstate Loans
Total Dollar Range Number ofBorrowers
Amount
Number ofBorrowers
Amount
Number ofBorrowers
Amount
Number ofBorrowers
Amount
$5.0 million or more
3
$ 38,681
1
$ 13,433
-
$ -
4
$ 52,114
$3.0 million to $4.9 million
1
3,927
-
-
-
-
1
3,927
$1.5 million to $2.9 million
1
1,522
-
-
1
2,308
2
3,830
Under $1.5 million
15
5,488
4
3,504
11
6,353
30
15,345
20
$ 49,618
5
$ 16,937
12
$ 8,661
37
$ 75,216
Percent of loan category
2.42
%
2.13
%
0.39
%
1.25
%
Below is a reconciliation of the activity in our allowance for loan
losses for the periods indicated (dollar amounts in thousands):
Three Months Ended
June 30, 2008
March 31, 2008
December 31, 2007
September 30, 2007
June 30, 2007
Balance at beginning of period
$ 78,764
$ 65,103
$ 61,122
$ 59,058
$ 58,705
Provision for loan losses
12,200
22,540
8,000
4,500
3,000
Charge-offs
Commercial loans
(1,342
)
(4,166
)
(136
)
(2,409
)
(958
)
Commercial loans collateralized by assignment
of lease payments (lease loans)
(154
)
(182
)
(108
)
-
(99
)
Commercial real estate loans
(1,854
)
(3,650
)
(1,239
)
(489
)
(2,534
)
Construction real estate
(4,551
)
(1,135
)
(2,293
)
-
-
Residential real estate
(92
)
(26
)
(11
)
(186
)
(33
)
Indirect vehicle
(366
)
(629
)
(450
)
(152
)
(304
)
Home equity
(488
)
(182
)
(93
)
(26
)
(32
)
Consumer loans
(144
)
(115
)
(182
)
(133
)
(86
)
Total charge-offs
(8,991
)
(10,085
)
(4,512
)
(3,395
)
(4,046
)
Recoveries
Commercial loans
214
191
289
648
248
Commercial loans collateralized by assignment
of lease payments (lease loans)
-
-
17
18
928
Commercial real estate loans
6
3
20
7
3
Construction real estate
161
750
-
-
37
Residential real estate
5
6
4
5
8
Indirect vehicle
163
194
109
156
92
Home equity
15
52
41
120
70
Consumer loans
7
10
13
5
13
Total Recoveries
571
1,206
493
959
1,399
Net charge-offs
(8,420
)
(8,879
)
(4,019
)
(2,436
)
(2,647
)
Balance
$ 82,544
$ 78,764
$ 65,103
$ 61,122
$ 59,058
Total loans
$ 6,000,982
$ 5,829,101
$ 5,615,627
$ 5,382,532
$ 5,189,506
Average loans
$ 5,927,236
$ 5,687,646
$ 5,459,430
$ 5,275,376
$ 5,099,822
Ratio of allowance for loan losses to total loans
1.38
%
1.35
%
1.16
%
1.14
%
1.14
%
Net loan charge-offs to average loans (annualized)
0.57
%
0.63
%
0.29
%
0.18
%
0.21
%
The following is a summary of charge-offs and non-performing loans for
the prior twenty-two quarters (in thousands):
NetCharge-Offs
Annualized Net Charge-Offsto AverageLoans
End ofPeriodNon-PerformingLoans
Non-PerformingLoans to TotalLoans
PotentialProblemLoans toTotalLoans
Total Non-PerformingLoans andPotentialProblemLoans
toTotal Loans
2003 – 1st Qtr
$ 1,219
0.20%
$ 22,384
0.86%
1.56%
2.42%
2003 – 2nd Qtr
2,872
0.44%
$ 21,503
0.84%
1.15%
1.99%
2003 – 3rd Qtr
4,538
0.69%
$ 25,519
0.98%
1.04%
2.02%
2003 – 4th Qtr
1,524
0.23%
$ 21,073
0.79%
0.89%
1.68%
2003 – Full Year
$ 10,153
0.39%
2004 – 1st Qtr
$ 1,317
0.20%
$ 25,922
0.96%
1.45%
2.40%
2004 – 2nd Qtr
1,962
0.28%
$ 28,789
0.95%
1.34%
2.29%
2004 – 3rd Qtr
1,632
0.21%
$ 25,228
0.84%
1.45%
2.28%
2004 – 4th Qtr
2,416
0.31%
$ 22,571
0.71%
1.28%
1.99%
2004 – Full Year
$ 7,327
0.25%
2005 – 1st Qtr
$ 2,890
0.36%
$ 25,623
0.79%
0.81%
1.60%
2005 – 2nd Qtr
2,074
0.25%
$ 22,883
0.67%
0.59%
1.26%
2005 – 3rd Qtr
1,805
0.21%
$ 18,212
0.53%
0.67%
1.20%
2005 – 4th Qtr
1,346
0.16%
$ 20,171
0.58%
0.61%
1.19%
2005 – Full Year
$ 8,115
0.24%
2006 – 1st Qtr
$ 1,035
0.12%
$ 19,685
0.55%
0.66%
1.21%
2006 – 2nd Qtr
866
0.10%
$ 15,887
0.43%
0.88%
1.31%
2006 – 3rd Qtr
4,975
0.46%
$ 19,912
0.41%
0.45%
0.86%
2006 – 4th Qtr
2,956
0.24%
$ 21,468
0.43%
0.48%
0.91%
2006 – Full Year
$ 9,832
0.24%
2007 – 1st Qtr
$ 4,091
0.33%
$ 23,222
0.46%
0.63%
1.09%
2007 – 2nd Qtr
2,647
0.21%
$ 21,799
0.42%
0.41%
0.83%
2007 – 3rd Qtr
2,436
0.18%
$ 23,901
0.44%
0.85%
1.29%
2007 – 4th Qtr
4,019
0.29%
$ 24,459
0.44%
1.56%
2.00%
2007 – Full Year
$ 13,193
0.25%
2008 – 1st Qtr
$ 8,879
0.63%
$ 50,884
0.87%
2.11%
2.98%
2008 – 2nd Qtr
8,420
0.57%
$ 93,599
1.56%
1.25%
2.81%
INVESTMENT SECURITIES AVAILABLE FOR SALE
The following table sets forth the fair value, amortized cost, and total
unrealized gain (loss) of our investment securities available for sale,
by type (in thousands):
At June 30,
At March 31,
At December 31,
At September 30,
At June 30, 2008
2008
2007
2007
2007 Fair value
U.S. Treasury securities
$-
$-
$-
$-
$1,274
Government sponsored agencies and enterprises
269,947
274,217
310,538
328,040
414,620
States and political subdivisions
431,882
417,609
412,302
397,807
386,040
Mortgage-backed securities
608,737
479,383
438,056
487,747
489,345
Corporate bonds
8,000
11,123
13,057
22,006
27,643
Equity securities
3,480
3,520
3,460
9,892
6,222
Debt securities issued by foreign governments
295
301
301
298
298
Total fair value
1,322,341
1,186,153
1,177,714
1,245,790
1,325,442
Amortized cost
U.S. Treasury securities
-
-
-
-
1,290
Government sponsored agencies and enterprises
266,418
266,276
305,768
326,504
417,647
States and political subdivisions
432,780
408,969
407,973
396,896
392,378
Mortgage-backed securities
606,150
472,482
435,743
489,219
496,675
Corporate bonds
7,765
10,779
12,797
22,120
28,024
Equity securities
3,520
3,484
3,446
9,950
6,434
Debt securities issued by foreign governments
301
301
299
298
298
Total amortized cost
1,316,934
1,162,291
1,166,026
1,244,987
1,342,746
Unrealized gain (loss)
U.S. Treasury securities
-
-
-
-
(16
)
Government sponsored agencies and enterprises
3,529
7,941
4,770
1,536
(3,027
)
States and political subdivisions
(898
)
8,640
4,329
911
(6,338
)
Mortgage-backed securities
2,587
6,901
2,313
(1,472
)
(7,330
)
Corporate bonds
235
344
260
(114
)
(381
)
Equity securities
(40
)
36
14
(58
)
(212
)
Debt securities issued by foreign governments
(6
)
-
2
-
-
Total unrealized gain (loss)
$5,407
$23,862
$11,688
$803
$(17,304
)
We do not have any meaningful direct or indirect holdings of subprime
residential mortgage loans, home equity lines of credit, or trust
preferred securities in our investment portfolio. We do not own any
Fannie Mae or Freddie Mac preferred or common equity securities.
FUNDING MIX
The following table shows the composition of our core and wholesale
funding resources as of the dates indicated (dollars in thousands):
June 30,
March 31,
December 31,
September 30,
June 30, 2008
2008
2007
2007
2007 Amount
% of Total
Amount
% of Total
Amount
% of Total
Amount
% of Total
Amount
% of Total
Core funding:
Non-interest bearing deposits
$ 898,954
12
%
$ 865,665
12
%
$ 875,491
13
%
$ 846,699
13
%
$ 879,338
13
%
Money market and NOW accounts
1,257,852
17
%
1,220,152
17
%
1,263,021
18
%
1,336,162
20
%
1,221,893
18
%
Savings accounts
390,145
5
%
389,944
5
%
390,980
6
%
407,608
6
%
429,625
7
%
Certificates of deposit
2,379,894
32
%
2,324,157
33
%
2,193,793
32
%
2,236,197
33
%
2,270,184
34
%
Customer repurchase agreements
312,170
4
%
328,976
5
%
367,702
5
%
341,893
5
%
326,194
5
%
Total core funding
5,239,015
70
%
5,128,894
72
%
5,090,987
74
%
5,168,559
77
%
5,127,234
77
%
Wholesale funding:
Public funds deposits
252,693
3
%
264,972
5
%
312,032
5
%
314,826
5
%
327,560
5
%
Brokered deposit accounts
858,135
12
%
616,197
9
%
478,466
7
%
408,796
6
%
394,644
6
%
Other short-term borrowings
452,002
6
%
594,009
7
%
610,019
9
%
468,042
6
%
456,959
7
%
Long-term borrowings
433,625
6
%
304,010
4
%
158,865
2
%
162,577
3
%
161,322
3
%
Subordinated debt
50,000
1
%
50,000
1
%
50,000
1
%
25,000
0
%
25,000
0
%
Junior subordinated notes issued to capital trusts
158,920
2
%
158,968
2
%
159,016
2
%
197,537
3
%
166,657
2
%
Total wholesale funding
2,205,375
30
%
1,988,156
28
%
1,768,398
26
%
1,576,778
23
%
1,532,142
23
%
Total funding
$ 7,444,390
100
%
$ 7,117,050
100
%
$ 6,859,385
100
%
$ 6,745,337
100
%
$ 6,659,376
100
%
FORWARD-LOOKING STATEMENTS
When used in this press release and in filings with the Securities and
Exchange Commission, in other press releases or other public shareholder
communications, or in oral statements made with the approval of an
authorized executive officer, the words or phrases "believe," "will,"
"should," "will likely result," "are expected to," "will continue," "is
anticipated," "estimate," "project," "plans," or similar expressions are
intended to identify "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. You are cautioned
not to place undue reliance on any forward-looking statements, which
speak only as of the date made. These statements may relate to our
future financial performance, strategic plans or objectives, revenues or
earnings projections, or other financial items. By their nature, these
statements are subject to numerous uncertainties that could cause actual
results to differ materially from those anticipated in the statements.
Important factors that could cause actual results to differ materially
from the results anticipated or projected include, but are not limited
to, the following (1) expected cost savings and synergies from our
merger and acquisition activities, including our recently completed
acquisition of Cedar Hill Associates, might not be realized within the
expected time frames; (2) 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; (3) competitive pressures among depository institutions;
(4) interest rate movements and their impact on customer behavior and
net interest margin; (5) the impact of repricing and competitors'
pricing initiatives on loan and deposit products; (6) fluctuations in
real estate values; (7) the ability to adapt successfully to
technological changes to meet customers' needs and developments in the
market place; (8) our ability to realize the residual values of our
direct finance, leveraged, and operating leases; (9) our ability to
access cost-effective funding; (10) changes in financial markets; (11)
changes in economic conditions in general and in the Chicago
metropolitan area in particular; (12) the costs, effects and outcomes of
litigation; (13) new legislation or regulatory changes, including but
not limited to changes in federal and/or state tax laws or
interpretations thereof by taxing authorities; (14) changes in
accounting principles, policies or guidelines; (15) our future
acquisitions of other depository institutions or lines of business.
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 June 30, 2008, March 31, 2008, December 31, 2007, September 30, 2007, and June 30, 2007 (Amounts in thousands, except common share data) (Unaudited)
June 30, March 31, December 31, September 30, June 30, 2008
2008
2007
2007
2007
ASSETS
Cash and due from banks
$164,996
$187,116
$141,248
$119,961
$153,496
Interest bearing deposits with banks
6,487
16,054
9,093
7,582
3,622
Investment securities:
Securities available for sale, at fair value
1,322,341
1,186,153
1,177,714
1,245,790
1,325,442
Non-marketable securities - FHLB and FRB Stock
63,913
63,671
63,671
63,634
63,634
Total investment securities
1,386,254
1,249,824
1,241,385
1,309,424
1,389,076
Loans (net of allowance for loan losses of $82,544 at June 30, 2008,
$78,764 at March 31, 2008, $65,103 at December 31, 2007,
$61,122 at September 30, 2007, and $59,058 at June 30, 2007)
5,918,438
5,750,337
5,550,524
5,321,410
5,130,448
Assets held for sale
-
-
-
353,028
375,149
Lease investments, net
113,101
91,675
97,321
90,670
80,353
Premises and equipment, net
185,411
184,257
183,722
183,506
184,090
Cash surrender value of life insurance
119,423
118,296
116,690
117,900
116,624
Goodwill, net
387,069
379,047
379,047
379,047
379,047
Other intangibles, net
27,602
24,537
25,352
26,223
27,097
Other assets
90,961
89,213
90,321
91,745
82,306
Total assets
$8,399,742
$8,090,356
$7,834,703
$8,000,496
$7,921,308
LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS' EQUITY Liabilities
Deposits:
Noninterest bearing
$898,954
$865,665
$875,491
$846,699
$879,338
Interest bearing
5,138,719
4,814,621
4,638,292
4,703,589
4,643,906
Total deposits
6,037,673
5,680,286
5,513,783
5,550,288
5,523,244
Short-term borrowings
764,172
922,985
977,721
809,935
783,153
Long-term borrowings
483,625
354,010
208,865
187,577
186,322
Junior subordinated notes issued to capital trusts
158,920
158,968
159,016
197,537
166,657
Liabilities held for sale
-
-
-
321,144
344,643
Accrued expenses and other liabilities
74,471
102,060
112,949
79,112
74,972
Total liabilities
7,518,861
7,218,309
6,972,334
7,145,593
7,078,991
Minority interest
2,564
-
-
-
-
Stockholders' Equity
Common stock, ($0.01 par value; authorized 43,000,000 shares at June
30, 2008, March 31, 2007, December 31, 2007, September 30, 2007,
and June 30, 2007; issued 37,525,940, 37,414,091, 37,401,023,
37,404,087 and 37,345,661 shares at June 30, 2008, March 31, 2008,
December 31, 2007, September 30, 2007, and June 30, 2007,
respectively)
375
374
374
374
373
Additional paid-in capital
441,914
441,405
441,201
440,655
439,450
Retained earnings
520,595
504,861
505,260
475,208
463,359
Accumulated other comprehensive income (loss)
3,515
15,511
7,597
120
(12,028
)
Less: 2,676,592, 2,734,281, 2,785,573, 1,809,035 and 1,442,588
shares of
Treasury stock, at cost, at June 30, 2008, March 31, 2008,
December 31,2007, September 30, 2007 and June 30, 2007, respectively
(88,082
)
(90,104
)
(92,063
)
(61,454
)
(48,837
)
Total stockholders' equity
878,317
872,047
862,369
854,903
842,317
Total liabilities, minority interest and stockholders' equity
$8,399,742
$8,090,356
$7,834,703
$8,000,496
$7,921,308
MB FINANCIAL, INC. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Amounts in thousands, except common share data) (Unaudited)
Three months ended
Six months ended June 30,
March 31,
December 31,
September 30,
June 30, June 30,
June 30, 2008
2008
2007
2007
2007
2008
2007
Interest income:
Loans
$ 87,458
$ 93,877
$ 100,802
$ 101,488
$ 96,793
$ 181,335
$ 190,726
Investment securities available for sale:
Taxable
10,001
9,971
10,181
11,983
13,163
19,972
27,511
Nontaxable
3,828
3,753
3,649
3,586
3,325
7,581
6,627
Federal funds sold
14
95
95
52
67
109
302
Other interest bearing accounts
89
106
102
63
49
195
99
Total interest income
101,390
107,802
114,829
117,172
113,397
209,192
225,265
Interest expense:
Deposits
34,309
40,849
45,917
47,942
46,337
75,158
91,790
Short-term borrowings
5,351
7,867
9,729
9,617
9,390
13,218
18,008
Long-term borrowings and junior subordinated notes
5,657
5,623
5,211
5,530
5,316
11,280
11,216
Total interest expense
45,317
54,339
60,857
63,089
61,043
99,656
121,014
Net interest income
56,073
53,463
53,972
54,083
52,354
109,536
104,251
Provision for loan losses
12,200
22,540
8,000
4,500
3,000
34,740
6,813
Net interest income after provision for loan losses
43,873
30,923
45,972
49,583
49,354
74,796
97,438
Other income:
Loan service fees
2,475
2,470
2,080
1,253
1,388
4,945
2,925
Deposit service fees
6,889
6,530
6,635
6,501
5,624
13,419
10,782
Lease financing, net
3,969
3,867
4,155
3,952
3,744
7,836
7,740
Brokerage fees
1,187
985
1,846
2,067
3,216
2,172
5,668
Trust and asset management fees
3,589
2,220
2,101
2,490
2,666
5,809
5,856
Net (loss) gain on sale of investment securities
1
1,105
(1,529
)
(114
)
(2,077
)
1,106
(2,101
)
Increase in cash surrender value of life insurance
1,128
1,606
1,225
1,288
1,269
2,734
2,490
Net gain (loss) on sale of other assets
50
(306
)
723
293
9,059
(256
)
9,081
Merchant card processing
4,644
4,530
4,293
4,131
4,045
9,174
7,923
Other operating income
1,635
1,530
1,452
1,398
1,786
3,165
3,300
25,567
24,537
22,981
23,259
30,720
50,104
53,664
Other expense:
Salaries and employee benefits
29,107
26,784
32,649
27,164
26,634
55,891
51,456
Occupancy and equipment expense
6,967
7,525
7,733
6,928
7,054
14,492
14,254
Computer services expense
2,030
1,916
1,949
1,846
1,857
3,946
3,674
Advertising and marketing expense
1,504
1,316
962
1,214
1,444
2,820
2,854
Professional and legal expense
803
306
2,776
593
656
1,109
1,179
Brokerage fee expense
470
419
620
1,152
1,582
889
3,030
Telecommunication expense
774
762
757
681
689
1,536
1,370
Other intangibles amortization expense
913
815
871
874
878
1,728
1,759
Merchant card processing
4,069
3,926
3,815
3,487
3,474
7,995
6,744
Charitable contributions
15
15
1,512
31
3,034
29
3,143
Other operating expenses
5,474
4,440
5,486
4,857
4,771
9,915
9,416
52,126
48,224
59,130
48,827
52,073
100,350
98,879
Income before income taxes
17,314
7,236
9,823
24,015
28,001
24,550
52,223
Income tax (benefit) expense
(4,693
)
1,412
1,890
6,709
8,394
(3,281
)
15,437
Income from continuing operations
$ 22,007
$ 5,824
$ 7,933
$ 17,306
$ 19,607
$ 27,831
$ 36,786
Discontinued operations
Income (loss) from discontinued operations before income taxes
-
-
(741
)
1,499
1,803
-
3,232
Gain on disposal of discontinued operations before income taxes
-
-
46,485
-
-
-
-
Income before income taxes
-
-
45,744
1,499
1,803
-
3,232
Income taxes
-
-
17,281
500
369
-
856
Income from discontinued operations
-
-
28,463
999
1,434
-
2,376
Net income
$ 22,007
$ 5,824
$ 36,396
$ 18,305
$ 21,041
$ 27,831
$ 39,162
Three months ended
Six months ended June 30,
March 31,
December 31,
September 30,
June 30,
June 30,
June 30, 2008
2008
2007
2007
2007
2008
2007 Common share data:
Basic earnings per common share from continuing operations
$ 0.63
$ 0.17
$ 0.23
$ 0.48
$ 0.54
$ 0.80
$ 1.01
Basic earnings per common share from discontinued operations
$ -
$ -
$ 0.81
$ 0.03
$ 0.04
$ -
$ 0.06
Basic earnings per common share
$ 0.63
$ 0.17
$ 1.04
$ 0.51
$ 0.58
$ 0.80
$ 1.07
Diluted earnings per common share from continuing operations
$ 0.63
$ 0.17
$ 0.22
$ 0.48
$ 0.53
$ 0.79
$ 1.00
Diluted earnings per common share from discontinued operations
$ -
$ -
$ 0.80
$ 0.03
$ 0.04
$ -
$ 0.06
Diluted earnings per common share
$ 0.63
$ 0.17
$ 1.02
$ 0.51
$ 0.57
$ 0.79
$ 1.06
Weighted average common shares outstanding
34,692,571
34,620,435
35,095,301
35,733,165
36,239,731
34,656,503
36,433,948
Diluted weighted average common shares outstanding
35,047,596
34,994,731
35,536,449
36,213,532
36,744,473
35,043,849
36,958,570
Three months ended
Six months ended June 30, March 31, December 31, September 30, June 30, June 30, June 30, 2008
2008
2007
2007
2007
2008
2007
Performance Ratios (continuing operations):
Annualized return on average assets
1.08
%
0.30
%
0.40
%
0.86
%
1.00
%
0.70
%
0.94
%
Annualized return on average equity
10.11
2.66
3.68
8.10
9.25
6.38
8.72
Annualized return on average tangible equity (1)
19.12
5.28
7.32
15.72
17.87
12.14
16.86
Net interest rate spread
2.88
2.75
2.76
2.81
2.79
2.82
2.79
Efficiency ratio (2)
61.96
61.07
73.46
61.47
59.86
61.48
60.38
Net interest margin
3.11
3.10
3.16
3.22
3.20
3.11
3.21
Tax equivalent effect
0.14
0.12
0.12
0.12
0.11
0.13
0.11
Net interest margin – fully tax
equivalent basis (3)
3.25
3.22
3.28
3.34
3.31
3.24
3.32
Performance Ratios (total):
Annualized return on average assets
1.08
%
0.30
%
1.82
%
0.91
%
1.07
%
0.70
%
1.00
%
Annualized return on average equity
10.11
2.66
16.86
8.57
9.93
6.38
9.28
Annualized return on average tangible equity (1)
19.12
5.28
31.83
16.60
19.14
12.14
17.92
Net interest rate spread
2.88
2.75
2.76
2.81
2.80
2.82
2.81
Efficiency ratio (2)
61.96
61.07
47.60
61.29
59.44
61.48
60.03
Net interest margin
3.11
3.10
3.17
3.24
3.22
3.11
3.23
Tax equivalent effect
0.14
0.12
0.12
0.12
0.12
0.13
0.11
Net interest margin – fully tax
equivalent basis (3)
3.25
3.22
3.29
3.36
3.34
3.24
3.34
Asset Quality Ratios:
Total non-performing loans and potential problem
loans to total loans
2.81
%
2.98
%
2.00
%
1.29
%
0.83
%
2.81
%
0.83
%
Non-performing loans to total loans
1.56
0.87
0.44
0.44
0.42
1.56
0.42
Non-performing assets to total assets
1.13
0.65
0.33
0.31
0.28
1.13
0.28
Allowance for loan losses to total loans
1.38
1.35
1.16
1.14
1.14
1.38
1.14
Allowance for loan losses to non-performing loans
88.19
154.79
266.17
255.73
270.92
88.19
270.92
Net loan charge-offs to average loans (annualized)
0.57
0.63
0.29
0.18
0.21
0.60
0.27
Capital Ratios:
Tangible equity to assets (4)
5.95
%
6.20
%
6.28
%
6.03
%
5.92
%
5.95
%
5.92
%
Equity to total assets
10.46
10.78
11.01
10.69
10.63
10.46
10.63
Book value per share (5)
25.20
25.15
24.91
24.02
23.46
25.20
23.46
Less: goodwill and other intangible assets, net of
tax benefit, per common share
11.62
11.39
11.43
11.13
11.05
11.62
11.05
Tangible book value per share (6)
13.58
13.76
13.48
12.89
12.41
13.58
12.41
Total capital (to risk–weighted assets)
11.60
%
11.81
%
11.58
%
11.83
%
11.62
%
11.60
%
11.62
%
Tier 1 capital (to risk-weighted assets)
9.59
9.78
9.75
10.31
10.09
9.59
10.09
Tier 1 capital (to average assets)
8.08
8.29
8.18
8.61
8.25
8.08
8.25
(1) Net cash flow available to stockholders (net income or net income
from continuing operations, as appropriate, plus other intangibles
amortization expense, net of tax benefit) / Average tangible equity
(average equity less average goodwill and average other intangibles, net
of tax benefit)
(2) Equals total other expense divided by the sum of net interest income
on a fully tax equivalent basis and total other income less net gains
(losses) on securities available for sale.
(3) Represents net interest income, on a fully tax equivalent basis
assuming a 35% tax rate, as a percentage of average interest earning
assets.
(4) 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.
(5) Equals total ending stockholders’ equity
divided by common shares outstanding.
(6) Equals total ending stockholders’ equity
less goodwill and other intangibles, net of tax benefit, divided by
common shares outstanding.
NON-GAAP FINANCIAL INFORMATION
This press release contains certain financial information determined by
methods other than in accordance with accounting principles generally
accepted in the United States of America (GAAP). These measures include
net interest income on a fully tax equivalent basis, net interest margin
on a fully tax equivalent basis, tangible equity to assets ratio,
tangible book value per share, and annualized cash return on average
tangible equity. Our management uses these non-GAAP measures in its
analysis of our performance. The tax equivalent adjustment to net
interest income recognizes the income tax savings when comparing taxable
and tax-exempt assets and assumes a 35% tax rate. Management believes
that it is a standard practice in the banking industry to present net
interest income and net interest margin on a fully tax equivalent basis,
and accordingly believes that providing these measures may be useful for
peer comparison purposes. The other measures exclude the ending balances
of acquisition-related goodwill and other intangible assets, net of tax
benefit, in determining tangible stockholders’
equity. Management believes the presentation of these other financial
measures excluding the impact of such items provides useful supplemental
information that is helpful in understanding our financial results, as
they provide a method to assess management’s
success in utilizing our tangible capital. These disclosures should not
be viewed as substitutes for the results determined to be in accordance
with GAAP, nor are they necessarily comparable to non-GAAP performance
measures that may be presented by other companies.
The following table presents a reconciliation of tangible equity to
stockholders’ equity (in thousands):
June 30,
March 31,
December 31,
September 30,
June 30, 2008
2008
2007
2007
2007
Stockholders’ equity –
as reported
$878,317
$872,047
$862,369
$854,903
$842,317
Plus: minority interest
2,564
-
-
-
-
Less: goodwill
387,069
379,047
379,047
379,047
379,047
Less: other intangible assets, net of tax benefit
17,941
15,949
16,479
17,045
17,613
Tangible equity
$475,871
$477,051
$466,843
$458,811
$445,657
The following table presents a reconciliation of average tangible equity
to average stockholders’ equity (in
thousands):
Three months ended
Six months ended June 30,
March 31,
December 31,
September 30,
June 30, June 30,
June 30, 2008
2008
2007
2007
2007
2008
2007
Average Stockholders’ equity –
as reported
$ 875,636
$ 879,056
$ 856,362
$ 847,326
$ 849,816
$ 877,346
$ 850,795
Plus: average minority interest
1,814
-
-
-
-
907
-
Less: average goodwill
384,865
379,047
379,047
379,047
379,047
381,956
379,047
Less: average other intangible assets, net of tax benefit
17,295
16,131
16,671
17,245
17,805
16,802
18,099
Average tangible equity
$ 475,290
$ 483,878
$ 460,644
$ 451,034
$ 452,964
$ 479,495
$ 453,649
The following table presents a reconciliation of net cash flow available
to stockholders to net income from continuing operations (in thousands):
Three months ended
Six months ended June 30,
March 31,
December 31,
September 30,
June 30, June 30,
June 30, 2008
2008
2007
2007
2007
2008
2007
Net income – as reported
$ 22,007
$ 5,824
$ 7,933
$ 17,306
$ 19,607
$ 27,831
$ 36,786
Add: other intangible amortization
expense, net of tax benefit
593
530
566
568
571
1,123
1,143
Net cash flow available to stockholders
$ 22,600
$ 6,354
$ 8,499
$ 17,874
$ 20,178
$ 28,954
$ 37,929
The following table presents a reconciliation of net cash flow available
to stockholders to net income (in thousands):
Three months ended
Six months ended June 30,
March 31,
December 31,
September 30,
June 30, June 30,
June 30, 2008
2008
2007
2007
2007
2008
2007
Net income – as reported
$ 22,007
$ 5,824
$ 36,396
$ 18,305
$ 21,041
$ 27,831
$ 39,162
Add: other intangible amortization
expense, net of tax benefit
593
530
566
568
571
1,123
1,143
Net cash flow available to stockholders
$ 22,600
$ 6,354
$ 36,962
$ 18,873
$ 21,612
$ 28,954
$ 40,305
Reconciliations of net interest income on a fully tax equivalent basis
to net interest income and net interest margin on a fully tax equivalent
basis to net interest margin are contained in the tables under "Net
Interest Margin.” A reconciliation of
tangible book value per share to book value per share is contained in
the "Selected Financial Ratios”
table.
NET INTEREST MARGIN
The following table presents, for the periods indicated, the total
dollar amount of interest income from average interest earning assets
and the resultant yields, as well as the interest expense on average
interest bearing liabilities, and the resultant costs, expressed both in
dollars and rates (dollars in thousands):
Three Months Ended June 30,
Three Months Ended March 31, 2008
2007
2008 AverageBalance
Interest
Yield/Rate
AverageBalance
Interest
Yield/Rate
AverageBalance
Interest
Yield/Rate
Interest Earning Assets: Loans (1) (2): Commercial related credits
Commercial
$ 1,375,537
$ 19,605
5.64
%
$ 1,140,869
$ 22,635
7.85
%
$ 1,365,694
$ 22,771
6.60
%
Commercial – nontaxable (3)
65,880
1,206
7.24
7,693
142
7.30
7,560
141
7.38
Commercial loans collateralized by assignment of lease payments
577,051
9,524
6.60
402,079
6,984
6.95
555,076
9,411
6.78
Real estate commercial
2,145,371
32,593
6.01
1,809,011
33,159
7.25
2,003,039
32,969
6.51
Real estate construction
804,946
11,010
5.41
854,090
18,426
8.53
827,220
14,124
6.75
Total commercial related credits
4,968,785
73,938
5.89
4,213,742
81,346
7.64
4,758,589
79,416
6.60
Other loans
Real estate residential
378,163
5,565
5.89
350,842
5,330
6.08
373,989
5,587
5.98
Home equity
352,209
4,273
4.88
356,205
6,783
7.64
348,789
5,082
5.86
Indirect
174,681
3,395
7.82
125,848
2,373
7.56
152,774
3,028
7.97
Consumer loans
53,398
709
5.34
53,185
1,011
7.62
53,505
813
6.11
Total other loans
958,451
13,942
5.85
886,080
15,497
7.01
929,057
14,510
6.28
Total loans
5,927,236
87,880
5.96
5,099,822
96,843
7.62
5,687,646
93,926
6.64
Taxable investment securities
886,736
10,001
4.51
1,088,104
13,163
4.84
819,845
9,971
4.86
Investments securities exempt from federal income taxes (3)
409,389
5,889
5.69
358,761
5,115
5.64
401,207
5,774
5.69
Federal funds sold
2,912
14
1.90
5,099
67
5.20
15,220
95
2.47
Other interest bearing deposits
18,345
89
1.95
6,245
49
3.15
15,387
106
2.77
Total interest earning assets
7,244,618
103,873
5.77
6,558,031
115,237
7.05
6,939,305
109,872
6.37
Assets held for sale
-
399,584
-
Non-interest earning assets
933,310
931,340
925,512
Total assets
$ 8,177,928
$ 7,888,955
$ 7,864,817
Interest Bearing Liabilities: Core funding:
Money market and NOW accounts
$ 1,226,903
$ 4,762
1.56
$ 1,181,417
$ 9,293
3.16
$ 1,234,965
$ 6,602
2.15
Savings accounts
391,683
269
0.28
438,093
813
0.74
388,956
443
0.46
Certificates of deposit
2,299,976
20,647
3.61
2,295,965
27,588
4.82
2,218,570
24,899
4.51
Customer repos
291,208
1,033
1.43
298,323
2,868
3.86
334,464
1,830
2.20
Total core funding
4,209,770
26,711
2.55
4,213,798
40,562
3.86
4,176,955
33,774
3.25
Wholesale funding:
Public funds
245,953
1,956
3.20
293,026
3,820
5.23
282,793
3,013
4.29
Brokered accounts (includes fee expense)
735,325
6,675
3.65
391,427
4,823
4.94
516,841
5,892
4.59
Other short-term borrowings
533,462
4,318
3.26
495,660
6,522
5.28
605,282
6,037
4.01
Long-term borrowings
587,940
5,657
3.81
353,081
5,316
5.96
461,053
5,623
4.82
Total wholesale funding
2,102,680
18,606
3.56
1,533,194
20,481
5.36
1,865,969
20,565
4.43
Total interest bearing liabilities
$ 6,312,450
45,317
2.89
$ 5,746,992
61,043
4.26
$ 6,042,924
54,339
3.62
Non-interest bearing deposits
905,201
848,459
839,386
Liabilities held for sale
-
368,892
-
Other non-interest bearing liabilities
84,641
74,796
103,451
Stockholders’ equity
875,636
849,816
879,056
Total liabilities and stockholders’ equity
$ 8,177,928
$ 7,888,955
$ 7,864,817
Net interest income/interest rate spread (4)
$ 58,556
2.88
%
$ 54,194
2.79
%
$ 55,533
2.75
%
Taxable equivalent adjustment
2,483
1,840
2,070
Net interest income, as reported
$ 56,073
$ 52,354
$ 53,463
Net interest margin (5)
3.11
%
3.20
%
3.10
%
Tax equivalent effect
0.14
%
0.11
%
0.12
%
Net interest margin on a fully tax equivalent basis (5)
3.25
%
3.31
%
3.22
%
(1) Non-accrual loans are included in average loans.
(2) Interest income includes amortization of deferred loan origination
fees of $1.5 million, $1.8 million and $2.0 million for the three months
ended June 30, 2008, June 30, 2007, and March 31, 2008, respectively.
(3) Non-taxable loan and investment income is presented on a fully tax
equivalent basis assuming a 35% tax rate.
(4) Interest rate spread represents the difference between the average
yield on interest earning assets and the average cost of interest
bearing liabilities and is presented on a fully tax equivalent basis.
(5) Net interest margin represents net interest income as a percentage
of average interest earning assets.
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):
Six Months Ended June 30, 2008
2007 AverageBalance
Interest
Yield/Rate
AverageBalance
Interest
Yield/ Rate
Interest Earning Assets: Loans (1) (2):
Commercial related credits
Commercial
$ 1,360,739
$ 42,126
6.12
%
$ 1,086,277
$ 43,041
7.88
%
Commercial – nontaxable (3)
46,596
1,732
7.35
11,410
478
8.33
Commercial loans collateralized by assignment of lease payments
566,064
18,935
6.69
394,584
13,597
6.89
Real estate commercial
2,074,204
65,562
6.25
1,810,363
66,102
7.26
Real estate construction
816,083
25,134
6.09
853,649
36,612
8.53
Total commercial related credits
4,863,686
153,489
6.24
4,156,283
159,830
7.65
Other loans
Real estate residential
376,076
11,152
5.93
351,253
10,625
6.05
Home equity
350,499
9,355
5.37
363,416
13,827
7.67
Indirect
163,728
6,423
7.89
120,114
4,587
7.70
Consumer loans
53,451
1,522
5.73
54,057
2,025
7.55
Total other loans
943,754
28,452
6.06
888,840
31,064
7.05
Total loans
5,807,440
181,941
6.30
5,045,123
190,894
7.63
Taxable investment securities
853,290
19,972
4.68
1,135,660
27,511
4.84
Investments securities exempt from federal income taxes (3)
405,298
11,663
5.69
359,384
10,195
5.64
Federal funds sold
9,066
109
2.38
11,515
302
5.22
Other interest bearing deposits
16,867
195
2.32
6,412
99
3.11
Total interest earning assets
7,091,961
213,880
6.06
6,558,094
229,001
7.04
Assets held for sale
-
393,784
Non-interest bearing assets
929,412
932,504
Total assets
$ 8,021,373
$ 7,884,382
Interest Bearing Liabilities: Core funding:
Money market and NOW accounts
$ 1,230,934
$ 11,365
1.86
$ 1,126,142
$ 17,023
3.05
Savings accounts
390,319
712
0.37
448,543
1,677
0.75
Certificates of deposit
2,259,273
45,545
4.05
2,310,764
55,170
4.81
Customer repos
312,836
2,863
1.84
303,657
5,761
3.83
Total core funding
4,193,362
60,485
2.90
4,189,106
79,631
3.83
Wholesale funding:
Public funds
264,373
4,969
3.78
275,334
7,140
5.23
Brokered accounts (includes fee expense)
626,083
12,567
4.04
440,167
10,780
4.94
Other short-term borrowings
569,372
10,355
3.66
465,806
12,247
5.30
Long-term borrowings
524,497
11,280
4.25
373,816
11,216
5.97
Total wholesale funding
1,984,325
39,171
3.97
1,555,123
41,383
5.37
Total interest bearing liabilities
$ 6,177,687
99,656
3.24
$ 5,744,229
121,014
4.25
Non-interest bearing deposits
872,294
853,771
Liabilities held for sale
-
362,630
Other non-interest bearing liabilities
94,046
72,957
Stockholders’ equity
877,346
850,795
Total liabilities and stockholders’ equity
$ 8,021,373
$ 7,884,382
Net interest income/interest rate spread (4)
$ 114,224
2.82
%
$ 107,987
2.79
%
Taxable equivalent adjustment
4,688
3,736
Net interest income, as reported
$ 109,536
$ 104,251
Net interest margin (5)
3.11
%
3.21
%
Tax equivalent effect
0.13
%
0.11
%
Net interest margin on a fully tax equivalent basis (5)
3.24
%
3.32
%
(1) Non-accrual loans are included in average loans.
(2) Interest income includes amortization of deferred loan origination
fees of $3.5 million and $3.5 million for the six months ended June 30,
2008, and June 30, 2007, 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 percentage of
average interest earning assets.
