EX-99 2 exhibit99.htm PRESS RELEASE OF MB FINANCIAL, INC. exhibit99.htm
 
EXHIBIT 99

 
MB Financial, Inc.
800 West Madison Street
Chicago, Illinois 60607
(888) 422-6562
NASDAQ:  MBFI

PRESS RELEASE


For Information at MB Financial, Inc. contact:
Jill York - Vice President and Chief Financial Officer
E-Mail: jyork@mbfinancial.com

FOR IMMEDIATE RELEASE

MB FINANCIAL, INC. REPORTS FOURTH QUARTER 2011 NET INCOME OF $19.5 MILLION, FOURTH QUARTER LOAN GROWTH, STRONG PRE-TAX, PRE-PROVISION INCOME AND IMPROVING CREDIT QUALITY

CHICAGO, January 26, 2012 – MB Financial, Inc. (NASDAQ: MBFI), the holding company for MB Financial Bank, N.A (“the Bank” or “MB Financial Bank”), announced today fourth quarter results for 2011.  The words “MB Financial,” “the Company,” “we,” “our” and “us” refer to MB Financial, Inc. and its consolidated subsidiaries, unless indicated otherwise.  We had net income of $19.5 million and net income available to common stockholders of $16.8 million for the fourth quarter of 2011 compared to net income of $3.2 million and net income available to common stockholders of $595 thousand for the fourth quarter of 2010, and net income of $19.7 million and net income available to common stockholders of $17.1 million for the third quarter of 2011.

Key items for the quarter were as follows:

Fourth Quarter Loan Growth:
·  
Total loans increased $152.5 million to $6.0 billion at December 31, 2011, or 2.6% sequentially compared to $5.8 billion at September 30, 2011.
·  
Total commercial related loans increased $194.4 million to $4.4 billion at December 31, 2011, or 4.7% sequentially compared to $4.2 billion at September 30, 2011.  The four loan categories that make up commercial related loans changed as follows during the fourth quarter of 2011 (in millions):

Lease loans                                                      $141.4
Commercial and industrial loans                       70.5
Commercial real estate loans                               8.9
Construction                                                      (26.4)
                $194.4

 
Pre-Tax, Pre-Provision Operating Earnings Remain Strong:
·  
Pre-tax, pre-provision operating earnings on a fully tax equivalent basis were $46.0 million, or 2.87% of risk-weighted assets, for the fourth quarter of 2011 compared to $47.2 million, or 3.03% of risk-weighted assets, for the third quarter of 2011.  Pre-tax, pre-provision operating earnings on a fully tax equivalent basis to average assets was 1.85% for the fourth quarter of 2011 compared to 1.91% for the third quarter of 2011.
·  
Net interest income on a fully tax equivalent basis increased $977 thousand compared to the third quarter of 2011.
·  
Net interest margin on a fully tax equivalent basis was 3.91% for the fourth quarter of 2011 compared to 3.90% in the third quarter of 2011.
·  
Core other income was $29.6 million for the fourth quarter of 2011, relatively consistent with the third quarter of 2011.
·  
Core other expense was $68.8 million for the fourth quarter of 2011, an increase of $1.8 million from $67.0 million for the third quarter of 2011.
 
 
 
5

 

 
Continued Improvement in Credit Quality – Lower Credit Losses, Lower Non-Performing Loans and Lower Non-Performing Assets:
·  
Our provision for credit losses was $8.0 million for the fourth quarter of 2011, while our net charge-offs were $13.9 million.  Our provision for credit losses and net charge-offs for the third quarter of 2011 were $11.5 million and $16.7 million, respectively.
·  
Our non-performing loans were $129.4 million or 2.17% of total loans as of December 31, 2011, a decrease of $11.6 million from $141.0 million or 2.42% of total loans at September 30, 2011.
·  
Our allowance for loan losses to non-performing loans was 98.00% as of December 31, 2011 compared to 91.23% as of September 30, 2011.
·  
Our non-performing assets were $208.0 million or 2.12% of total assets as of December 31, 2011, a decrease of $20.7 million from $228.7 million or 2.30% of total assets as of September 30, 2011.
·  
Our allowance for loan losses to total loans was 2.13% as of December 31, 2011 compared to 2.21% as of September 30, 2011.

 
Top Ten Workplaces in Chicago:
·  
During the fourth quarter of 2011, our bank was named one of Chicago’s Top Workplaces by the Chicago Tribune.
·  
We ranked among the top ten in the large employers category.

RESULTS OF OPERATIONS

Fourth Quarter Results

Net Interest Income

Net interest income on a fully tax equivalent basis increased $977 thousand from the third quarter of 2011, but decreased by $2.6 million from the fourth quarter of 2010 to the fourth quarter of 2011.  The decrease from the fourth quarter of 2010 was due primarily to a decrease in interest earning assets partially offset by an increase in net interest margin.

Our net interest margin, on a fully tax equivalent basis, was 3.91% for the fourth quarter of 2011 compared to 3.90% for the third quarter of 2011 and 3.83% for the fourth quarter of 2010.  The margin increase from 2010 was due to a decrease in our average cost of funds as a result of an improved deposit mix and downward repricing of interest bearing deposits, as well as an improved interest earning asset mix and a lower level of non-performing loans.

Our net interest margin, on a fully tax equivalent basis, was 3.90% for the year ended December 31, 2011 compared to 3.83% for the year ended December 31, 2010.  The margin increase from 2010 was due to a decrease in our average cost of funds as a result of an improved deposit mix and downward repricing of interest bearing deposits, as well as a lower level of non-performing loans.

See the supplemental net interest margin tables for further detail.
 
 
 
6

 
 

Other Income (in thousands):

   
Three Months Ended
Year Ended
     
December 31,
 
September 30,
 
June 30,
 
March 31,
 
December 31,
 
December 31,
 
December 31,
     
2011
 
2011
 
2011
 
2011
 
2010
 
2011
 
2010
Core other income:
                           
 
Loan service fees
 $
 1,601
 $
 2,159
 $
 2,812
 $
 1,126
 $
 1,532
 $
 7,698
 $
 6,517
 
Deposit service fees
 
 10,085
 
 9,932
 
 9,023
 
 10,030
 
 9,920
 
 39,070
 
 38,934
 
Lease financing, net
 
 7,801
 
 6,494
 
 6,861
 
 5,783
 
 7,185
 
 26,939
 
 21,853
 
Brokerage fees
 
 1,577
 
 1,273
 
 1,615
 
 1,419
 
 1,231
 
 5,884
 
 5,012
 
Trust and asset management fees
 
 4,166
 
 4,272
 
 4,455
 
 4,431
 
 4,243
 
 17,324
 
 15,037
 
Increase in cash surrender value of life insurance
 
 944
 
 1,014
 
 1,451
 
 968
 
 930
 
 4,377
 
 3,516
 
Accretion of FDIC indemnification asset
 
 683
 
 985
 
 1,339
 
 1,831
 
 3,009
 
 4,838
 
 9,678
 
Card fees
 
 1,096
 
 2,071
 
 2,062
 
 1,788
 
 2,287
 
 7,017
 
 7,057
 
Other operating income
 
 1,632
 
 1,690
 
 1,979
 
 1,598
 
 1,570
 
 6,899
 
 4,947
Total core other income
 
 29,585
 
 29,890
 
 31,597
 
 28,974
 
 31,907
 
 120,046
 
 112,551
                               
Non-core other income: (1)
                           
 
Net gain (loss) on sale of investment securities
 
 411
 
 -
 
 232
 
 (3)
 
 (4)
 
 640
 
 18,648
 
Net (loss) gain on sale of other assets
 
 (87)
 
 -
 
 13
 
 357
 
 419
 
 283
 
 630
 
Net gain on sale of loans held for sale (A)
 
 -
 
 -
 
 1,790
 
 -
 
 -
 
 1,790
 
 -
 
Net loss recognized on other real estate owned (B)
 
 (3,620)
 
 (2,354)
 
 (3,628)
 
 (369)
 
 (1,656)
 
 (9,971)
 
 (8,511)
 
Net loss recognized on other real estate
                           
 
owned related to FDIC transactions (B)
 
 (1,858)
 
 (764)
 
 (1,017)
 
 (3)
 
 (468)
 
 (3,642)
 
 (773)
 
Acquisition related gains
 
 -
 
 -
 
 -
 
 -
 
 -
 
 -
 
 62,649
 
Increase (decrease) in market value of assets
                         
 
held in trust for deferred compensation (A)
 
 20
 
 (405)
 
 158
 
 187
 
 597
 
 (40)
 
 562
Total non-core other income
 
 (5,134)
 
 (3,523)
 
 (2,452)
 
 169
 
 (1,112)
 
 (10,940)
 
 73,205
                               
Total other income
 $
 24,451
 $
 26,367
 $
 29,145
 $
 29,143
 $
 30,795
 $
 109,106
 $
 185,756

(1)  
Letter denotes the corresponding line items where these non-core other income items reside in the consolidated statements of income as follows:  A – Other operating income, B – Net loss recognized on other real estate owned.

Core other income was relatively consistent from the third quarter of 2011 to the fourth quarter of 2011. Loan service fees decreased due to less prepayment, exit and letters of credit fees during the fourth quarter of 2011.  Net lease financing income increased mainly as a result of an increase in the sales of third party equipment maintenance contracts and related income.  Accretion of indemnification asset decreased as a result of the corresponding decrease in the indemnification asset balance during the fourth quarter of 2011.  Card fees were down due to the impact of the Durbin Amendment to the Dodd-Frank Act on debit card interchange fees.  Non-core other income was impacted by higher losses recognized on other real estate owned.

Core other income increased by $7.5 million from the year ended December 31, 2010 to the year ended December 31, 2011.  Loan service fees increased due to an increase in prepayment, exit and interest rate swap fees partly offset by a decrease in letters of credit fees.  Net lease financing increased primarily due to an increase in the sales of third party equipment maintenance contracts and related income.  Trust and asset management fees increased primarily due to the addition of a significant number of accounts during the third quarter of 2010, which impacted the full year in 2011.  The increase in cash surrender value of life insurance was higher due to an improvement in overall asset yields.  Accretion of indemnification asset decreased as a result of corresponding decrease in the indemnification asset balance during the year ended December 31, 2011.  Other operating income increased primarily due to additional income from our international banking line of business and increased income from a Small Business Investment Company (SBIC) investment.  Non-core other income decreased in the year ended December 31, 2011 compared to the year ended December 31, 2010 primarily as a result of the acquisition related gains recognized on the Broadway Bank and New Century Bank FDIC-assisted transactions in the second quarter of 2010, lower gains on sales of investment securities in 2011 and higher losses recognized on other real estate owned in 2011.
 
 
 
7

 

 
Other Expense (in thousands):
 
   
Three Months Ended
Year Ended
     
December 31,
 
September 30,
 
June 30,
 
March 31,
 
December 31,
 
December 31,
 
December 31,
     
2011
 
2011
 
2011
 
2011
 
2010
 
2011
 
2010
Core other expense:
                           
 
Salaries and employee benefits
 $
39,826
$
38,827
$
37,657
$
37,588
$
35,802
$
153,898
$
143,787
 
Occupancy and equipment expense
 
8,498
 
9,092
 
8,483
 
9,394
 
7,938
 
35,467
 
34,845
 
Computer services and telecommunication expense
 
4,382
 
3,488
 
3,570
 
3,445
 
3,264
 
14,885
 
14,615
 
Advertising and marketing expense
 
1,831
 
1,740
 
1,748
 
1,719
 
1,573
 
7,038
 
6,465
 
Professional and legal expense
 
1,422
 
1,647
 
1,853
 
1,225
 
1,718
 
6,147
 
5,803
 
Brokerage fee expense
 
137
 
363
 
574
 
483
 
448
 
1,557
 
1,926
 
Other intangible amortization expense
 
1,410
 
1,414
 
1,416
 
1,425
 
1,632
 
5,665
 
6,214
 
FDIC insurance premiums
 
2,662
 
2,272
 
3,502
 
3,428
 
3,930
 
11,864
 
15,600
 
Other real estate expense, net
 
1,464
 
1,181
 
1,251
 
398
 
858
 
4,294
 
2,694
 
Other operating expenses
 
7,187
 
6,989
 
6,516
 
6,572
 
6,855
 
27,264
 
26,265
Total core other expense
 
68,819
 
67,013
 
66,570
 
65,677
 
64,018
 
268,079
 
258,214
                               
Non-core other expense: (1)
                           
 
Branch impairment charges
 
594
 
-
 
-
 
1,000
 
-
 
1,594
 
-
 
Increase (decrease) in market value of assets held in trust for deferred compensation (A)
 
20
 
(405)
 
158
 
187
 
597
 
(40)
 
562
Total non-core other expense
 
614
 
(405)
 
158
 
1,187
 
597
 
1,554
 
562
                               
Total other expense
 $
69,433
$
66,608
$
66,728
$
66,864
$
64,615
$
269,633
$
258,776

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

Core other expense increased by $1.8 million in the fourth quarter of 2011 compared with the third quarter of 2011.  Salaries and employee benefits increased due to an increase in leasing incentive compensation on higher leasing revenues and an increase in health and benefits expense.  We are largely self-insured for health insurance and expense can vary from quarter to quarter.  Occupancy and equipment expense was down in the fourth quarter as most major maintenance projects were completed by the end of the third quarter.  Computer services and telecommunication expense increased due to product and system enhancements during the fourth quarter of 2011.  Non-core other expense was primarily impacted by $594 thousand of fixed asset impairment charges as a result of our decision to close two branches during the fourth quarter.

Core other expense increased by $9.9 million from the year ended December 31, 2010 to the year ended December 31, 2011.  Salaries and employee benefits expense increased due to additional employees added in April 2010 in connection with the New Century and Broadway FDIC-assisted acquisitions, problem loan remediation staff added throughout 2010, and increased leasing incentive compensation on higher leasing revenues.  FDIC insurance premiums decreased due to lower deposits,a change in the assessment computation during the second quarter of 2011, and the impact of improved credit quality on the computation.  Other real estate expense increased as a result of more properties in other real estate owned throughout 2011 compared to 2010.  Non-core other expense was primarily impacted by $1.6 million of fixed asset impairment charges due to our decision to close three branches throughout 2011.

Income Taxes

The Company had income tax expense of $7.8 million for the three months ended December 31, 2011 and $5.3 million for the year ended December 31, 2011.  The three month and annual tax expenses are calculated based on pre-tax income excluding tax-exempt items.  The annual amount also reflects a $2 million increase in deferred tax assets as a result of an increase in the Illinois corporate income tax rate which was enacted and effective in the first quarter of 2011.
 
 
 
8

 
 

LOAN PORTFOLIO

The following table sets forth the composition of the loan portfolio, excluding loans held for sale, as of the dates indicated (dollars in thousands):
 
     
December 31,
 
September 30,
 
June 30,
 
March 31,
 
December 31,
     
2011
 
2011
 
2011
 
2011
 
2010
     
Amount
% of Total
 
Amount
% of Total
 
Amount
% of Total
 
Amount
% of Total
 
Amount
% of Total
Commercial related credits:
                             
 
Commercial loans
$
1,113,123
19%
$
1,042,583
18%
$
1,108,295
19%
$
1,154,451
18%
$
1,206,984
18%
 
Commercial loans collateralized by assignment of lease payments (lease loans)
 
1,208,575
20%
 
1,067,191
18%
 
1,031,677
17%
 
1,038,507
16%
 
1,053,446
16%
 
Commercial real estate
 
1,853,788
31%
 
1,844,894
32%
 
1,863,223
32%
 
2,084,651
33%
 
2,176,584
33%
 
Construction real estate
 
183,789
3%
 
210,206
4%
 
246,557
4%
 
356,579
6%
 
423,339
6%
Total commercial related credits
 
4,359,275
73%
 
4,164,874
72%
 
4,249,752
72%
 
4,634,188
73%
 
4,860,353
73%
Other loans:
                             
 
Residential real estate
 
316,787
5%
 
316,305
5%
 
317,821
5%
 
335,423
5%
 
328,482
5%
 
Indirect vehicle
 
187,481
3%
 
189,033
4%
 
182,536
3%
 
175,058
3%
 
175,664
3%
 
Home equity
 
336,043
6%
 
348,934
6%
 
357,181
6%
 
371,108
6%
 
381,662
6%
 
Consumer loans
 
88,865
2%
 
76,025
1%
 
75,069
1%
 
74,585
1%
 
59,320
1%
Total other loans
 
929,176
16%
 
930,297
16%
 
932,607
15%
 
956,174
15%
 
945,128
15%
Gross loans excluding covered loans
 
5,288,451
89%
 
5,095,171
88%
 
5,182,359
87%
 
5,590,362
88%
 
5,805,481
88%
 
Covered loans (1)
 
677,770
11%
 
718,566
12%
 
755,670
13%
 
777,634
12%
 
812,330
12%
Total loans
$
5,966,221
100%
$
5,813,737
100%
$
5,938,029
100%
$
6,367,996
100%
$
6,617,811
100%

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

During the second quarter of 2011, we sold certain performing, sub-performing and non-performing loans. The loans sold had an aggregate carrying amount of $281.6 million prior to the transfer to loans held for sale, which was comprised of $160.8 million in commercial real estate loans, $73.7 million in construction real estate loans, $14.5 million in commercial loans and $32.6 million in residential real estate and home equity loans.
 
 
 
9

 
 
 
ASSET QUALITY

The following table presents a summary of non-performing assets, excluding loans held for sale, credit-impaired loans that were acquired as part of our FDIC-assisted transactions and OREO related to FDIC-assisted transactions, as of the dates indicated (dollar amounts in thousands):

     
December 31,
 
September 30,
 
June 30,
 
March 31,
 
December 31,
     
2011
 
2011
 
2011
 
2011
 
2010
Non-performing loans:
                   
 
Non-accrual loans(1)
$
129,309
$
140,979
$
149,905
$
318,923
$
362,441
 
Loans 90 days or more past due, still accruing interest
 
82
 
-
 
1,121
 
-
 
1
Total non-performing loans
 
129,391
 
140,979
 
151,026
 
318,923
 
362,442
                       
OREO
 
78,452
 
87,469
 
88,185
 
80,107
 
71,476
Repossessed vehicles
 
156
 
249
 
55
 
139
 
82
Total non-performing assets
$
207,999
$
228,697
$
239,266
$
399,169
$
434,000
                       
Total allowance for loan losses (2)
$
126,798
$
128,610
$
130,057
$
178,410
$
192,217
                       
Accruing restructured loans(3)
$
37,996
$
34,321
$
35,037
$
31,819
$
22,543
                       
Total non-performing loans to total loans
 
2.17%
 
2.42%
 
2.54%
 
5.01%
 
5.48%
Total non-performing assets to total assets
 
2.12%
 
2.30%
 
2.40%
 
3.96%
 
4.21%
Allowance for loan losses to non-performing loans
 
98.00%
 
91.23%
 
86.12%
 
55.94%
 
53.03%

(1)  
Includes $42.5 million, $36.0 million, $22.5 million, $60.9 million, and $47.6 million of restructured loans on non-accrual status at December 31, 2011, September 30, 2011, June 30, 2011, March 31, 2011 and December 31, 2010, respectively.
(2)  
Includes $12.7 million and $13.6 million for unfunded credit commitments at March 31, 2011 and December 31, 2010, respectively.
(3)  
Accruing restructured loans consists primarily of commercial, commercial real estate, and residential real estate loans that have been modified and are performing in accordance with those modified terms.

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

 
The following table presents a summary of total performing loans greater than 30 days and less than 90 days past due, excluding loans held for sale and credit-impaired loans that were acquired as part of our FDIC-assisted transactions, as of the dates indicated (dollar amounts in thousands):

   
December 31,
 
September 30,
 
June 30,
 
March 31,
 
December 31,
   
2011
 
2011
 
2011
 
2011
 
2010
                     
30 - 59 Days Past Due
$
 9,379
$
 15,564
$
 10,568
$
 23,912
$
 9,386
60 - 89 Days Past Due
 
 5,316
 
 4,307
 
 4,881
 
 4,049
 
 5,073
 
$
 14,695
$
 19,871
$
 15,449
$
 27,961
$
 14,459

Approximately $549 thousand of performing loans past due were included among the loans classified as potential problem loans (defined and discussed below) as of December 31, 2011 compared to $9.2 million as of September 30, 2011.
 
 
 
10

 

 
The following table represents a summary of OREO, excluding OREO related to FDIC-assisted transactions (in thousands):
 
   
December 31,
 
September 30,
 
June 30,
 
March 31,
 
December 31,
   
2011
 
2011
 
2011
 
2011
 
2010
                     
Balance at the beginning of quarter
$
 87,469
$
 88,185
$
 80,107
$
 71,476
$
 59,114
Transfers in at fair value less estimated costs to sell
 
 4,209
 
 15,658
 
 15,761
 
 25,167
 
 27,170
Fair value adjustments
 
 (3,733)
 
 (2,524)
 
 (3,417)
 
 (1,314)
 
 (1,562)
Net gains (losses) on sales of OREO
 
 113
 
 170
 
 (212)
 
 945
 
 (94)
Cash received upon disposition
 
 (9,606)
 
 (14,020)
 
 (4,054)
 
 (16,167)
 
 (13,152)
Balance at the end of quarter
$
 78,452
$
 87,469
$
 88,185
$
 80,107
$
 71,476


The following table presents data related to non-performing loans, by dollar amount and category at December 31, 2011, excluding loans held for sale and credit-impaired loans that were acquired as part of our FDIC-assisted transactions (dollar amounts in thousands):
 
 
Commercial and Lease Loans
 
Construction Real Estate Loans
 
Commercial Real Estate Loans
 
Consumer Loans
 
Total Loans
 
Number of Relationships
 
Amount
 
Number of Relationships
 
Amount
 
Number of Relationships
 
Amount
 
Amount
 
Amount
$10.0 million or more
-
$
-
 
-
$
-
 
-
$
-
$
-
$
-
$5.0 million to $9.9 million
2
 
14,322
 
-
 
-
 
2
 
15,435
 
-
 
29,757
$1.5 million to $4.9 million
5
 
12,031
 
-
 
-
 
13
 
37,509
 
-
 
49,540
Under $1.5 million
42
 
10,642
 
3
 
1,145
 
61
 
23,607
 
14,700
 
50,094
 
49
$
36,995
 
3
$
1,145
 
76
$
76,551
$
14,700
$
129,391
                               
Percentage of individual loan category
 
1.59%
     
0.62%
     
4.13%
 
1.58%
 
2.17%
 
 
The following table presents data related to non-performing loans, by dollar amount and category at September 30, 2011, excluding loans held for sale and credit-impaired loans that were acquired as part of our FDIC-assisted transactions (dollar amounts in thousands):
 
 
Commercial and Lease Loans
 
Construction Real Estate Loans
 
Commercial Real Estate Loans
 
Consumer Loans
 
Total Loans
 
Number of Relationships
 
Amount
 
Number of Relationships
 
Amount
 
Number of Relationships
 
Amount
 
Amount
 
Amount
$10.0 million or more
 -
 $
 -
 
 -
 $
 -
 
 -
 $
 -
 $
 -
 $
 -
$5.0 million to $9.9 million
 3
 
 20,136
 
 -
 
 -
 
 3
 
 23,938
 
 -
 
 44,074
$1.5 million to $4.9 million
 4
 
 8,854
 
 -
 
 -
 
 13
 
 37,474
 
 -
 
 46,328
Under $1.5 million
 37
 
 8,654
 
 5
 
 2,913
 
 54
 
 25,495
 
 13,515
 
 50,577
 
 44
 $
 37,644
 
 5
 $
 2,913
 
 70
 $
 86,907
 $
 13,515
 $
 140,979
                               
Percentage of individual loan category
 
1.78%
     
1.39%
     
4.71%
 
1.45%
 
2.42%
 
We define potential problem loans as performing loans rated substandard that do not meet the definition of a non-performing loan (See “Asset Quality” section above for non-performing loans).  Potential problem loans carry a higher probability of default and require additional attention by management.  The aggregate principal amount of potential problem loans was $149.8 million, or 2.51% of total loans, as of December 31, 2011, compared to $179.7 million, or 3.09% of total loans, as of September 30, 2011.  The decrease was primarily due to loan risk rating upgrades and loan payments, as well as some downward migration to non-performing status.
 
 
 
11

 
 

Below is a reconciliation of the activity in our allowance for credit and loan losses for the periods indicated (dollar amounts in thousands):

     
Three Months Ended
Year Ended
     
December 31,
 
September 30,
 
June 30,
 
March 31,
 
December 31,
 
December 31,
 
December 31,
     
2011
 
2011
 
2011
 
2011
 
2010
 
2011
 
2010
Allowance for credit losses, balance
                           
at the beginning of period
$
141,861
$
147,107
$
178,410
$
192,217
$
193,926
$
192,217
$
177,072
Provision for credit losses
 
8,000
 
11,500
 
61,250
 
40,000
 
49,000
 
120,750
 
246,200
Charge-offs:
                           
 
Commercial loans
 
(2,932)
 
(3,497)
 
(7,991)
 
(3,151)
 
(9,141)
 
(17,571)
 
(58,077)
 
Commercial loans collateralized by assignment
                           
 
of lease payments (lease loans)
 
(1,373)
 
-
 
(93)
 
-
 
(43)
 
(1,466)
 
(1,711)
 
Commercial real estate loans
 
(3,793)
 
(7,815)
 
(55,250)
 
(29,775)
 
(27,360)
 
(96,633)
 
(79,828)
 
Construction real estate
 
(6,989)
 
(6,008)
 
(18,826)
 
(21,094)
 
(17,136)
 
(52,917)
 
(94,533)
 
Residential real estate
 
(860)
 
(141)
 
(8,080)
 
(3,562)
 
(1,363)
 
(12,643)
 
(3,326)
 
Indirect vehicle
 
(954)
 
(611)
 
(553)
 
(718)
 
(968)
 
(2,836)
 
(3,199)
 
Home equity
 
(2,061)
 
(1,605)
 
(5,493)
 
(1,907)
 
(1,364)
 
(11,066)
 
(4,632)
 
Consumer loans
 
(285)
 
(475)
 
(344)
 
(544)
 
(428)
 
(1,648)
 
(1,755)
 
Total charge-offs
 
(19,247)
 
(20,152)
 
(96,630)
 
(60,751)
 
(57,803)
 
(196,780)
 
(247,061)
Recoveries:
                           
 
Commercial loans
 
634
 
1,413
 
758
 
2,565
 
3,842
 
5,370
 
8,788
 
Commercial loans collateralized by assignment
                           
 
of lease payments (lease loans)
 
1
 
5
 
153
 
66
 
26
 
225
 
184
 
Commercial real estate loans
 
747
 
739
 
312
 
1,534
 
800
 
3,332
 
2,070
 
Construction real estate
 
3,519
 
681
 
2,364
 
2,026
 
1,672
 
8,590
 
3,170
 
Residential real estate
 
9
 
7
 
26
 
7
 
127
 
49
 
184
 
Indirect vehicle
 
378
 
327
 
369
 
325
 
286
 
1,399
 
1,163
 
Home equity
 
6
 
151
 
19
 
48
 
250
 
224
 
351
 
Consumer loans
 
67
 
83
 
76
 
373
 
91
 
599
 
96
 
Total recoveries
 
5,361
 
3,406
 
4,077
 
6,944
 
7,094
 
19,788
 
16,006
                               
Total net charge-offs
 
(13,886)
 
(16,746)
 
(92,553)
 
(53,807)
 
(50,709)
 
(176,992)
 
(231,055)
                               
Allowance for credit losses
 
135,975
 
141,861
 
147,107
 
178,410
 
192,217
 
135,975
 
192,217
                               
Allowance for unfunded credit commitments (1)
 
(9,177)
 
(13,251)
 
(17,050)
 
-
 
-
 
(9,177)
 
-
                               
Allowance for loan losses (2)
$
126,798
$
128,610
$
130,057
$
178,410
$
192,217
$
126,798
$
192,217
                               
Total loans, excluding loans held for sale
$
5,966,221
$
5,813,737
$
5,938,029
$
6,367,996
$
6,617,811
$
5,966,221
$
6,617,811
Average loans, excluding loans held for sale
$
5,818,425
$
5,827,181
$
6,299,990
$
6,460,508
$
6,723,840
$
6,097,291
$
6,758,776
                               
Ratio of allowance for loan losses to total loans,
                           
 
excluding loans held for sale
 
2.13%
 
2.21%
 
2.19%
 
2.80%
 
2.90%
 
2.13%
 
2.90%
Ratio of allowance for credit losses to total loans,
                           
 
excluding loans held for sale, and unfunded credit
                           
 
commitments
 
2.25%
 
2.40%
 
2.43%
 
2.75%
 
2.85%
 
2.25%
 
2.85%
Net loan charge-offs to average loans, excluding loans
                           
 
held for sale (annualized)
 
0.95%
 
1.14%
 
5.89%
 
3.38%
 
2.99%
 
2.90%
 
3.42%

(1)  
The reserve for unfunded credit commitments (primarily letters of credit) was reclassified from the allowance for loan losses to other liabilities as of June 30, 2011.
(2)  
Includes $12.7 million and $13.6 million for unfunded credit commitments at March 31, 2011 and December 31, 2010, respectively.

The activity in the second quarter of 2011 reflects the previously disclosed sale of certain performing, sub-performing and non-performing loans, which resulted in approximately $87 million in charge-offs and an increase in the provision for losses of approximately $50 million.
 
 
 
12

 
 

Our allowance for loan losses is comprised of three elements: a general loss reserve, a specific reserve for impaired loans and a reserve for smaller-balance homogenous loans.  The following table presents these three elements of our allowance for loan losses (in thousands):
 
   
December 31,
 
September 30,
 
June 30,
 
March 31,
 
December 31,
   
2011
 
2011
 
2011
 
2011
 
2010
                     
General loss reserve
$
 102,196
$
 102,752
$
 104,002
$
 126,423
$
 126,435
Specific reserve (1)
 
 10,804
 
 11,416
 
 12,111
 
 38,054
 
 51,826
Smaller-balance homogenous loans reserve
 
 13,798
 
 14,442
 
 13,944
 
 13,933
 
 13,956
Total allowance for loan losses
$
 126,798
$
 128,610
$
 130,057
$
 178,410
$
 192,217
 
(1)  
The specific reserve as of March 31, 2011 and December 31, 2010 includes reserves on unfunded credit commitments of approximately $12.7 million and $13.6 million, respectively.  Beginning as of June 30, 2011, reserves on unfunded credit commitments are recorded as liabilities.

Although management believes that adequate specific and general loan loss allowances have been established, actual losses are dependent upon future events and, as such, further additions to the level of specific and general loan loss allowances may become necessary.
 
 
 
13

 

 
INVESTMENT SECURITIES

The following table sets forth the fair value, amortized cost, and total unrealized gain of our investment securities, by type (in thousands):
 
   
At December 31,
 
At September 30,
 
At June 30,
 
At March 31,
 
At December 31,
   
2011
 
2011
 
2011
 
2011
 
2010
                     
Securities available for sale:
                   
Fair value
                   
Government sponsored agencies and enterprises
$
 42,401
$
 56,007
$
 55,656
$
 56,971
$
 19,434
States and political subdivisions
 
 535,660
 
 394,279
 
 392,670
 
 365,481
 
 364,932
Mortgage-backed securities
 
 1,334,491
 
 1,421,789
 
 1,424,302
 
 1,279,968
 
 1,197,066
Corporate bonds
 
 5,899
 
 5,899
 
 6,019
 
 6,019
 
 6,140
Equity securities
 
 10,846
 
 10,764
 
 10,435
 
 10,215
 
 10,171
Total fair value
$
 1,929,297
$
 1,888,738
$
 1,889,082
$
 1,718,654
$
 1,597,743
                     
Amortized cost
                   
Government sponsored agencies and enterprises
$
 39,640
$
 53,016
$
 54,423
$
 56,452
$
 18,766
States and political subdivisions
 
 500,979
 
 366,651
 
 371,598
 
 350,851
 
 351,274
Mortgage-backed securities
 
 1,308,020
 
 1,399,801
 
 1,401,975
 
 1,258,171
 
 1,175,021
Corporate bonds
 
 5,899
 
 5,899
 
 6,019
 
 6,019
 
 6,140
Equity securities
 
 10,457
 
 10,324
 
 10,246
 
 10,169
 
 10,093
Total amortized cost
$
 1,864,995
$
 1,835,691
$
 1,844,261
$
 1,681,662
$
 1,561,294
                     
Unrealized gain
                   
Government sponsored agencies and enterprises
$
 2,761
$
 2,991
$
 1,233
$
 519
$
 668
States and political subdivisions
 
 34,681
 
 27,628
 
 21,072
 
 14,630
 
 13,658
Mortgage-backed securities
 
 26,471
 
 21,988
 
 22,327
 
 21,797
 
 22,045
Corporate bonds
 
 -
 
 -
 
 -
 
 -
 
 -
Equity securities
 
 389
 
 440
 
 189
 
 46
 
 78
Total unrealized gain
$
 64,302
$
 53,047
$
 44,821
$
 36,992
$
 36,449
                     
Securities held to maturity, at cost:
                   
States and political subdivisions
$
 240,183
$
 240,839
$
 -
$
 -
$
 -
Mortgage-backed securities
 
 259,100
 
 258,199
 
 230,154
 
 102,206
 
 -
Total amortized cost
$
 499,283
$
 499,038
$
 230,154
$
 102,206
$
 -

We do not have any meaningful direct or indirect holdings of subprime residential mortgage loans, home equity lines of credit, or any Fannie Mae or Freddie Mac preferred or common equity securities in our investment securities portfolio.  Additionally, more than 99% of our mortgage-backed securities are agency guaranteed.
 
 
 
14

 

 
DEPOSIT MIX

The following table shows the composition of deposits as of the dates indicated (dollars in thousands):

     
December 31,
 
September 30,
 
June 30,
 
March 31,
 
December 31,
     
2011
 
2011
 
2011
 
2011
 
2010
       
% of
   
% of
   
% of
   
% of
   
% of
     
Amount
Total
 
Amount
Total
 
Amount
Total
 
Amount
Total
 
Amount
Total
Low cost deposits:
                             
 
Noninterest bearing deposits
$
1,885,694
25%
$
1,803,141
23%
$
1,776,873
23%
$
1,666,868
22%
$
1,691,599
21%
 
Money market and NOW accounts
 
2,645,334
34%
 
2,722,162
35%
 
2,645,953
34%
 
2,712,314
34%
 
2,776,181
34%
 
Savings accounts
 
753,610
10%
 
751,062
10%
 
729,222
9%
 
718,896
9%
 
697,851
8%
Total low cost deposits
 
5,284,638
69%
 
5,276,365
68%
 
5,152,048
66%
 
5,098,078
65%
 
5,165,631
63%
                                 
Certificates of deposit:
                             
 
Certificates of deposit
 
1,925,608
25%
 
2,001,210
26%
 
2,124,815
28%
 
2,326,591
29%
 
2,519,117
31%
 
Brokered deposit accounts
 
437,361
6%
 
444,332
6%
 
441,720
6%
 
467,337
6%
 
468,210
6%
Total certificates of deposit
 
2,362,969
31%
 
2,445,542
32%
 
2,566,535
34%
 
2,793,928
35%
 
2,987,327
37%
                                 
Total deposits
$
7,647,607
100%
$
7,721,907
100%
$
7,718,583
100%
$
7,892,006
100%
$
8,152,958
100%

Our deposit mix improved in the quarter. Approximately 69% of deposits were in lower cost sources at December 31, 2011 compared to 68% at September 30, 2011 and 63% at December 31, 2010.  Our ratio of certificates of deposit to total deposits was 31% at December 31, 2011 compared to 32% at September 30, 2011 and 37% at December 31, 2010.  Our ratio of noninterest bearing deposits to total deposits was 25% at December 31, 2011 compared to 23% at September 30, 2011 and 21% at December 31, 2010.
 
 
 
15

 

 
FORWARD-LOOKING STATEMENTS

When used in this press release and in reports filed with or furnished to the Securities and Exchange Commission, in press releases or other public stockholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases “believe,” “will,” “should,” “will likely result,” “are expected to,” “will continue” “is anticipated,” “estimate,” “project,” “plans,” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date made.  These statements may relate to our future financial performance, strategic plans or objectives, revenues or earnings projections, or other financial items.  By their nature, these statements are subject to numerous uncertainties that could cause actual results to differ materially from those anticipated in the statements.

Important factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to, the following: (1) expected revenues, cost savings, synergies and other benefits from our merger and acquisition activities might not be realized within the anticipated time frames or at all, and costs or difficulties relating to integration matters, including but not limited to customer and employee retention, might be greater than expected; (2) the possibility that the expected benefits of the FDIC-assisted transactions we previously completed will not be realized; (3) the credit risks of lending activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses, which could necessitate additional provisions for loan losses, resulting both from loans we originate and loans we acquire from other financial institutions; (4) results of examinations by the Office of Comptroller of Currency and other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our allowance for loan losses or write-down assets; (5) competitive pressures among depository institutions; (6) interest rate movements and their impact on customer behavior and net interest margin; (7) the impact of repricing and competitors’ pricing initiatives on loan and deposit products; (8) fluctuations in real estate values; (9) the ability to adapt successfully to technological changes to meet customers’ needs and developments in the market place; (10) our ability to realize the residual values of our direct finance, leveraged, and operating leases; (11) our ability to access cost-effective funding; (12) changes in financial markets; (13) changes in economic conditions in general and in the Chicago metropolitan area in particular; (14) the costs, effects and outcomes of litigation; (15) new legislation or regulatory changes, including but not limited to the Dodd-Frank Wall Street Reform and Consumer Protection Act and regulations adopted thereunder, changes in federal and/or state tax laws or interpretations thereof by taxing authorities, changes in laws, rules or regulations applicable to companies that have participated in the TARP Capital Purchase Program of the U.S. Department of the Treasury and other governmental initiatives affecting the financial services industry; (16) changes in accounting principles, policies or guidelines; (17) our future acquisitions of other depository institutions or lines of business; and (18) future goodwill impairment due to changes in our business, changes in market conditions, or other factors.

We do not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date on which the forward-looking statement is made.


TABLES TO FOLLOW
 
 
 
 
 
 
16

 
 
 
MB FINANCIAL, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
As of the dates indicated
(Amounts in thousands)
 
     
December 31,
 
September 30,
 
June 30,
 
March 31,
 
December 31,
     
2011
 
2011
 
2011
 
2011
 
2010
ASSETS
                   
Cash and due from banks
 $
 144,228
 $
 133,755
 $
 129,942
 $
 123,794
 $
 106,726
Interest earning deposits with banks
 
 100,337
 
 347,055
 
 513,378
 
 504,765
 
 737,433
       Total cash and cash equivalents
 
 244,565
 
 480,810
 
 643,320
 
 628,559
 
 844,159
Investment securities:
                   
 
Securities available for sale, at fair value
 
 1,929,297
 
 1,888,738
 
 1,889,082
 
 1,718,654
 
 1,597,743
 
Securities held to maturity, at cost
 
 499,283
 
 499,038
 
 230,154
 
 102,206
 
 -
 
Non-marketable securities - FHLB and FRB Stock
 
 80,832
 
 80,815
 
 80,815
 
 80,186
 
 80,186
       Total investment securities
 
 2,509,412
 
 2,468,591
 
 2,200,051
 
 1,901,046
 
 1,677,929
Loans held for sale
 
 4,727
 
 -
 
 -
 
 11,533
 
 -
Loans:
                   
 
Total loans excluding covered loans
 
 5,288,451
 
 5,095,171
 
 5,182,359
 
 5,590,362
 
 5,805,481
 
Covered loans
 
 677,770
 
 718,566
 
 755,670
 
 777,634
 
 812,330
       Total loans  
 5,966,221
 
 5,813,737
 
 5,938,029
 
 6,367,996
 
 6,617,811
 
Less allowance for loan losses
 
 126,798
 
 128,610
 
 130,057
 
 178,410
 
 192,217
          Net loans
 
 5,839,423
 
 5,685,127
 
 5,807,972
 
 6,189,586
 
 6,425,594
Lease investments, net
 
 135,490
 
 133,345
 
 139,391
 
 129,182
 
 126,906
Premises and equipment, net
 
 210,705
 
 211,062
 
 210,901
 
 209,257
 
 210,886
Cash surrender value of life insurance
 
 125,309
 
 124,364
 
 126,938
 
 126,014
 
 125,046
Goodwill, net
 
 387,069
 
 387,069
 
 387,069
 
 387,069
 
 387,069
Other intangibles, net
 
 29,494
 
 30,904
 
 32,318
 
 33,734
 
 35,159
Other real estate owned
 
 78,452
 
 87,469
 
 88,185
 
 80,107
 
 71,476
Other real estate owned related to FDIC transactions
 
 60,363
 
 69,311
 
 69,920
 
 61,461
 
 44,745
FDIC indemnification asset
 
 65,604
 
 94,542
 
 119,837
 
 148,314
 
 215,460
Other assets
 
 142,459
 
 149,767
 
 151,833
 
 165,481
 
 155,935
             Total assets
 $
 9,833,072
 $
 9,922,361
 $
 9,977,735
 $
 10,071,343
 $
 10,320,364
LIABILITIES AND STOCKHOLDERS' EQUITY
                   
Liabilities
                   
Deposits:
                   
 
Noninterest bearing
$
1,885,694
$
1,803,141
$
1,776,873
$
1,666,868
$
1,691,599
 
Interest bearing
 
5,761,913
 
5,918,766
 
5,941,710
 
6,225,138
 
6,461,359
       Total deposits
 
7,647,607
 
7,721,907
 
7,718,583
 
7,892,006
 
8,152,958
Short-term borrowings
 
219,954
 
257,418
 
235,733
 
295,180
 
268,844
Long-term borrowings
 
266,264
 
274,378
 
275,559
 
275,327
 
285,073
Junior subordinated notes issued to capital trusts
 
158,538
 
158,546
 
158,554
 
158,563
 
158,571
Accrued expenses and other liabilities
 
147,682
 
141,490
 
243,962
 
100,031
 
110,132
          Total liabilities
 
8,440,045
 
8,553,739
 
8,632,391
 
8,721,107
 
8,975,578
Stockholders' Equity
                   
Preferred stock
 
194,719
 
194,562
 
194,407
 
194,255
 
194,104
Common stock
 
548
 
548
 
546
 
546
 
546
Additional paid-in capital
 
731,248
 
730,056
 
728,244
 
726,604
 
725,400
Retained earnings
 
427,956
 
411,659
 
396,081
 
406,594
 
402,810
Accumulated other comprehensive income
 
39,150
 
32,322
 
27,322
 
22,566
 
22,233
Treasury stock
 
(3,044)
 
(3,010)
 
(3,771)
 
(2,845)
 
(2,828)
       Controlling interest stockholders' equity
 
1,390,577
 
1,366,137
 
1,342,829
 
1,347,720
 
1,342,265
Noncontrolling interest
 
2,450
 
2,485
 
2,515
 
2,516
 
2,521
          Total stockholders' equity
 
1,393,027
 
1,368,622
 
1,345,344
 
1,350,236
 
1,344,786
             Total liabilities and stockholders' equity
$
9,833,072
$
9,922,361
$
9,977,735
$
10,071,343
$
10,320,364
 
 
 
17

 

 
MB FINANCIAL, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share data) (Unaudited)

   
Three Months Ended
Year Ended
   
December 31,
September 30,
June 30,
March 31,
December 31,
December 31,
December 31,
   
2011
2011
2011
2011
2010
2011
2010
Interest income:
             
 
Loans
$   75,466
$   78,046
$   84,114
$   87,167
$   92,701
$   324,793
$   364,484
 
Investment securities:
             
 
     Taxable
11,608
11,699
10,290
7,752
7,001
41,349
50,541
 
     Nontaxable
6,178
4,299
3,443
3,345
3,367
17,265
13,585
 
Federal funds sold
-
-
-
-
-
-
2
 
Other interest earning accounts
181
244
258
470
504
1,153
1,028
 
     Total interest income
93,433
94,288
98,105
98,734
103,573
384,560
429,640
Interest expense:
             
 
Deposits
9,569
10,207
11,746
13,359
15,598
44,881
75,850
 
Short-term borrowings
189
204
239
217
255
849
1,145
 
Long-term borrowings and junior subordinated notes
3,430
3,461
3,713
2,953
3,065
13,557
12,873
 
     Total interest expense
13,188
13,872
15,698
16,529
18,918
59,287
89,868
Net interest income
80,245
80,416
82,407
82,205
84,655
325,273
339,772
Provision for credit losses
8,000
11,500
61,250
40,000
49,000
120,750
246,200
Net interest income after provision for credit losses
72,245
68,916
21,157
42,205
35,655
204,523
93,572
Other income:
             
 
Loan service fees
1,601
2,159
2,812
1,126
1,532
7,698
6,517
 
Deposit service fees
10,085
9,932
9,023
10,030
9,920
39,070
38,934
 
Lease financing, net
7,801
6,494
6,861
5,783
7,185
26,939
21,853
 
Brokerage fees
1,577
1,273
1,615
1,419
1,231
5,884
5,012
 
Trust and asset management fees
4,166
4,272
4,455
4,431
4,243
17,324
15,037
 
Net gain (loss) on sale of investment securities
411
-
232
(3)
(4)
640
18,648
 
Increase in cash surrender value of life insurance
944
1,014
1,451
968
930
4,377
3,516
 
Net (loss) gain on sale of other assets
(87)
-
13
357
419
283
630
 
Acquisition related gains
-
-
-
-
-
-
62,649
 
Accretion of FDIC indemnification asset
683
985
1,339
1,831
3,009
4,838
9,678
 
Card fees
1,096
2,071
2,062
1,788
2,287
7,017
7,057
 
Net loss recognized on other real estate owned
(5,478)
(3,118)
(4,645)
(372)
(2,124)
(13,613)
(9,285)
 
Other operating income
1,652
1,285
3,927
1,785
2,167
8,649
5,510
 
Total other income
24,451
26,367
29,145
29,143
30,795
109,106
185,756
Other expense:
             
 
Salaries and employee benefits
39,846
38,422
37,815
37,775
36,399
153,858
144,349
 
Occupancy and equipment expense
8,498
9,092
8,483
9,394
7,938
35,467
34,845
 
Computer services and telecommunication expense
4,382
3,488
3,570
3,445
3,264
14,885
14,615
 
Advertising and marketing expense
1,831
1,740
1,748
1,719
1,573
7,038
6,465
 
Professional and legal expense
1,422
1,647
1,853
1,225
1,718
6,147
5,803
 
Brokerage fee expense
137
363
574
483
448
1,557
1,926
 
Other intangible amortization expense
1,410
1,414
1,416
1,425
1,632
5,665
6,214
 
FDIC insurance premiums
2,662
2,272
3,502
3,428
3,930
11,864
15,600
 
Branch impairment charges
594
-
-
1,000
-
1,594
-
 
Other real estate expense, net
1,464
1,181
1,251
398
858
4,294
2,694
 
Other operating expenses
7,187
6,989
6,516
6,572
6,855
27,264
26,265
 
Total other expense
69,433
66,608
66,728
66,864
64,615
269,633
258,776
Income (loss) before income taxes
27,263
28,675
(16,426)
4,484
1,835
43,996
20,552
Income taxes
7,810
8,978
(9,060)
(2,460)
(1,358)
5,268
24
Net income (loss)
19,453
19,697
(7,366)
6,944
3,193
38,728
20,528
Preferred stock dividends and discount accretion
2,606
2,605
2,602
2,601
2,598
10,414
10,382
 
Net income (loss) available to common stockholders
$   16,847
$   17,092
$  (9,968)
$     4,343
$         595
$     28,314
$     10,146

 
 
18

 

 
 
Three Months Ended
Year Ended
   
December 31,
 
September 30,
 
June 30,
 
March 31,
 
December 31,
 
December 31,
 
December 31,
   
2011
 
2011
 
2011
 
2011
 
2010
 
2011
 
2010
Common share data:
                           
Net income (loss) per basic common share
$
0.36
$
0.36
$
(0.14)
$
0.13
$
0.06
$
0.71
$
0.39
Impact of preferred stock dividends on
                           
   basic earnings (loss) per common share
 
(0.05)
 
(0.04)
 
(0.04)
 
(0.05)
 
(0.05)
 
(0.19)
 
(0.20)
Basic earnings (loss) per common share
 
0.31
 
0.32
 
(0.18)
 
0.08
 
0.01
 
0.52
 
0.19
                             
Net income (loss) per common share
 
0.36
 
0.36
 
(0.14)
 
0.13
 
0.06
 
0.71
 
0.39
Impact of preferred stock dividends on
                           
   diluted earnings (loss) per common share
 
(0.05)
 
(0.05)
 
(0.04)
 
(0.05)
 
(0.05)
 
(0.19)
 
(0.20)
Diluted earnings (loss) per common share
 
0.31
 
0.31
 
(0.18)
 
0.08
 
0.01
 
0.52
 
0.19
                             
Weighted average common shares outstanding
 
54,140,646
 
54,121,156
 
54,002,979
 
53,961,176
 
53,572,157
 
54,057,158
 
52,724,715
Diluted weighted average common shares outstanding
 
54,360,178
 
54,323,320
 
54,002,979
 
54,254,876
 
53,790,047
 
54,337,280
 
53,035,047



 
19

 

 
   
Three Months Ended
 
Year Ended
 
   
December 31,
   
September 30,
   
June 30,
   
March 31,
   
December 31,
   
December 31,
   
December 31,
 
   
2011
   
2011
   
2011
   
2011
   
2010
   
2011
   
2010
 
Performance Ratios:
                                         
Annualized return on average assets
 
0.78
%
 
0.80
%
 
(0.30)
%
 
0.28
%
 
0.12
%
 
0.39
%
 
0.20
%
Annualized return on average common equity
5.66
   
5.86
   
(3.43)
   
1.53
   
0.21
   
2.43
   
0.89
 
Annualized cash return on average tangible common equity(1)
 
9.09
   
9.52
   
(4.80)
   
2.88
   
0.89
   
4.23
   
1.96
 
Net interest rate spread
 
3.71
   
3.71
   
3.71
   
3.68
   
3.63
   
3.71
   
3.61
 
Cost of funds(2)
 
0.63
   
0.66
   
0.74
   
0.77
   
0.83
   
0.70
   
0.99
 
Efficiency ratio(3)
 
59.94
   
58.69
   
56.63
   
57.45
   
53.49
   
58.17
   
55.57
 
Annualized net non-interest expense to average assets(4)
 
1.56
   
1.48
   
1.38
   
1.44
   
1.20
   
1.46
   
1.37
 
Pre-tax pre-provision operating earnings to risk-weighted assets(5)
 
2.87
   
3.03
   
3.30
   
3.00
   
3.26
   
3.04
   
3.05
 
Pre-tax pre-provision operating earnings to average assets(5)
 
1.85
   
1.91
   
2.05
   
1.93
   
2.11
   
1.94
   
1.97
 
Net interest margin
 
3.71
   
3.74
   
3.79
   
3.76
   
3.72
   
3.75
   
3.72
 
Tax equivalent effect
 
0.20
   
0.16
   
0.13
   
0.12
   
0.11
   
0.15
   
0.11
 
Net interest margin - fully tax equivalent basis(6)
3.91
   
3.90
   
3.92
   
3.88
   
3.83
   
3.90
   
3.83
 
Asset Quality Ratios:
                                         
Non-performing loans(7) to total loans
 
2.17
%
 
2.42
%
 
2.54
%
 
5.01
%
 
5.48
%
 
2.17
%
 
5.48
%
Non-performing assets(7) to total assets
 
2.12
   
2.30
   
2.40
   
3.96
   
4.21
   
2.12
   
4.21
 
Allowance for loan losses to non-performing loans(7)
 
98.00
   
91.23
   
86.12
   
55.94
   
53.03
   
98.00
   
53.03
 
Allowance for loan losses to total loans
 
2.13
   
2.21
   
2.19
   
2.80
   
2.90
   
2.13
   
2.90
 
Allowance for credit losses to total loans and unfunded credit commitments
 
2.25
   
2.40
   
2.43
   
2.75
   
2.85
   
2.25
   
2.85
 
Net loan charge-offs to average loans (annualized)
0.95
   
1.14
   
5.89
   
3.38
   
2.99
   
2.90
   
3.42
 
Capital Ratios:
                                         
Tangible equity to tangible assets(8)
 
10.47
%
 
10.10
%
 
9.79
%
 
9.74
%
 
9.43
%
 
10.47
%
 
9.43
%
Tangible common equity to risk weighted assets(9)
12.48
   
12.42
   
11.97
   
11.36
   
10.94
   
12.48
   
10.94
 
Tangible common equity to tangible assets(10)
8.40
   
8.06
   
7.76
   
7.73
   
7.47
   
8.40
   
7.47
 
Book value per common share(11)
$
21.92
 
$
21.48
 
$
21.14
 
$
21.24
 
$
21.14
 
$
21.92
 
$
21.14
 
Less: goodwill and other intangible assets,net of benefit, per common share
 
7.43
   
7.45
   
7.49
   
7.52
   
7.53
   
7.43
   
7.53
 
Tangible book value per common share(12)
 
14.49
   
14.03
   
13.64
   
13.73
   
13.60
   
14.49
   
13.60
 
                                           
Total capital (to risk-weighted assets)
 
19.41
%
 
19.61
%
 
19.18
%
 
18.33
%
 
17.75
%
 
19.41
%
 
17.75
%
Tier 1 capital (to risk-weighted assets)
 
17.36
   
17.54
   
17.11
   
16.31
   
15.75
   
17.36
   
15.75
 
Tier 1 capital (to average assets)
 
11.73
   
11.59
   
11.16
   
11.00
   
10.66
   
11.73
   
10.66
 
Tier 1 common capital (to risk-weighted assets)
11.87
   
11.90
   
11.50
   
11.01
   
10.61
   
11.87
   
10.61
 

(1)
Net cash flow available to common stockholders (net income available to common stockholders, plus other intangibles amortization expense, net of tax benefit) divided by average tangible common equity (average common equity less average goodwill and average other intangibles, net of tax benefit).
(2)
Equals total interest expense divided by the sum of average interest bearing liabilities and noninterest bearing deposits.
(3)
Equals total other expense excluding non-core items divided by the sum of net interest income on a fully tax equivalent basis, total other income less non-core items, and tax equivalent adjustment on the increase in cash surrender value of life insurance.
(4)
Equals total other expense excluding non-core items less total other income excluding non-core items, and including tax equivalent adjustment on the increase in cash surrender value of life insurance divided by average assets.
(5)
Equals net income before taxes, on a fully tax equivalent basis, excluding loan loss provision expense, non-core other income items, and non-core other expense items, including tax equivalent adjustment on the increase in cash surrender value of life insurance divided by risk-weighted assets or average assets.
(6)
Represents net interest income, on a fully tax equivalent basis assuming a 35% tax rate, as a percentage of average interest earning assets.
(7)
Non-performing loans excludes purchased credit-impaired loans and loans held for sale.  Non-performing assets excludes purchased credit-impaired loans, loans held for sale, and other real estate owned related to FDIC transactions.
(8)
Equals total ending stockholders’ equity less goodwill and other intangibles, net of tax benefit, divided by total assets less goodwill and other intangibles, net of tax benefit.
(9)
Equals total ending common stockholders’ equity less goodwill and other intangibles, net of tax benefit, divided by total risk weighted assets.
(10)
Equals total ending common stockholders’ equity less goodwill and other intangibles, net of tax benefit, divided by total assets less goodwill and other intangibles, net of tax benefit.
(11)
Equals total ending common stockholders’ equity divided by common shares outstanding.
(12)
Equals total ending common stockholders’ equity less goodwill and other intangibles, net of tax benefit, divided by common shares outstanding.


 
20

 

NON-GAAP FINANCIAL INFORMATION

This press release contains certain financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (GAAP).  These measures include pre-tax, pre-provision operating earnings; core other income, core other expense, non-core other income and non-core other expense; net interest income on a fully tax equivalent basis, net interest margin on a fully tax equivalent basis; efficiency ratio, ratio of annualized net non-interest expense to average assets, ratio of pre-tax, pre-provision operating earnings to risk-weighted assets and ratio of pre-tax, pre-provision operating earnings to average assets, with net gains and losses on securities available for sale, net gains and losses on sale of other assets, net gains and losses on other real estate owned, net gain on sale of loans held for sale, acquisition related gains and increase (decrease) in market value of assets held in trust for deferred compensation excluded from the non-interest income components of these ratios, 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 the tax equivalent adjustment for tax-exempt interest income and increase in cash surrender value of life insurance included in the net interest income and non-interest income components of these ratios; ratios of tangible equity to tangible assets, tangible common equity to risk weighted assets, tangible common equity to tangible assets and Tier 1 common capital to risk-weighted assets; tangible book value per common share; and annualized cash return on average tangible common equity.   Our management uses these non-GAAP measures, together with the related GAAP measures, in its analysis of our performance and in making business decisions.  Management also uses these measures for peer comparisons.

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

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

The tax equivalent adjustment to net interest income, net interest margin, tax-exempt interest income and increase in cash surrender value of life insurance 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.  For the same reasons, management believes the tax equivalent adjustments to tax-exempt interest income and increase in cash surrender value of life insurance are useful.

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

 
 
21

 


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

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

The following table presents a reconciliation of tangible equity to equity (in thousands):
 
   
December 31,
 
September 30,
 
June 30,
 
March 31,
 
December 31,
   
2011
 
2011
 
2011
 
2011
 
2010
Stockholders' equity - as reported
$
1,393,027
$
1,368,622
$
1,345,344
$
1,350,236
$
1,344,786
 
Less: goodwill
 
387,069
 
387,069
 
387,069
 
387,069
 
387,069
 
Less: other intangible, net of tax benefit
 
19,171
 
20,088
 
21,007
 
21,927
 
22,853
Tangible equity
$
986,787
$
961,465
$
937,268
$
941,240
$
934,864


The following table presents a reconciliation of tangible assets to total assets (in thousands):
 
   
December 31,
 
September 30,
 
June 30,
 
March 31,
 
December 31,
   
2011
 
2011
 
2011
 
2011
 
2010
Total assets - as reported
$
9,833,072
$
9,922,361
$
9,977,735
$
10,071,343
$
10,320,364
 
Less: goodwill
 
387,069
 
387,069
 
387,069
 
387,069
 
387,069
 
Less: other intangible, net of tax benefit
 
19,171
 
20,088
 
21,007
 
21,927
 
22,853
Tangible assets
$
9,426,832
$
9,515,204
$
9,569,659
$
9,662,347
$
9,910,442


The following table presents a reconciliation of tangible common equity to stockholders’ common equity (in thousands):
 
   
December 31,
 
September 30,
 
June 30,
 
March 31,
 
December 31,
   
2011
 
2011
 
2011
 
2011
 
2010
Common stockholders' equity - as reported
 $
1,198,308
$
1,174,060
$
1,150,937
$
1,155,981
$
1,150,682
 
Less: goodwill
 
387,069
 
387,069
 
387,069
 
387,069
 
387,069
 
Less: other intangible, net of tax benefit
 
19,171
 
20,088
 
21,007
 
21,927
 
22,853
Tangible common equity
 $
792,068
$
766,903
$
742,861
$
746,985
$
740,760

 
 
22

 

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

     
Three Months Ended
Year Ended
     
December 31,
 
September 30,
 
June 30,
 
March 31,
 
December 31,
 
December 31,
 
December 31,
     
2011
 
2011
 
2011
 
2011
 
2010
 
2011
 
2010
Average common stockholders' equity - as reported
$
1,181,820
$
1,158,119
$
1,165,022
$
1,152,119
$
1,147,581
$
1,164,316
$
1,135,189
 
Less:  average goodwill
 
387,069
 
387,069
 
387,069
 
387,069
 
387,069
 
387,069
 
387,069
 
Less:  average other intangible assets, net of tax benefit
19,494
 
20,414
 
21,331
 
22,254
 
23,236
 
20,865
 
23,154
Average tangible common equity
$
775,257
$
750,636
$
756,622
$
742,796
$
737,276
$
756,382
$
724,966


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

     
Three Months Ended
Year Ended
     
December 31,
 
September 30,
 
June 30,
 
March 31,
 
December 31,
 
December 31,
 
December 31,
     
2011
 
2011
 
2011
 
2011
 
2010
 
2011
 
2010
                             
Net income (loss) available to common stockholders - as reported
$
16,847
$
17,092
$
(9,968)
$
4,343
$
595
$
28,314
$
10,146
 
Add: other intangible amortization expense, net of tax benefit
 
917
 
919
 
920
 
926
 
1,062
 
3,682
 
4,039
Net cash flow available to common stockholders
$
17,764
$
18,011
$
(9,048)
$
5,269
$
1,657
$
31,996
$
14,185


The following table presents a reconciliation of Tier 1 common capital to Tier 1 capital (in thousands):
 
   
December 31,
 
September 30,
 
June 30,
 
March 31,
 
December 31,
   
2011
 
2011
 
2011
 
2011
 
2010
Tier 1 capital - as reported
 $
1,101,538
$
1,083,020
$
1,061,482
$
1,072,537
$
1,066,538
 
Less: preferred stock
 
194,719
 
194,562
 
194,407
 
194,255
 
194,104
 
Less: qualifying trust preferred securities
 
153,787
 
153,795
 
153,803
 
153,812
 
153,820
Tier 1 common capital
 $
753,032
$
734,663
$
713,272
$
724,470
$
718,614

 
 
23

 

 
Efficiency Ratio Calculation (Dollars in Thousands)

     
Three Months Ended
Year Ended
     
December 31,
 
September 30,
 
June 30,
 
March 31,
 
December 31,
 
December 31,
 
December 31,
     
2011
 
2011
 
2011
 
2011
 
2010
 
2011
 
2010
Non-interest expense
 $
 69,433
 $
 66,608
 $
 66,728
 $
 66,864
 $
 64,615
 $
 269,633
 $
 258,776
Adjustment for impairment charges
 
 594
 
 -
 
 -
 
 1,000
 
 -
 
 1,594
 
 -
Adjustment for increase (decrease) in market value of
                         
   assets held in trust for deferred compensation
 
 20
 
 (405)
 
 158
 
 187
 
 597
 
 (40)
 
 562
 
Non-interest expense - as adjusted
 $
 68,819
 $
 67,013
 $
 66,570
 $
 65,677
 $
 64,018
 $
 268,079
 $
 258,214
                               
Net interest income
 $
 80,245
 $
 80,416
 $
 82,407
 $
 82,205
 $
 84,655
 $
 325,273
 $
 339,772
Tax equivalent adjustment
 
 4,468
 
 3,320
 
 2,775
 
 2,625
 
 2,609
 
 13,188
 
 10,458
Net interest income on a fully tax equivalent basis
 
 84,713
 
 83,736
 
 85,182
 
 84,830
 
 87,264
 
 338,461
 
 350,230
Tax equivalent adjustment on the increase
                           
   in cash surrender value of life insurance
 
 508
 
 546
 
 781
 
 521
 
 501
 
 2,357
 
 1,893
Plus other income
 
 24,451
 
 26,367
 
 29,145
 
 29,143
 
 30,795
 
 109,106
 
 185,756
Less net losses on other real estate owned
 
 (5,478)
 
 (3,118)
 
 (4,645)
 
 (372)
 
 (2,124)
 
 (13,613)
 
 (9,284)
Less net gains (losses) on securities available for sale
 411
 
 -
 
 232
 
 (3)
 
 (4)
 
 640
 
 18,648
Less net (losses) gains on sale of other assets
 
 (87)
 
 -
 
 13
 
 357
 
 419
 
 283
 
 630
Less net gain on sale of loans held for sale
 
 -
 
 -
 
 1,790
 
 -
 
 -
 
 1,790
 
 -
Less acquisition related gains
 
 -
 
 -
 
 -
 
 -
 
 -
 
 -
 
 62,649
Less increase (decrease) in market value of assets
                         
   held in trust for deferred compensation
 
 20
 
 (405)
 
 158
 
 187
 
 597
 
 (40)
 
 562
                               
Net interest income plus non-interest income - as adjusted
 $
 114,806
 $
 114,172
 $
 117,560
 $
 114,325
 $
 119,672
 $
 460,864
 $
 464,674
                               
Efficiency ratio
 
59.94%
 
58.69%
 
56.63%
 
57.45%
 
53.49%
 
58.17%
 
55.57%
                               
Efficiency ratio (without adjustments)
 
66.32%
 
62.38%
 
59.82%
 
60.05%
 
55.97%
 
62.07%
 
49.24%


Annualized Net Non-interest Expense to Average Assets Calculation (Dollars in Thousands)

     
Three Months Ended
Year Ended
     
December 31,
 
September 30,
 
June 30,
 
March 31,
 
December 31,
 
December 31,
 
December 31,
     
2011
 
2011
 
2011
 
2011
 
2010
 
2011
 
2010
Non-interest expense
 $
 69,433
 $
 66,608
 $
 66,728
 $
 66,864
 $
 64,615
 $
 269,633
 $
 258,776
Adjustment for impairment charges
 
 594
 
 -
 
 -
 
 1,000
 
 -
 
 1,594
 
 -
Adjustment for increase (decrease) in market value of
                         
     assets held in trust for deferred compensation
 
 20
 
 (405)
 
 158
 
 187
 
 597
 
 (40)
 
 562
 
Non-interest expense - as adjusted
 
 68,819
 
 67,013
 
 66,570
 
 65,677
 
 64,018
 
 268,079
 
 258,214
                               
Other income
 
 24,451
 
 26,367
 
 29,145
 
 29,143
 
 30,795
 
 109,106
 
 185,756
Less net losses  on other real estate owned
 
 (5,478)
 
 (3,118)
 
 (4,645)
 
 (372)
 
 (2,124)
 
 (13,613)
 
 (9,284)
Less net gains (losses) on securities available for sale
 411
 
 -
 
 232
 
 (3)
 
 (4)
 
 640
 
 18,648
Less net (losses) gains on sale of other assets
 
 (87)
 
 -
 
 13
 
 357
 
 419
 
 283
 
 630
Less net gain on sale of loans held for sale
 
 -
 
 -
 
 1,790
 
 -
 
 -
 
 1,790
 
 -
Less acquisition related gains
 
 -
 
 -
 
 -
 
 -
 
 -
 
 -
 
 62,649
Less increase (decrease) in market value of assets
                           
     held in trust for deferred compensation
 
 20
 
 (405)
 
 158
 
 187
 
 597
 
 (40)
 
 562
Other income - as adjusted
 
 29,585
 
 29,890
 
 31,597
 
 28,974
 
 31,907
 
 120,046
 
 112,551
Less tax equivalent adjustment on the increase
                           
   in cash surrender value of life insurance
 
 508
 
 546
 
 781
 
 521
 
 501
 
 2,357
 
 1,893
                               
Net non-interest expense
 $
 38,726
 $
 36,577
 $
 34,192
 $
 36,182
 $
 31,610
 $
 145,676
 $
 143,770
                               
Average assets
 $
 9,856,835
 $
 9,807,561
 $
 9,966,898
 $
 10,198,626
 $
 10,452,626
 $
 9,956,133
 $
 10,506,028
                               
Annualized net non-interest expense to average assets
1.56%
 
1.48%
 
1.38%
 
1.44%
 
1.20%
 
1.46%
 
1.37%
                               
Annualized net non-interest expense to average assets
                           
 
(without adjustments)
 
1.81%
 
1.63%
 
1.51%
 
1.50%
 
1.28%
 
1.61%
 
0.70%

 
 
24

 

 
Calculation of Pre-Tax, Pre-Provision Operating Earnings (Dollars in Thousands)

     
Three Months Ended
Year Ended
     
December 31,
 
September 30,
 
June 30,
 
March 31,
 
December 31,
 
December 31,
 
December 31,
     
2011
 
2011
 
2011
 
2011
 
2010
 
2011
 
2010
Income (loss) before income taxes
$
27,263
$
28,675
$
(16,426)
$
4,484
$
1,835
$
43,996
$
20,552
Provision for credit losses
 
8,000
 
11,500
 
61,250
 
40,000
 
49,000
 
120,750
 
246,200
 
Pre-tax, pre-provision earnings
 
35,263
 
40,175
 
44,824
 
44,484
 
50,835
 
164,746
 
266,752
                               
Tax equivalent adjustment on tax-exempt interest income
 
4,468
 
3,320
 
2,775
 
2,625
 
2,609
 
13,188
 
10,458
Tax equivalent adjustment on the increase in cash
                           
   surrender value of life insurance
 
508
 
546
 
781
 
521
 
501
 
2,357
 
1,893
 
Pre-tax, pre-provision earnings on a fully tax equivalent basis
40,239
 
44,041
 
48,380
 
47,630
 
53,945
 
180,291
 
279,103
                               
Non-core other income
                           
 
Net losses on other real estate owned
 
(5,478)
 
(3,118)
 
(4,645)
 
(372)
 
(2,124)
 
(13,613)
 
(9,284)
 
Net gains (losses) on securities available for sale
 
411
 
-
 
232
 
(3)
 
(4)
 
640
 
18,648
 
Net (losses) gain on sale of other assets
 
(87)
 
-
 
13
 
357
 
419
 
283
 
630
 
Net gain on sale of loans held for sale
 
-
 
-
 
1,790
 
-
 
-
 
1,790
 
-
 
Acquisition related gains
 
-
 
-
 
-
 
-
 
-
 
-
 
62,649
 
Increase (decrease) in market value of assets held in
                           
 
     trust for deferred compensation
 
20
 
(405)
 
158
 
187
 
597
 
(40)
 
562
Total non-core other income
 
(5,134)
 
(3,523)
 
(2,452)
 
169
 
(1,112)
 
(10,940)
 
73,205
                               
Non-core other expense
                           
 
Impairment charges
 
594
 
-
 
-
 
1,000
 
-
 
1,594
 
-
 
Increase (decrease) in market value of assets held in
                           
 
     trust for deferred compensation
 
20
 
(405)
 
158
 
187
 
597
 
(40)
 
562
Total non-core other expense
 
614
 
(405)
 
158
 
1,187
 
597
 
1,554
 
562
Pre-tax, pre-provision operating earnings
$
45,987
$
47,159
$
50,990
$
48,648
$
55,654
$
192,785
$
206,460
                               
Risk-weighted assets
$
6,346,201
$
6,174,508
$
6,203,587
$
6,577,477
$
6,772,761
$
6,346,201
$
6,772,761
                               
Average assets
$
9,856,835
$
9,807,561
$
9,966,898
$
10,198,626
$
10,452,626
$
9,956,133
$
10,506,028
                               
                               
Annualized pre-tax, pre-provision operating earnings to
                           
 
risk-weighted assets
 
2.87%
 
3.03%
 
3.30%
 
3.00%
 
3.26%
 
3.04%
 
3.05%
Annualized pre-tax, pre-provision operating earnings to
                           
 
risk-weighted assets (without adjustments)
 
2.20%
 
2.58%
 
2.90%
 
2.74%
 
2.98%
 
2.60%
 
3.94%
                               
Annualized pre-tax, pre-provision operating earnings to
                           
 
average assets
 
1.85%
 
1.91%
 
2.05%
 
1.93%
 
2.11%
 
1.94%
 
1.97%
                               
Annualized pre-tax, pre-provision operating earnings to
                           
 
average assets (without adjustments)
 
1.42%
 
1.63%
 
1.80%
 
1.77%
 
1.93%
 
1.65%
 
2.54%

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

 
 
25

 
 
 
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 December 31,
 
Three Months Ended September 30,
       
2011
 
2010
 
2011
       
Average
   
Yield/
 
Average
   
Yield/
 
Average
   
Yield/
       
Balance
 
Interest
Rate
 
Balance
 
Interest
Rate
 
Balance
 
Interest
Rate
Interest Earning Assets:
                             
Loans (1) (2) (3):
                             
Commercial related credits
                             
 
Commercial
$
 1,051,065
$
 12,989
4.90%
$
 1,243,057
 
 15,053
4.80%
$
 1,070,852
$
 12,915
4.78%
 
Commercial loans collateralized by assignment
                             
   
of lease payments
 
 1,102,220
 
 14,167
5.14
 
 1,018,026
 
 14,662
5.76
 
 1,015,925
 
 13,694
5.39
 
Real estate commercial
 
 1,839,689
 
 25,132
5.35
 
 2,235,328
 
 29,853
5.23
 
 1,845,988
 
 25,230
5.35
 
Real estate construction
 
 209,098
 
 2,443
4.57
 
 438,622
 
 3,741
3.34
 
 238,396
 
 2,233
3.67
Total commercial related credits
 
 4,202,072
 
 54,731
5.10
 
 4,935,033
 
 63,309
5.02
 
 4,171,161
 
 54,072
5.07
Other loans
                             
 
Real estate residential
 
 316,087
 
 3,719
4.71
 
 326,785
 
 4,523
5.54
 
 317,050
 
 3,739
4.72
 
Home equity
 
 342,011
 
 3,701
4.29
 
 385,119
 
 4,234
4.36
 
 354,131
 
 3,828
4.29
 
Indirect
 
 188,562
 
 3,080
6.48
 
 178,940
 
 3,583
7.94
 
 185,850
 
 2,968
6.34
 
Consumer loans
 
 62,703
 
 482
3.05
 
 57,709
 
 633
4.35
 
 56,257
 
 439
3.10
Total other loans
 
 909,363
 
 10,982
4.79
 
 948,553
 
 12,973
5.43
 
 913,288
 
 10,974
4.77
 
Total loans, excluding covered loans
 
 5,111,435
 
 65,713
5.10
 
 5,883,586
 
 76,282
5.14
 
 5,084,449
 
 65,046
5.08
 
Covered loans
 
 707,039
 
 10,894
6.11
 
 840,254
 
 17,213
8.13
 
 742,732
 
 14,004
7.48
 
Total loans
 
 5,818,474
 
 76,607
5.22
 
 6,723,840
 
 93,495
5.52
 
 5,827,181
 
 79,050
5.38
                                   
Taxable investment securities
 
 1,820,680
 
 11,608
2.55
 
 1,172,751
 
 7,002
2.39
 
 1,869,961
 
 11,699
2.50
Investment securities exempt from federal income taxes (3)
 
 676,893
 
 9,505
5.49
 
 351,955
 
 5,181
5.76
 
 456,777
 
 6,614
5.67
Federal funds sold
 
 -
 
 -
0.00
 
 -
 
 -
0.00
 
 -
 
 -
0.00
Other interest earning deposits
 
 272,762
 
 181
0.26
 
 784,803
 
 504
0.25
 
 365,723
 
 244
0.26
 
Total interest earning assets
$
 8,588,809
$
 97,901
4.52
$
 9,033,349
$
 106,182
4.66
$
 8,519,642
$
 97,607
4.55
Non-interest earning assets
 
 1,268,026
       
 1,419,277
       
 1,287,919
     
 
Total assets
$
 9,856,835
     
$
 10,452,626
     
$
 9,807,561
     
                                   
Interest Bearing Liabilities:
                             
Core funding:
                             
 
Money market and NOW accounts
$
 2,653,486
$
 1,498
0.22%
$
 2,823,619
$
 3,410
0.48%
$
 2,656,490
$
 1,731
0.26%
 
Savings accounts
 
 751,766
 
 327
0.17
 
 657,816
 
 505
0.30
 
 742,334
 
 320
0.17
 
Certificates of deposit
 
 1,971,473
 
 4,294
0.89
 
 2,611,365
 
 7,609
1.17
 
 2,048,556
 
 4,759
0.92
 
Customer repurchase agreements
 
 235,666
 
 151
0.25
 
 277,782
 
 218
0.31
 
 218,928
 
 146
0.26
Total core funding
 
 5,612,391
 
 6,270
0.44
 
 6,370,582
 
 11,742
0.73
 
 5,666,308
 
 6,956
0.49
Wholesale funding:
                             
 
Brokered accounts (includes fee expense)
 
 438,123
 
 3,450
3.12
 
 473,090
 
 4,074
3.42
 
 412,714
 
 3,396
3.26
 
Other borrowings
 
 431,165
 
 3,468
3.15
 
 452,212
 
 3,102
2.68
 
 442,066
 
 3,519
3.11
Total wholesale funding
 
 869,288
 
 6,918
2.88
 
 925,302
 
 7,176
2.88
 
 854,780
 
 6,915
3.08
Total interest bearing liabilities
$
 6,481,679
$
 13,188
0.81
$
 7,295,884
$
 18,918
1.03
$
 6,521,088
$
 13,871
0.84
Non-interest bearing deposits
 
 1,878,049
       
 1,694,179
       
 1,810,501
     
Other non-interest bearing liabilities
 
 120,671
       
 120,974
       
 123,391
     
Stockholders' equity
 
 1,376,436
       
 1,341,589
       
 1,352,581
     
   
Total liabilities and stockholders' equity
$
 9,856,835
     
$
 10,452,626
     
$
 9,807,561
     
   
Net interest income/interest rate spread (4)
   
$
 84,713
3.71%
   
$
 87,264
3.63%
   
$
 83,736
3.71%
   
Taxable equivalent adjustment
     
 4,468
       
 2,609
       
 3,320
 
   
Net interest income, as reported
   
$
 80,245
     
$
 84,655
     
$
 80,416
 
   
Net interest margin (5)
       
3.71%
       
3.72%
       
3.74%
   
Tax equivalent effect
       
0.20%
       
0.11%
       
0.16%
   
Net interest margin on a fully tax equivalent basis (5)
     
3.91%
       
3.83%
       
3.90%

(1)
Non-accrual loans are included in average loans.
(2)
Interest income includes amortization of deferred loan origination fees of $1.2 million, $972 thousand, and $1.0 million for the three months ended December 31, 2011, September 30, 2011, and December 31, 2010, respectively.
(3)
Non-taxable loan and investment income is presented on a fully tax equivalent basis assuming a 35% tax rate.
(4)
Interest rate spread represents the difference between the average yield on interest earning assets and the average cost of interest bearing liabilities and is presented on a fully tax equivalent basis.
(5)
Net interest margin represents net interest income as a percentage of average interest earning assets.

 
 
26

 
 
 
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):

       
Year Ended December 31,
       
2011
 
2010
       
Average
   
Yield/
 
Average
   
Yield/
       
Balance
 
Interest
Rate
 
Balance
 
Interest
Rate
Interest Earning Assets:
                   
Loans (1) (2) (3):
                   
Commercial related credits
                   
 
Commercial
$
 1,108,033
$
 53,813
4.86%
$
 1,324,118
$
 66,121
4.99%
 
Commercial loans collateralized by assignment
                   
   
of lease payments
 
 1,041,033
 
 56,453
5.42
 
 981,384
 
 58,807
5.99
 
Real estate commercial
 
 1,968,087
 
 105,342
5.28
 
 2,345,202
 
 125,115
5.26
 
Real estate construction
 
 300,288
 
 11,984
3.94
 
 520,734
 
 17,357
3.29
Total commercial related credits
 
 4,417,441
 
 227,592
5.08
 
 5,171,438
 
 267,400
5.10
Other loans
                   
 
Real estate residential
 
 326,189
 
 15,914
4.88
 
 314,713
 
 16,878
5.36
 
Home equity
 
 359,972
 
 15,481
4.30
 
 394,142
 
 17,317
5.39
 
Indirect
 
 181,988
 
 12,034
6.61
 
 180,337
 
 13,115
7.27
 
Consumer loans
 
 58,205
 
 1,957
3.36
 
 58,834
 
 2,209
3.75
Total other loans
 
 926,354
 
 45,386
4.90
 
 948,026
 
 49,519
5.22
 
Total loans, excluding covered loans
 
 5,343,795
 
 272,978
5.11
 
 6,119,464
 
 316,919
5.18
 
Covered loans
 
 755,242
 
 55,706
7.38
 
 639,312
 
 50,707
7.93
 
Total loans
 
 6,099,037
 
 328,684
5.39
 
 6,758,776
 
 367,626
5.44
                         
Taxable investment securities
 
 1,669,971
 
 41,349
2.48
 
 1,635,544
 
 50,542
3.09
Investment securities exempt from federal income taxes (3)
 
 460,972
 
 26,562
5.68
 
 356,496
 
 20,900
5.78
Federal funds sold
 
 -
 
 -
0.00
 
 352
 
 2
0.56
Other interest earning deposits
 
 442,190
 
 1,153
0.26
 
 386,521
 
 1,028
0.27
 
Total interest earning assets
$
 8,672,170
$
 397,748
4.59
$
 9,137,689
$
 440,098
4.82
Non-interest earning assets
 
 1,283,963
       
 1,368,339
     
 
Total assets
$
 9,956,133
     
$
 10,506,028
     
                         
Interest Bearing Liabilities:
                   
Core funding:
                   
 
Money market and NOW accounts
$
 2,678,049
$
 7,637
0.29%
$
 2,767,044
$
 14,965
0.54%
 
Savings accounts
 
 732,731
 
 1,379
0.19
 
 619,304
 
 1,911
0.31
 
Certificates of deposit
 
 2,165,541
 
 21,162
0.99
 
 2,846,246
 
 41,085
1.47
 
Customer repurchase agreements
 
 239,896
 
 639
0.27
 
 260,291
 
 959
0.37
Total core funding
 
 5,816,217
 
 30,817
0.53
 
 6,492,885
 
 58,920
0.91
Wholesale funding:
                   
 
Brokered accounts (includes fee expense)
 
 444,895
 
 14,703
3.30
 
 489,211
 
 17,889
3.66
 
Other borrowings
 
 443,752
 
 13,767
3.06
 
 473,347
 
 13,059
2.72
Total wholesale funding
 
 888,647
 
 28,470
3.03
 
 962,558
 
 30,948
2.99
Total interest bearing liabilities
$
 6,704,864
$
 59,287
0.88
$
 7,455,443
$
 89,868
1.21
Non-interest bearing deposits
 
 1,771,918
       
 1,594,504
     
Other non-interest bearing liabilities
 
 120,647
       
 127,099
     
Stockholders' equity
 
 1,358,704
       
 1,328,982
     
   
Total liabilities and stockholders' equity
$
 9,956,133
     
$
 10,506,028
     
   
Net interest income/interest rate spread (4)
   
$
 338,461
3.71%
   
$
 350,230
3.61%
   
Taxable equivalent adjustment
     
 13,188
       
 10,458
 
   
Net interest income, as reported
   
$
 325,273
     
$
 339,772
 
   
Net interest margin (5)
       
3.75%
       
3.72%
   
Tax equivalent effect
       
0.15%
       
0.11%
   
Net interest margin on a fully tax equivalent basis (5)
       
3.90%
       
3.83%

(1)
Non-accrual loans are included in average loans.
(2)
Interest income includes amortization of deferred loan origination fees of $4.7 million and $4.6 million for the year ended December 31, 2011, and December 31 2010, respectively.
(3)
Non-taxable loan and investment income is presented on a fully tax equivalent basis assuming a 35% tax rate.
(4)
Interest rate spread represents the difference between the average yield on interest earning assets and the average cost of interest bearing liabilities and is presented on a fully tax equivalent basis.
(5)
Net interest margin represents net interest income as a percentage of average interest earning assets.
 
 
 
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