UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 9, 2011
MB FINANCIAL, INC.
(Exact name of registrant as specified in its charter)
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Maryland |
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0-24566-01 |
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36-4460265 |
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(State or other jurisdiction of incorporation) |
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(Commission File No.) |
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(IRS Employer Identification No.) |
800 West Madison Street, Chicago, Illinois 60607
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (888) 422-6562
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17CFR 240.13e-4(c))
Item 7.01. Regulation FD Disclosure
Forward-Looking Statements
When used in this Current Report on Form 8-K and in other reports filed with or furnished to the Securities and Exchange Commission, in 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 MB Financial, Inc.’s 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.
MB Financial, Inc. does 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.
Set forth below are investor presentation materials.
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Mitchell Feiger, President and Chief Executive Officer Jill E. York, Vice President and Chief Financial Officer November 2011 NASDAQ: MBFI Investor Presentation |
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Forward Looking Statements 1 When used in this presentation 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. |
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Premier middle-market franchise in Chicago MSA Chicago-based bank with a strong position in affluent DuPage and Cook counties. Strategically located to have access to ~80% of middle-market companies in the Chicago MSA. Strong pre-tax, pre-provision operating earnings Well-positioned for opportunistic acquisitions Consolidator of six failed banks Track record of being disciplined acquirer and experienced integrator. Strong liquidity and capital position Improved and improving asset quality Strong and experienced management team Company Highlights 2 Source: Company filings, SNL Financial Note: Chicago peers consist of banks headquartered in Chicago MSA with assets between $1.9bn and $16.0bn in 2010 and include: First Midwest, Old Second, PrivateBancorp, Taylor Capital, Wintrust MBFI 2011 Q3 Peer Median 2011 Q3 Pre-tax, pre-provision operating earnings - fully tax equivalent basis to average assets 1.89% 1.64% Pre-tax, pre-provision operating earnings - fully tax equivalent basis to risk-weighted assets 3.00% 1.87% Net interest margin - fully tax equivalent basis 3.90% 3.56% Cost of funds 0.66% 1.06% Core fee income to total revenue - fully tax equivalent 26.31% 23.29% September 30, 2011 September 30, 2010 Tangible common equity to tangible assets 8.1% 7.2% Noninterest bearing deposits to total deposits 23.4% 20.3% Time deposits to total deposits 31.7% 38.6% September 30, 2011 September 30, 2010 Non-performing loans to total loans 2.4% 5.7% Non-performing assets to total assets 2.3% 4.3% Allowance for loan losses to non-performing loans 91.2% 49.4% |
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MB Financial is a leading commercial bank serving the Chicago market 3 Provides the majority of the funding for commercial lending business Provides 60% of deposits Provides 14% of loans High percentage of core funding Low reliance on CDs Focused on low-cost deposits, deposit service fees, and business banking Retail Banking Growing private bank that targets wealthy individuals Asset management and trust focus Brokerage services through branch network Focused on low-cost deposits, private banking, and asset management Wealth Management Largest, most developed business unit, drives company performance +9.0% CAGR in commercial loans since 2002 Lending and depository services to middle-market companies with revenues ranging from $5 to $100mm 84 calling officers with 20+ years average experience Treasury management products for companies of all sizes Focused on treasury management, low-cost deposits, leasing, cross-selling wealth management products Commercial Banking Lines of business Chicago MSA – 90 branches Branches strategically located in Chicago MSA have access to ~80% of middle-market companies Source: Company management, SNL Financial Note: Business line financial data as of September 30, 2011 |
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Company Strategy Emerge from the current economic cycle stronger, more capable, and more profitable than at the beginning of the cycle. Accelerate growth of our non-interest business revenue/profits. Reduce balance sheet risk and improve balance sheet profitability. Remix loan portfolio to improve long-term profitability and reduce risk. Improve an already strong deposit base. Increase deposit customer “stickiness.” Reduce funding cost to among the lowest in the market. Control expenses. Keep the ratio of net non-interest expense to average assets at the low end of our peers. 4 |
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Balance Sheet Composition September 30, 2011 5 Source: Company filings Overall loan composition Lease loans $1,067mm (18%) Covered loans $719mm (12%) Construction $210mm (4%) Commercial real estate $1,845mm (32%) Commercial loans $1,043mm (18%) 1-4 Family and home equity $665mm (11%) Other consumer loans $265mm (5%) Overall deposit composition NOW and MMDA $2,723mm (35%) Non-interest bearing $1,803mm (23%) Savings $751mm (10%) Brokered CDs $444mm (6%) Time and public funds $2,001mm (26%) Assets Loans $5,814mm (58%) Cash and cash equivalents $481mm (5%) Investment Securities $2,468mm (25%) Other $1,159mm (12%) Liabilities and stockholders’ equity Borrowings, accrued expenses and other liabilities $832mm (8%) Stockholders’ equity $1,368mm (14%) Deposits $7,722mm (78%) 2011 Q3 overall interest earning assets yield: 4.55% 2011 Q3 yield on loans: 5.38% 2011 Q3 cost of deposits: 0.53% 2011 Q3 cost of total funds: 0.66% 2011 Q3 net interest margin - FTE: 3.90% 2011 Q3 pre-tax, pre-provision operating earnings – FTE to average assets: 1.89% |
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Balance Sheet Composition December 31, 2007 6 Source: Company filings Overall loan composition Lease loans $553mm (10%) Construction $825mm (15%) Commercial real estate $1,994mm (35%) Commercial loans $1,324mm (24%) 1-4 Family and home equity $721mm (13%) Other consumer loans $199mm (3%) Overall deposit composition NOW and MMDA $1,263mm (23%) Non-interest bearing $875mm (16%) Savings 391mm (7%) Brokered CDs $479mm (9%) Time and public funds $2,506mm (45%) Assets Loans $5,616mm (72%) Cash and cash equivalents $150mm (2%) Investment Securities $1,242mm (16%) Other $827mm (10%) Liabilities and stockholders’ equity Borrowings, accrued expenses and other liabilities $1,459mm (19%) Stockholders’ equity $862mm (11%) Deposits $5,514mm (70%) 2007 overall interest earning assets yield: 7.01% 2007 yield on loans: 7.55% 2007 cost of deposits: 3.38% 2007 cost of total funds: 3.67% 2007 net interest margin - FTE: 3.33% 2007 pre-tax, pre-provision operating earnings - FTE to average assets: 1.49% |
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Asset Quality Statistics 7 Source: Company filings, press releases Consumer $13mm (10%) Construction $3mm (2%) Commercial real estate $87mm (61%) Commercial $37mm (27%) NPL composition September 30, 2011 Asset quality ratios September 30, 2011 September 30, 2010 Non-performing loans to total loans 2.4% 5.7% Non-performing assets to total assets 2.3% 4.3% Allowance for loan losses to non-performing loans 91.2% 49.4% Lease $1mm (0%) September 30, 2011 September 30, 2011 Percent of NPL Balance Reserved Outstanding Total NPLs Including Partial ($mm) ($mm) Charge-Offs Construction loans $210 $3 70% Commercial and lease loans $2,110 $38 44% Commercial real estate loans $1,845 $87 26% Total commercial related loans $4,165 $128 34% Consumer loans $930 $13 Total loans, excluding covered loans $5,095 $141 |
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Quarterly Non-performing Trends 8 Source: Company filings, SNL Financial |
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MB has achieved steady growth in PTPP operating earnings despite challenging market conditions... 9 Net non-interest expense / average assets2 (%) Core fee income / total revenue - FTE (%) Asset yields (%) Source: Company filings, SNL Financial Note: Chicago peers consist of public banks headquartered in Chicago MSA with assets between $1.9bn and $16.0bn in 2010 and include: First Midwest, Old Second, PrivateBancorp, Taylor Capital, Wintrust 1 YTD 2011 annualized as of 9/30/2011 2 Net non-interest expense / average assets = (core other expense – core other income)/average assets 3 Pre-tax, pre-provision earnings = net income before taxes excluding loan loss provision, non-core other income and non-core other expense Pre-tax, pre-provision operating earnings - FTE / average assets (%) Cost of funds (%) MBFI Chicago Peers Median Net interest margin - FTE (%) 1.60 1.54 1.33 1.95 1.94 1.54 1.37 0.98 1.49 1.75 1.34 1.49 2006 2007 2008 2009 2010 20111 25 26 26 24 24 26 26 22 26 26 23 22 2006 2007 2008 2009 2010 20111 6.88 7.01 5.80 4.59 4.82 4.61 6.91 7.09 5.80 5.03 4.82 4.54 2006 2007 2008 2009 2010 20111 3.36 2.66 1.67 0.99 0.72 3.66 4.02 3.06 1.78 1.26 1.13 3.67 2006 2007 2008 2009 2010 20111 3.52 3.16 2.97 3.83 3.90 3.46 3.14 2.81 3.06 3.38 3.47 3.33 2006 2007 2008 2009 2010 20111 1.34 1.29 1.26 1.34 1.39 1.46 1.54 1.62 1.57 1.76 1.87 1.95 2006 2007 2008 2009 2010 20111 |
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MB Financial has maintained stronger capital levels than peers 10 Source: Company filings, SNL Financial Note: Chicago peers consist of median data for public banks headquartered in Chicago MSA with assets between $1.9bn and $16.0bn and include: First Midwest, Old Second, PrivateBancorp, Taylor Capital, Wintrust TCE / TA (%) Tier I Ratio (%) Total Capital Ratio (%) TCE / RWA (%) MBFI Chicago Peers Median 5.9 6.3 5.6 6.2 7.5 8.1 5.6 5.6 4.5 4.7 7.1 7.4 2006 2007 2008 2009 2010 2011 7.5 7.4 7.1 8.8 10.9 12.4 7.3 7.2 5.2 5.6 7.9 8.8 2006 2007 2008 2009 2010 2011 11.8 11.6 14.1 15.5 17.8 19.6 11.3 11.6 13.0 13.3 13.8 13.6 2006 2007 2008 2009 2010 2011 10.5 9.8 12.1 13.5 15.8 17.5 9.8 9.5 10.2 11.0 12.1 12.0 2006 2007 2008 2009 2010 2011 |
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11 Source: Company filings, SNL Financial Note: Chicago peers consist of median data for public banks headquartered in Chicago MSA with assets between $1.9bn and $16.0bn and include: First Midwest, Old Second, PrivateBancorp, Taylor Capital, Wintrust NPAs / Assets (%) Reserves/Loans (%) Reserves / NPLs (%) Credit metrics better than local peers Reserves / Loans (%) NPLs / Loans (%) MBFI Chicago Peers Median 0.31 0.33 1.71 2.84 4.21 2.30 0.38 0.81 2.30 3.84 4.35 3.35 2006 2007 2008 2009 2010 2011 275 266 99 65 53 91 215 125 57 58 66 73 2006 2007 2008 2009 2010 2011 1.19 1.16 2.31 2.71 2.90 2.21 1.08 1.16 1.75 2.71 2.61 2.42 2006 2007 2008 2009 2010 2011 0.43 0.44 2.34 4.16 5.48 2.42 0.32 0.69 2.52 4.70 4.96 3.94 2006 2007 2008 2009 2010 2011 |
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Position in the Chicago MSA Rank Institution Branches Total deposits in market ($mm) Total market share (%) 1 JPMorgan Chase 431 57,983 19.8 2 Harris (Bank of Montreal) 230 33,730 11.5 3 Bank of America 182 25,147 8.6 4 Northern Trust 15 18,854 6.4 5 PNC Financial Services 148 11,958 4.1 6 Wintrust Financial 94 11,794 4.0 7 Citigroup 74 9,447 3.2 8 PrivateBancorp 19 8,742 3.0 9 Fifth Third 181 8,318 2.8 10 MB Financial 90 7,740 2.6 11 First Midwest 87 5,951 2.0 12 US Bancorp 88 5,770 2.0 13 Royal Bank of Scotland 112 5,326 1.8 14 TCF Financial 203 3,566 1.2 15 Wells Fargo 10 3,102 1.1 All other institutions 1,251 75,469 25.9 MSA Total 3,215 292,897 100.0 Rank Institution Branches Total deposits in market ($mm) Total market share (%) 1 JPMorgan Chase 326 38,407 16.0 2 ABN Amro (LaSalle Bank) 140 30,957 12.9 3 Harris (Bank of Montreal) 192 23,237 9.7 4 Northern Trust 18 8,461 3.5 5 Fifth Third 123 8,052 3.4 6 Royal Bank of Scotland 136 6,446 2.7 7 Wintrust Financial 55 6,019 2.5 8 Corus Bankshares 14 5,500 2.3 9 Citigroup 51 5,441 2.3 10 MAF Bancorp 49 4,904 2.0 11 National City 59 4,528 1.9 12 First Midwest 56 4,488 1.9 13 Bank of America 31 4,159 1.7 14 MB Financial 39 3,770 1.6 15 FBOP Corp 25 2,824 1.2 All other institutions 1,686 82,474 34.4 MSA Total 3,000 239,667 100.0 Current Chicago MSA Rankings 2005 Chicago MSA Rankings Source: SNL Financial Note: Data as of June 30, 2011 reflects acquisitions post June 30, 2011 12 |
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Market share of top banks in 10 largest U.S. MSAs 13 Market share of top 10 banks in 10 largest U.S. MSAs Market share of top 3 banks in 10 largest U.S. MSAs Source: SNL Financial ` ` |
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Deposit share of top 3 and top 10 banks in Chicago MSA 14 |
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Market dislocation may create in-market opportunities 15 Source: SNL Financial, Company filings as of September 30, 2011 and September 30, 2010, respectively 1 Texas Ratio = Non-performing assets / (total tangible equity + loan loss reserve) Number of local banks < 50% MB is here (21%) >= 50% & < 75% >= 75% & < 100% >= 100% Number of local banks < 5% >= 5% & < 10% >= 10% MB is here (2.30%) 62% 9% 8% 21% 57% 23% 20% Texas Ratio Frequency1 NPAs / Assets Frequency Number of local banks Number of local banks 60% 11% 9% 20% < 50% >= 50% & < 75% >= 75% & < 100% >= 100% < 5% >= 5% & < 10% >= 10% 58% 28% 14% MB was here (40%) MB was here (4.26%) 6 banks with assets greater than $100mm have failed in the Chicago MSA since September 30, 2010 Harris Bank consolidated 26 charters 2004-2005 22 89 43 31 91 14 12 30 84 34 30 93 17 14 |
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16 Skilled Acquirer Thirteen acquisitions since 2000 Disciplined financial analyses focused on: Internal rates of return Returns on invested capital Long-term per share earnings accretion Long track record of successful and rapid employee, customer, and systems integrations Ability to manage multiple integrations simultaneously Branch network size and location makes acquired branch consolidations more likely resulting in enhanced expense savings opportunities Separate dedicated asset management team for FDIC-assisted transactions Company culture suited for acquisitions |
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17 2001 2002 2004 2006 2008 First SecurityFed Financial (Chicago, IL) January 9, 2004 $67mm in stock; $73mm cash Acquired $501mm in assets and $314mm in deposits First Lincolnwood (Lincolnwood, IL) December 27, 2001 $35mm all cash Acquired $227mm in assets and $183mm in deposits South Holland Bancorp (South Holland, IL) November 1, 2002 $93mm all cash Acquired $532mm in assets and $454mm in deposits First Oak Brook Bancshares (Oak Brook, IL) May 1, 2006 $297mm in stock; $74mm cash Acquired $2,362mm in assets and $1,914mm in deposits Heritage Community Bank (Glenwood, IL) February 27, 2009 FDIC-assisted transaction Entered into a loss-sharing agreement with the FDIC on all purchased assets Acquired $158mm in loans (net of discount) and $209mm in core deposits Source: Company filings Note: Transaction dates indicate announcement date Cedar Hill Associates, LLC (Chicago, IL) April 18, 2008 Asset management firm with approximately $960mm in assets under management Acquired 80% interest LaSalle Systems Leasing, Inc. July 22, 2002 $31mm cash, $5mm MBFI stock, $4mm in deferred payments Track record of being a disciplined acquirer and experienced integrator InBank (Oak Forest, IL) September 4, 2009 FDIC-assisted transaction Acquired $101mm in loans (net of discount) and $122mm in core deposits Corus Bank (Chicago, IL) September 11, 2009 FDIC-assisted transaction Acquired $6.5bn in deposits, of which MB Financial plans to retain $1.6bn - $2.0bn of core local deposits 2009 Benchmark Bank (Aurora, IL) December 4, 2009 FDIC-assisted transaction Entered into a loss-sharing agreement with the FDIC on all purchased assets Acquired $104mm in loans (net of discount) and $95mm in core deposits 2010 Broadway Bank (Chicago, IL) April 23, 2010 FDIC-assisted transaction Entered into a loss-sharing agreement with the FDIC on all purchased assets Acquired $786mm in loans (net of discount) and $202mm in core deposits New Century Bank (Chicago, IL) April 23, 2010 FDIC-assisted transaction Entered into a loss-sharing agreement with the FDIC on all purchased assets Acquired $407mm in loans (net of discount) and $270mm in core deposits MidCity Financial (Chicago, IL) April 19, 2001 $275mm all stock Merger of equals Combined assets and deposits of $3,465mm and $2,822mm, respectively |
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Summary Premier middle-market franchise in Chicago MSA Strong pre-tax, pre-provision operating earnings Well-positioned for opportunistic acquisitions Strong liquidity and capital position Improved and improving asset quality Strong and experienced management team 18 |
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Appendix 19 |
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Non-GAAP Disclosure Reconciliations This presentation 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 margin on a fully tax equivalent basis; core fee income; total revenue on a fully tax equivalent basis; ratio of core fee income to total revenue on a fully tax equivalent basis; pre-tax, pre-provision operating earnings on a fully tax equivalent basis; ratio of net non-interest expense to average assets and ratio of pre-tax, pre-provision operating earnings on a fully tax equivalent basis to risk-weighted assets and average assets, with net gains and losses on securities available for sale, net gains and losses on sale of other assets, net gain on sale of loans held for sale, net gains and losses on other real estate owned, 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 from the calculations of core fee income and pre-tax, pre-provision operating earnings and the FDIC special assessment expense, contributions to MB Charitable Foundation, executive separation agreement expense, unamortized issuance costs related to redemption of trust preferred securities, 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 and from the calculation of pre-tax, pre-provision operating earnings; and ratios of tangible common equity to risk weighted assets and tangible common equity to tangible assets. 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. The tax equivalent adjustment to net interest margin, pre-tax, pre-provision operating earnings and total revenue recognizes the income tax savings when comparing taxable and tax-exempt assets and assumes a 35% tax rate. Management believes that others within the banking industry present these measures on a fully tax equivalent basis, and accordingly believes that providing these measures may be useful for peer comparison purposes. Management believes that pre-tax, pre-provision operating earnings are a useful measure in assessing our 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 (fee) income and other expense are useful in assessing our operating performance and in understanding the primary drivers of our other (fee) income and other expense when comparing periods. 20 |
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Non-GAAP Disclosure Reconciliations 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 gain on sale of loans held for sale, net gains and losses on other real estate, 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 the FDIC special assessment expense, contributions to MB Charitable Foundation, executive separation agreement expense, unamortized issuance costs related to redemption of trust preferred securities, impairment charges and increase (decrease) in market value of assets held in trust for deferred compensation from the other non-interest expense components of the ratio of annualized net non-interest expense to average assets and pre-tax, pre-provision operating earnings to risk-weighted assets and average assets as well as the calculation of pre-tax, pre-provision operating earnings, and, in the case of the income-related items, the calculation of core fee income, this information better reflects our operating performance, as the excluded items do not pertain to our core business operations and their exclusion makes this information more meaningful when comparing our operating results from period to period. The ratios of tangible common equity to tangible assets and tangible common equity to risk-weighted assets exclude goodwill and other intangible assets, net of tax benefits, in determining tangible assets and tangible common equity. Management believes that the presentation of these 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 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 reconciles net interest margin on a fully tax equivalent basis to net interest margin for the periods presented: 21 Net interest margin 2006 2007 2008 2009 2010 YTD 2011 (1) Net interest margin 3.41% 3.22% 3.03% 2.85% 3.72% 3.77% Plus: tax equivalent effect 0.11% 0.11% 0.13% 0.12% 0.11% 0.13% Net interest margin, fully tax equivalent 3.52% 3.33% 3.16% 2.97% 3.83% 3.90% (1) Annualized |
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Non-GAAP Disclosure Reconciliations (continued) The following table presents a reconciliation of tangible common equity to common stockholders’ equity (in thousands): 22 December 31, September 30, 2006 2007 2008 2009 2010 2011 Common stockholders' equity - as reported $ 846,952 $ 862,369 $ 875,799 $ 1,057,658 $ 1,150,682 $ 1,174,060 Less: goodwill 379,047 379,047 387,069 387,069 387,069 387,069 Less: other intangible, net of tax benefit 18,756 16,479 16,754 24,510 22,853 20,088 Tangible common equity $ 449,149 $ 466,843 $ 471,976 $ 646,079 $ 740,760 $ 766,903 |
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Non-GAAP Disclosure Reconciliations (continued) The following table presents a reconciliation of tangible assets to total assets (in thousands): 23 September 30, December 31, 2006 2007 2008 2009 2010 2011 Total assets - as reported $ 7,978,298 $ 7,834,703 $ 8,819,763 $ 10,865,393 $ 10,320,364 $ 9,922,361 Less: goodwill 379,047 379,047 387,069 387,069 387,069 387,069 Less: other intangible, net of tax benefit 18,756 16,479 16,754 24,510 22,853 20,088 Tangible assets $ 7,580,495 $ 7,439,177 $ 8,415,940 $ 10,453,814 $ 9,910,442 $ 9,515,204 |
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Non-GAAP Disclosure Reconciliations (continued) 24 Net Non-interest Expense to Average Assets Calculation (in thousands) Nine Months Ended September 30, 2006 2007 2008 2009 2010 2011 Non-interest expense 152,218 $ 191,506 $ 183,390 $ 223,750 $ 258,776 $ 200,200 $ Adjustment for FDIC special assessment - - - 3,850 - - Adjustment for contributions to MB Financial Charitable Foundation - 4,500 - - - - Adjustment for executive separation agreement expense - 5,908 - - - - Unamortized issuance costs related to redemption of trust preferred securities - 1,914 - - - - Adjustment for impairment charges - - - 4,000 - 1,000 Adjustment for increase (decrease) in market value of assets held in trust for deferred compensation 493 609 (1,657) 710 562 (60) Non-interest expense - as adjusted 151,725 178,575 185,047 215,190 258,214 199,260 Other income 64,376 83,528 80,393 127,154 185,756 84,655 Less net gains (losses) on securities available for sale (445) (3,744) 1,130 14,029 18,648 229 Less net gains (losses) on sale of other assets 860 10,097 (1,104) (13) 630 370 Less net gain on sale of loans held for sale - - - - - 1,790 Less net gains (losses) on other real estate owned 222 140 455 (429) (9,284) (8,135) Less acquisition related gains - - - 28,547 62,649 - Less increase (decrease) in market value of assets held in trust for deferred compensation 493 609 (1,657) 710 562 (60) Other income - as adjusted 63,246 76,426 81,569 84,310 112,551 90,461 Net non-interest expense 88,479 $ 102,149 $ 103,478 $ 130,880 $ 145,663 $ 108,799 $ Average assets 6,602,070 7,910,610 8,240,344 9,777,288 10,506,028 9,989,596 Net non-interest expense to average assets 1.34% 1.29% 1.26% 1.34% 1.39% 1.46% (1) (1) Annualized |
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Non-GAAP Disclosure Reconciliations (continued) 25 Pre-Tax, Pre-Provision Operating Earnings (in thousands) September 30, December 31, March 31, June 30, September 30, September 30, September 30, 2010 2010 2011 2011 2011 2010 2011 Income (loss) before income taxes (8,062) $ 1,835 $ 4,484 $ (16,426) $ 28,675 $ 18,717 $ 16,733 $ Provision for credit losses 65,000 49,000 40,000 61,250 11,500 197,200 112,750 Pre-tax, pre-provision earnings 56,938 50,835 44,484 44,824 40,175 215,917 129,483 Tax equivalent adjustment 2,614 2,609 2,625 2,775 3,320 7,849 8,720 Pre-tax, pre-provision earnings on a fully tax equivalent basis 59,552 53,444 47,109 47,599 43,495 223,766 138,203 Non-core other income Net (losses) gains on other real estate owned (3,913) (2,124) (372) (4,645) (3,118) (7,160) (8,135) Net gains (losses) on securities available for sale 9,482 (4) (3) 232 - 18,652 229 Net gain on sale of other assets 299 419 357 13 - 211 370 Net gain on sale of loans held for sale - - - 1,790 - - 1,790 Acquisition related gains - - - - - 62,649 - (Decrease) increase in market value of assets held in trust for deferred compensation (3) 597 187 158 (405) (35) (60) Total non-core other income 5,865 (1,112) 169 (2,452) (3,523) 74,317 (5,806) Non-core other expense Impairment charges - - 1,000 - - - 1,000 (Decrease) increase in market value of assets held in trust for deferred compensation (3) 597 187 158 (405) (35) (60) Total non-core other expense (3) 597 1,187 158 (405) (35) 940 Pre-tax, pre-provision operating earnings 53,684 $ 55,153 $ 48,127 $ 50,209 $ 46,613 $ 149,414 $ 144,949 $ Risk-weighted assets 6,985,940 $ 6,772,761 $ 6,577,477 $ 6,203,587 $ 6,174,508 $ 6,985,940 $ 6,174,508 $ Annualized pre-tax, pre-provision operating earnings to risk-weighted assets 3.05% 3.23% 2.97% 3.25% 3.00% 2.86% 3.14% Annualized pre-tax, pre-provision operating earnings to risk-weighted assets (without adjustments) 3.23% 2.98% 2.74% 2.90% 2.58% 4.13% 2.80% Average Assets 10,634,556 $ 10,452,626 $ 10,198,626 $ 9,966,898 $ 9,807,561 $ 10,524,024 $ 9,989,596 $ Annualized pre-tax, pre-provision operating earnings to average assets 2.00% 2.09% 1.91% 2.02% 1.89% 1.90% 1.94% Annualized pre-tax, pre-provision operating earnings to average assets (without adjustments) 2.12% 1.93% 1.77% 1.80% 1.63% 2.74% 1.73% Nine Months Ended Three Months Ended |
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Non-GAAP Disclosure Reconciliations (continued) 26 Pre-Tax, Pre-Provision Operating Earnings (in thousands) 2006 2007 2008 2009 2010 Income (loss) before income taxes 90,237 $ 85,015 $ (7,830) $ (77,844) $ 20,552 $ Provision for credit losses 10,100 19,313 125,721 231,800 246,200 Pre-tax, pre-provision earnings 100,337 104,328 117,891 153,956 266,752 Tax equivalent adjustment 6,191 7,728 9,890 10,625 10,458 Pre-tax, pre-provision earnings on a fully tax equivalent basis 106,528 112,056 127,781 164,581 277,210 Non-core other income Net gains (losses) on other real estate owned 222 140 455 (429) (9,284) Net (losses) gains on securities available for sale (445) (3,744) 1,130 14,029 18,648 Net gain (loss) on sale of other assets 860 10,097 (1,104) (13) 630 Acquisition related gains - - - 28,547 62,649 Increase (decrease) in market value of assets held in trust for deferred compensation 493 609 (1,657) 710 562 Total non-core other income 1,130 7,102 (1,176) 42,844 73,205 Non-core other expense FDIC special assessment - - - 3,850 - Contributions to MB Charitable Foundation - 4,500 - - - Executive separation agreement expense - 5,980 - - - Unamortized issuance costs related to redemption of trust preferred securities - 1,914 - - - Impairment charges - - - 4,000 - Increase (decrease) in market value of assets held in trust for deferred compensation 493 609 (1,657) 710 562 Total non-core other expense 493 13,003 (1,657) 8,560 562 Pre-tax, pre-provision operating earnings 105,891 $ 117,957 $ 127,300 $ 130,297 $ 204,567 $ Average Assets 6,602,070 $ 7,910,610 $ 8,240,344 $ 9,777,288 $ 10,506,028 $ Annualized pre-tax, pre-provision operating earnings to average assets 1.60% 1.49% 1.54% 1.33% 1.95% |
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Non-GAAP Disclosure Reconciliations (continued) 27 Core fee income (in thousands) Three Months Nine Months Ended Ended September 30, September 30, 2006 2007 2008 2009 2010 2011 2011 Other income 64,376 $ 83,528 $ 80,393 $ 127,154 $ 185,756 $ 26,367 $ 84,655 $ Less net gains (losses) on securities available for sale (445) (3,744) 1,130 14,029 18,648 - 229 Less net gains (loss) on sale of other assets 860 10,097 (1,104) (13) 630 - 370 Less net gain on sale of loans held for sale - - - - - - 1,790 Less (losses) net gains on other real estate owned 222 140 455 (429) (9,284) (3,118) (8,135) Less acquisition related gains - - - 28,547 62,649 - - Less increase (decrease) in market value of assets held in trust for deferred compensation 493 609 (1,657) 710 562 (405) (60) Core fee income 63,246 $ 76,426 $ 81,569 $ 84,310 $ 112,551 $ 29,890 $ 90,461 $ |
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Non-GAAP Disclosure Reconciliations (continued) 28 Total revenue, fully tax equivalent reconciliation (in thousands) Three Months Nine Months Ended Ended September 30, September 30, 2006 2007 2008 2009 2010 2011 2011 Net interest income 188,179 $ 212,306 $ 220,888 $ 250,552 $ 339,772 $ 80,416 $ 245,028 $ Plus: tax equivalent effect 6,191 7,728 9,890 10,625 10,458 3,320 8,720 Net interest income, fully tax equivalent 194,370 220,034 230,778 261,177 350,230 83,736 253,748 Core fee income 63,246 76,426 81,569 84,310 112,551 29,890 90,461 Total revenue, fully tax equivalent 257,616 $ 296,460 $ 312,347 $ 345,487 $ 462,781 $ 113,626 $ 344,209 $ Core fee income to total revenue, fully tax equivalent 25% 26% 26% 24% 24% 26% 26% |
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Mitchell Feiger, President and Chief Executive Officer Jill E. York, Vice President and Chief Financial Officer November 2011 NASDAQ: MBFI Investor Presentation |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, MB Financial, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 9th day of November, 2011.
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MB FINANCIAL, INC. |
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By: |
/s/ Jill E. York |
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Jill E. York |
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Vice President and Chief Financial Officer |
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(Principal Financial and Principal Accounting Officer) |
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