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Share Name | Share Symbol | Market | Type |
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MB Financial Inc. | NASDAQ:MBFI | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 42.38 | 42.56 | 42.67 | 0 | 01:00:00 |
MB Financial, Inc. (NASDAQ: MBFI), the holding company for MB Financial Bank, N.A., today announced 2014 third quarter net income of $6.9 million compared to $23.1 million last quarter and $24.4 million in the third quarter a year ago. Net income available to common stockholders was $4.9 million for the third quarter of 2014.
Key items for the third quarter include:
Completion of Taylor Capital Group, Inc. Merger:
Operating Earnings:
In December 2012, we acquired Celtic Leasing Corp. ("Celtic"). The purchase consideration paid to Celtic's selling shareholders included the right to receive certain contingent payments based on the realization of residuals owned by Celtic on the transaction closing date. Given Celtic's stronger than expected lease residual performance subsequent to the acquisition, we have increased the fair value of the residual based contingent consideration by $10.6 million.
Net Interest Income Increased $27.5 million, or 40.5%, from the Prior Quarter and $26.7 million, or 38.8%, from the Third Quarter of 2013:
Core Non-interest Income Increased $22.8 million, or 57.6%, from the Prior Quarter and $25.2 million, or 67.8%, from the Third Quarter of 2013:
Core Non-interest Expense Increased $27.4 million, or 35.6%, from the Prior Quarter and $30.4 million, or 41.1%, from the Third Quarter of 2013:
Credit Quality Metrics:
RESULTS OF OPERATIONS
Third Quarter Results
Net Interest Income
Net interest income and net interest margin on a fully tax equivalent basis for the three and nine months ended September 30, 2014 were impacted by the Taylor Capital merger. Net interest income on a fully tax equivalent basis increased $28.0 million from the second quarter of 2014 to $101.7 million in the third quarter of 2014. The Company's net interest margin on a fully tax equivalent basis for the third quarter of 2014 increased 25 basis points to 3.78% compared to the second quarter of 2014.
Net interest income on a fully tax equivalent basis increased $26.9 million from the third quarter of 2013. Our net interest margin on a fully tax equivalent basis for the third quarter of 2014 increased 12 basis points compared to the third quarter of 2013.
Net interest income on a fully tax equivalent basis for the nine months ended September 30, 2014 increased $27.2 million from the nine months ended September 30, 2013. Our net interest margin on a fully tax equivalent basis for the nine months ended September 30, 2014 increased four basis points to 3.66% compared to the nine months ended September 30, 2013.
As noted earlier, on August 18, 2014, we completed the Taylor Capital merger. The acquired assets and assumed liabilities were recorded at fair value as required under the acquisition method of accounting. Fair value adjustments are amortized or accreted into net interest income over the remaining terms of the interest earning assets and interest bearing liabilities. The fair value adjustment on acquired loans had the most significant impact on net interest margin. Excluding the purchase accounting loan discount accretion on Taylor Capital loans, our net interest margin on a fully tax equivalent basis would have been 3.54% and 3.57% for the three and nine months ended September 30, 2014, respectively, compared to 3.66% and 3.62% for the three and nine months ended September 30, 2013.
In September 2014, we repositioned our balance sheet and shortened the duration of our investment securities portfolio to pre-merger levels by selling $468.7 million in investment securities and utilizing the proceeds from the sales to reduce short term FHLB advances. A $3.2 million loss was recognized on investment securities in the third quarter of 2014 as a result of this balance sheet repositioning.
In September 2014, we also redeemed all of the outstanding 9.75% junior subordinated notes relating to the trust preferred securities of TAYC Capital Trust I. These notes were originally issued by Taylor Capital and were assumed by us in connection with the merger. The TAYC Capital Trust I trust preferred securities, which had an aggregate outstanding liquidation amount of $45.4 million, were automatically redeemed as a result of our redemption of the junior subordinated notes. A $1.9 million gain on the early extinguishment of the trust preferred securities was recorded in other operating income in the third quarter of 2014, which represented the difference between the fair market value of these securities on August 18, 2014 and their aggregate liquidation amount at redemption.
Non-interest Income and Expense
We acquired Taylor Capital's mortgage operations through the merger. As there can be fluctuations in the mortgage operations from quarter to quarter based on the overall level of interest rates, we are presenting non-interest income and expense both including and excluding mortgage banking.
Non-interest Income (in thousands):
Nine Months Ended September 30, 3Q14 2Q14 3Q13 2014 2013 Excluding Excluding Mortgage Mortgage Mortgage Mortgage Banking Banking Total Banking Banking Total Core non-interest income: Key fee initiatives: Lease financing, net $ 17,719 $ — $ 17,719 $ 14,853 $ 14,070 $ 45,768 $ — $ 45,768 $ 45,435 Mortgage banking revenue — 16,823 16,823 187 177 — 17,069 17,069 1,322 Commercial deposit and treasury management fees 9,345 — 9,345 7,106 6,327 23,595 — 23,595 18,322 Trust and asset management fees 5,712 — 5,712 5,405 4,799 16,324 — 16,324 14,167 Card fees 3,836 — 3,836 3,304 2,745 9,841 — 9,841 8,175 Capital markets and international banking service fees 1,472 — 1,472 1,360 972 3,810 — 3,810 2,719 Total key fee initiatives 38,084 16,823 54,907 32,215 29,090 99,338 17,069 116,407 90,140 Consumer and other deposit service fees 3,362 — 3,362 3,156 3,648 9,453 — 9,453 10,487 Brokerage fees 1,145 — 1,145 1,356 1,289 3,826 — 3,826 3,680 Loan service fees 1,069 — 1,069 916 1,427 2,950 — 2,950 4,349 Increase in cash surrender value of life insurance 855 — 855 834 851 2,516 — 2,516 2,537 Other operating income 1,145 — 1,145 1,162 942 3,106 — 3,106 3,179 Total core non-interest income 45,660 16,823 62,483 39,639 37,247 121,189 17,069 138,258 114,372 Non-core non-interest income: Net (loss) gain on investment securities (3,246 ) — (3,246 ) (87 ) 1 (3,016 ) — (3,016 ) 14 Net loss on sale of other assets (7 ) — (7 ) (24 ) — (24 ) — (24 ) — Gain on extinguishment of debt 1,895 — 1,895 — — 1,895 — 1,895 — (Decrease) increase in market value of assets held in trust for deferred compensation (1) (38 ) — (38 ) 400 459 514 — 514 963 Total non-core non-interest income (1,396 ) — (1,396 ) 289 460 (631 ) — (631 ) 977 Total non-interest income $ 44,264 $ 16,823 $ 61,087 $ 39,928 $ 37,707 $ 120,558 $ 17,069 $ 137,627 $ 115,349(1) Resides in other operating income in the consolidated statements of income.
Core non-interest income for the third quarter of 2014 increased 57.6% to $62.5 million from the second quarter of 2014. Excluding mortgage banking, core non-interest income increased by 15.2%.
Core non-interest income for the nine months ended September 30, 2014 increased 20.9% to $138.3 million from the nine months ended September 30, 2013. Excluding mortgage banking, core non-interest income increased by 6.0%.
Non-core non-interest income for the quarter and nine months ended September 30, 2014 was impacted by the net loss on investment securities and the gain on extinguishment of debt as a result of the balance sheet repositioning that occurred in September 2014.
Non-interest Expense (in thousands):
Nine Months Ended September 30, 3Q14 2Q14 3Q13 2014 2013 Excluding Excluding Mortgage Mortgage Mortgage Mortgage Banking Banking Total Banking Banking Total Core non-interest expense:(1) Salaries and employee benefits $ 54,911 $ 10,360 $ 65,271 $ 46,222 $ 44,459 $ 145,254 $ 10,360 $ 155,614 $ 131,378 Occupancy and equipment expense 10,659 655 11,314 9,504 8,797 29,755 655 30,410 27,609 Computer services and telecommunication expense 5,377 817 6,194 4,909 4,870 15,357 817 16,174 13,374 Advertising and marketing expense 1,879 94 1,973 2,113 1,917 5,983 94 6,077 6,187 Professional and legal expense 2,194 307 2,501 1,488 1,408 5,051 307 5,358 4,056 Other intangible amortization expense 1,470 — 1,470 1,174 1,513 3,884 — 3,884 4,595 Net loss (gain) recognized on other real estate owned (A) 1,339 9 1,348 204 754 1,665 9 1,674 (1,020 ) Net loss (gain) recognized on other real estate owned related to FDIC transactions (A) 421 — 421 (13 ) 37 473 — 473 126 Other real estate expense, net (A) 409 — 409 337 240 1,142 — 1,142 572 Other operating expenses 11,512 2,065 13,577 11,108 10,052 31,840 2,065 33,905 28,348 Total core non-interest expense 90,171 14,307 104,478 77,046 74,047 240,404 14,307 254,711 215,225 Non-core non-interest expense: (1) Merger related expenses (B) 27,161 — 27,161 488 1,759 28,329 — 28,329 1,759 Loss on low to moderate income real estate investment (C) — — — 96 — 2,124 — 2,124 — Contingent consideration - Celtic acquisition (C) 10,600 — 10,600 — — 10,600 — 10,600 — (Decrease) increase in market value of assets held in trust for deferred compensation (D) (38 ) — (38 ) 400 459 514 — 514 963 Total non-core non-interest expense 37,723 — 37,723 984 2,218 41,567 — 41,567 2,722 Total non-interest expense $ 127,894 $ 14,307 $ 142,201 $ 78,030 $ 76,265 $ 281,971 $ 14,307 $ 296,278 $ 217,947(1) Letters denote the corresponding line items where these non-core non-interest expense items reside in the consolidated statements of income as follows: A – Net (gain) loss recognized on other real estate owned and other expense, B – Salaries and employee benefits, occupancy and equipment expense, computer services and telecommunication expense, advertising and marketing expense, professional and legal expense and other operating expenses, C – Other operating expenses, D – Salaries and employee benefits.
Core non-interest expense increased by $27.4 million, or 35.6%, from the second quarter of 2014 to $104.5 million for the third quarter of 2014. Excluding mortgage banking, core non-interest expense increased by $13.1 million, or 17.0%.
Core non-interest expense increased by $39.5 million, or 18.3%, from the nine months ended September 30, 2013 to $254.7 million for the nine months ended September 30, 2014. Excluding mortgage banking, core non-interest expense increased by $25.2 million, or 11.7%.
Non-core non-interest expense was primarily impacted by the merger related expenses for the Taylor Capital merger and the contingent consideration expense related to our acquisition of Celtic Leasing Corp.
The following table presents the detail of the merger related expenses (dollars in thousands):
Nine Months Ended September 30, 3Q14 2Q14 1Q14 4Q13 3Q13 2014 2013 Merger related expenses: Salaries and employee benefits $ 14,259 $ — $ 104 $ — $ — $ 14,363 $ — Occupancy and equipment expense 428 14 — — — 442 — Computer services and telecommunication expense 5,312 170 13 — — 5,495 — Advertising and marketing expense 262 108 90 4 — 460 — Professional and legal expense 6,363 79 410 717 1,694 6,852 1,694 Other operating expenses 537 117 63 3 65 717 65 Total merger related expenses $ 27,161 $ 488 $ 680 $ 724 $ 1,759 $ 28,329 $ 1,759We expect to incur additional merger related expenses in the next few quarters primarily in the area of occupancy and equipment expense.
Income Tax Expense
Income tax expense was $4.5 million for the third quarter of 2014, compared to $8.8 million for the second quarter of 2014, a decrease of 49.1%. The reduction in income tax expense is primarily due to the 64.3% decrease in income before taxes from $31.9 million in the second quarter of 2014 to $11.4 million in the third quarter of 2014, partially offset by certain costs incurred in the third quarter of 2014 that were not currently deductible for tax purposes. These include the contingent consideration expense related to the Celtic acquisition and certain legal and professional fees associated with the Taylor Capital merger.
Operating Segments
The Company's operations consist of three reportable operating segments: banking, leasing and mortgage banking. The banking segment generates its revenues primarily from its lending and deposit gathering activities. The leasing segment generates its revenues through lease originations and related services offered through the Company's leasing subsidiaries: LaSalle Systems Leasing, Inc., Celtic Leasing Corp. and Cole Taylor Equipment Finance. The mortgage banking segment originates residential mortgage loans for sale to investors through its retail and third party channels. The mortgage banking segment also services residential mortgage loans owned by investors and the Company. The segment information incorporates the result of Taylor Capital for 44 days subsequent to the merger date.
The following table presents summary financial information, adjusted for funds transfer pricing and internal allocations of certain expenses, for the reportable segments (in thousands):
Mortgage Non-core Banking Leasing Banking Items Consolidated Three months ended September 30, 2014 Net interest income $ 88,863 $ 3,216 $ 3,533 $ — $ 95,612 Provision for credit losses 3,172 (58 ) (5 ) — 3,109 Non-interest income 29,323 16,299 16,823 (1,358 ) 61,087 Non-interest expense 79,564 9,721 15,155 37,761 142,201 Income tax expense 9,008 3,693 2,082 (10,295 ) 4,488 Net income $ 26,442 $ 6,159 $ 3,124 $ (28,824 ) $ 6,901 Three months ended June 30, 2014 Net interest income $ 65,266 $ 2,806 $ — $ — $ 68,072 Provision for credit losses (1,764 ) (186 ) — — (1,950 ) Non-interest income 25,789 14,063 187 (111 ) 39,928 Non-interest expense 67,346 10,100 — 584 78,030 Income tax expense 6,415 2,665 — (266 ) 8,814 Net income $ 19,058 $ 4,290 $ 187 $ (429 ) $ 23,106The following table presents additional information regarding the mortgage banking segment (dollars in thousands) for the 44 days subsequent to the Taylor Capital Merger:
3Q14 Origination volume $ 724,713 Refinance 35 % Purchase 65 % Origination volume by channel: Retail 18 % Third party 82 % Mortgage servicing book (unpaid principal balance of loans serviced for others) at September 30, 2014 $ 21,989,278 Mortgage servicing rights, recorded at fair value, at September 30, 2014 $ 249,376 Notional value of rate lock commitments, at September 30, 2014 $ 610,818LOAN PORTFOLIO
The following table sets forth the composition of the loan portfolio (excluding loans held for sale) based on period end balances as of the dates indicated (dollars in thousands):
9/30/2014 6/30/2014 9/30/2013 % of % of % of LegacyAcquired (1)
Total Total Amount Total Amount Total Commercial related credits: Commercial loans $ 1,343,085 $ 1,736,188 $ 3,079,273 34 % $ 1,272,200 23 % $ 1,169,009 21 % Commercial loans collateralized by assignment of lease payments (lease loans) 1,498,121 133,539 1,631,660 18 1,515,446 27 1,468,814 26 Commercial real estate 1,648,295 1,002,229 2,650,524 30 1,619,322 29 1,638,368 29 Construction real estate 70,428 161,114 231,542 3 116,996 2 136,146 2 Total commercial related credits 4,559,929 3,033,070 7,592,999 85 4,523,964 81 4,412,337 78 Other loans: Residential real estate 308,982 207,891 516,873 5 309,234 6 311,256 6 Indirect vehicle 273,038 — 273,038 3 272,841 5 257,740 5 Home equity 237,090 25,887 262,977 3 245,135 4 274,484 5 Consumer loans 68,050 978 69,028 1 70,584 1 57,418 1 Total other loans 887,160 234,756 1,121,916 12 897,794 16 900,898 17 Gross loans excluding purchased credit impaired and covered loans 5,447,089 3,267,826 8,714,915 97 5,421,758 97 5,313,235 95 Purchased credit impaired including covered loans (2) 89,247 178,855 268,102 3 134,966 3 273,497 5 Total loans $ 5,536,336 $ 3,446,681 $ 8,983,017 100 % $ 5,556,724 100 % $ 5,586,732 100 %(1) Acquired loans refer to the September 30, 2014 balance for loans acquired in the Taylor Capital merger.
(2) Covered loans refer to loans we acquired in FDIC-assisted transactions that have been subject to loss-sharing agreements with the FDIC.
Legacy gross loans excluding covered loans increased $25.3 million from $5.4 billion at June 30, 2014. This increase was primarily due to growth in the commercial loans category.
ASSET QUALITY
The following table presents a summary of criticized assets (excluding loans held for sale, purchased credit-impaired loans and other real estate owned acquired as part of our FDIC-assisted transactions) as of the dates indicated (dollars in thousands):
9/30/2014 6/30/2014 3/31/2014 12/31/20139/30/2013
Non-performing loans: Non-accrual loans (1) $ 97,580 $ 108,414 $ 118,023 $ 106,115 $ 102,042 Loans 90 days or more past due, still accruing interest 2,681 2,363 747 446 410 Total non-performing loans 100,261 110,777 118,770 106,561 102,452 Other real estate owned 19,179 20,306 20,928 23,289 31,356 Repossessed assets 126 73 772 840 861 Total non-performing assets $ 119,566 $ 131,156 $ 140,470 $ 130,690 $ 134,669 Potential problem loans (2) $ 51,690 $ 63,477 $ 68,785 $ 79,589 $ 96,410 Total allowance for loan losses $ 102,810 $ 100,910 $ 106,752 $ 111,746 $ 118,031 Accruing restructured loans (3) 18,277 26,793 25,797 29,430 29,911 Total non-performing loans to total loans 1.12 % 1.99 % 2.13 % 1.87 % 1.83 % Total non-performing assets to total assets 0.82 1.34 1.49 1.36 1.45 Allowance for loan losses to non-performing loans 102.54 91.09 89.88 104.87 115.21(1)
Includes $22.4 million, $14.5 million, $15.6 million, $25.0 million and $22.3 million of restructured loans on non-accrual status at September 30, 2014, June 30, 2014, March 31, 2014, December 31, 2013 and September 30, 2013, respectively. (2)We define potential problem loans as loans rated substandard that do not meet the definition of a non-performing loan. Potential problem loans carry a higher probability of default and require additional attention by management.
(3) Accruing restructured loans consist primarily of residential real estate and home equity loans that have been modified and are performing in accordance with those modified terms as of the dates indicated.The following table presents data related to non-performing loans by category (excluding loans held for sale and credit-impaired loans that were acquired as part of our FDIC-assisted transactions and Taylor Capital merger) as of the dates indicated (in thousands):
9/30/2014 6/30/2014 3/31/2014 12/31/2013 9/30/2013 Commercial and lease $ 22,985 $ 36,807 $ 42,532 $ 22,348 $ 22,293 Commercial real estate 42,832 48,751 49,541 58,292 54,276 Construction real estate 337 337 782 475 496 Consumer related 34,107 24,882 25,915 25,446 25,387 Total non-performing loans $ 100,261 $ 110,777 $ 118,770 $ 106,561 $ 102,452The increase in consumer non-performing loans relates to a group of restructured loans that are less than 90 days past due that are now reported as non-performing.
The following table represents a summary of other real estate owned (excluding other real estate owned related to assets acquired in FDIC-assisted transactions) as of the dates indicated (in thousands):
9/30/2014 6/30/2014 3/31/2014 12/31/2013 9/30/2013 Balance at the beginning of quarter $ 20,306 $ 20,928 $ 23,289 $ 31,356 $ 32,993 Transfers in at fair value less estimated costs to sell 221 112 539 104 1,846 Acquired from business combination 5,082 — — — — Capitalized other real estate owned costs — — — 21 45 Fair value adjustments (2,083 ) (286 ) (140 ) (176 ) (741 ) Net gains (losses) on sales of other real estate owned 735 82 18 1,007 (13 ) Cash received upon disposition (5,082 ) (530 ) (2,778 ) (9,023 ) (2,774 ) Balance at the end of quarter $ 19,179 $ 20,306 $ 20,928 $ 23,289 $ 31,356Below is a reconciliation of the activity in our allowance for credit and loan losses for the periods indicated (dollars in thousands):
Nine Months Ended September 30, 3Q14 2Q14 1Q14 4Q13 3Q13 2014 2013 Allowance for credit losses, balance at the beginning of period $ 103,905 $ 108,395 $ 113,462 $ 119,725 $ 125,497 $ 113,462 $ 128,279 Allowance for unfunded credit commitments acquired through business combination 1,261 — — — — 1,261 — Utilization of allowance for unfunded credit commitments (637 ) — — — — (637 ) — Provision for credit losses - legacy (1,600 ) (1,950 ) 1,150 (3,000 ) (3,304 ) (2,400 ) (2,804 ) Provision for credit losses - acquired Taylor Capital loan portfolio renewals 4,709 — — — — 4,709 — Charge-offs: Commercial loans 606 446 90 676 1,686 1,142 3,030 Commercial loans collateralized by assignment of lease payments (lease loans) — 40 — — — 40 — Commercial real estate 1,027 1,727 7,156 2,386 1,236 9,910 5,131 Construction real estate 5 14 56 125 26 75 855 Residential real estate 740 433 265 722 713 1,438 2,074 Home equity 566 817 619 1,145 437 2,002 2,547 Indirect vehicle 1,043 583 920 981 572 2,546 1,930 Consumer loans 497 590 495 572 485 1,582 1,501 Total charge-offs 4,484 4,650 9,601 6,607 5,155 18,735 17,068 Recoveries: Commercial loans 564 696 1,628 1,348 579 2,888 1,808 Commercial loans collateralized by assignment of lease payments (lease loans) 425 130 — — — 555 1,131 Commercial real estate 2,227 567 485 672 966 3,279 5,353 Construction real estate 25 77 99 789 420 201 827 Residential real estate 4 6 519 18 48 529 461 Home equity 46 127 133 152 228 306 442 Indirect vehicle 402 439 442 300 372 1,283 1,111 Consumer loans 65 68 78 65 74 211 185 Total recoveries 3,758 2,110 3,384 3,344 2,687 9,252 11,318 Total net charge-offs 726 2,540 6,217 3,263 2,468 9,483 5,750 Allowance for credit losses 106,912 103,905 108,395 113,462 119,725 106,912 119,725 Allowance for unfunded credit commitments (4,102 ) (2,995 ) (1,643 ) (1,716 ) (1,694 ) (4,102 ) (1,694 ) Allowance for loan losses $ 102,810 $ 100,910 $ 106,752 $ 111,746 $ 118,031 $ 102,810 $ 118,031 Total loans, excluding loans held for sale $ 8,983,017 $ 5,556,724 $ 5,568,315 $ 5,712,551 $ 5,586,732 $ 8,983,017 $ 5,586,732 Average loans, excluding loans held for sale 7,182,146 5,516,735 5,606,877 5,572,759 5,555,036 6,107,690 5,616,855 Ratio of allowance for loan losses to total loans, excluding loans held for sale 1.14 % 1.82 % 1.92 % 1.96 % 2.11 % 1.14 % 2.11 % Ratio of allowance for loan losses to total legacy loans plus Taylor renewed loans, excluding loans held for sale (1) 1.83 1.82 1.92 1.96 2.11 1.83 2.11 Net loan charge-offs to average loans, excluding loans held for sale (annualized) 0.04 0.18 0.45 0.23 0.18 0.21 0.14(1) Taylor renewed loans totaled $92.6 million at September 30, 2014.
The following table presents the three elements of the Company's allowance for loan losses (in thousands):
9/30/2014 6/30/2014 3/31/2014 12/31/2013 9/30/2013 Commercial related loans: General reserve $ 76,604 $ 70,855 $ 75,695 $ 78,270 $ 87,112 Specific reserve 5,802 10,270 11,325 12,834 12,378 Consumer related reserve 20,404 19,785 19,732 20,642 18,541 Total allowance for loan losses $ 102,810 $ 100,910 $ 106,752 $ 111,746 $ 118,031Specific reserves decreased during the quarter due to an improvement in credit quality on impaired loans.
Although management believes that adequate loan loss allowances have been established, actual losses are dependent upon future events and, as such, further additions to the level of loan loss allowances may become necessary.
Purchased loans acquired in a business combination are recorded at estimated fair value on their purchase date without a carryover of the related allowance for loan losses. These acquired loans are segregated into three types: pass rated loans with no discount attributable to credit quality, non-impaired loans with a discount attributable at least in part to credit quality and impaired loans with evidence of significant credit deterioration.
For pass rated loans (non-purchased credit impaired loans), the difference between the estimated fair value of the loans and the principal outstanding is accreted over the remaining life of the loans. We anticipate recording a provision for the acquired portfolio in future quarters related to renewing Taylor loans which will largely offset the accretion from the pass rated loans.
In accordance with ASC 310-30, for both purchased non-impaired loans and purchased impaired loans ("PCI loans"), the difference between contractually required payments at acquisition and the cash flows expected to be collected is referred to as the non-accretable difference. Further, any excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable yield and is recognized into interest income over the remaining life of the loan when there is a reasonable expectation about the amount and timing of such cash flows.
Changes in the purchase accounting discount for loans acquired in the Taylor Capital merger were as follows for the three months ended September 30, 2014 (in thousands):
Non- Accretable Accretable AccretableDiscount -
Discount - Discount -Non-PCI
PCI Loans PCI Loans Loans Total Balance at beginning of period $ — $ — $ — $ — Purchases 30,042 3,252 77,186 110,480 Charge-offs (1,062 ) — — (1,062 ) Accretion — (282 ) (5,892 ) (6,174 ) Balance at end of period $ 28,980 $ 2,970 $ 71,294 $ 103,244INVESTMENT SECURITIES
The following table sets forth, by type, the fair value and amortized cost of our investment securities, excluding FHLB and FRB stock, as well as the unrealized gain of our investment securities available for sale (in thousands):
9/30/2014 6/30/2014 3/31/2014 12/31/2013 9/30/2013 Securities available for sale: Fair value Government sponsored agencies and enterprises $ 65,829 $ 51,727 $ 51,836 $ 52,068 $ 52,527 States and political subdivisions 409,033 19,498 19,350 19,143 19,312 Mortgage-backed securities 1,006,102 797,783 726,439 754,174 744,722 Corporate bonds 267,239 275,529 273,853 283,070 263,021 Equity securities 10,447 10,421 10,572 10,457 10,541 Total fair value $ 1,758,650 $ 1,154,958 $ 1,082,050 $ 1,118,912 $ 1,090,123 Amortized cost Government sponsored agencies and enterprises $ 64,809 $ 50,096 $ 50,291 $ 50,486 $ 50,678 States and political subdivisions 391,900 19,228 19,285 19,398 19,461 Mortgage-backed securities 999,630 786,496 717,548 747,306 736,070 Corporate bonds 265,720 271,351 272,490 284,083 265,293 Equity securities 10,470 10,414 10,703 10,649 10,574 Total amortized cost $ 1,732,529 $ 1,137,585 $ 1,070,317 $ 1,111,922 $ 1,082,076 Unrealized gain, net Government sponsored agencies and enterprises $ 1,020 $ 1,631 $ 1,545 $ 1,582 $ 1,849 States and political subdivisions 17,133 270 65 (255 ) (149 ) Mortgage-backed securities 6,472 11,287 8,891 6,868 8,652 Corporate bonds 1,519 4,178 1,363 (1,013 ) (2,272 ) Equity securities (23 ) 7 (131 ) (192 ) (33 ) Total unrealized gain, net $ 26,121 $ 17,373 $ 11,733 $ 6,990 $ 8,047 Securities held to maturity, at amortized cost: States and political subdivisions $ 760,674 $ 993,937 $ 940,610 $ 932,955 $ 941,273 Mortgage-backed securities 244,675 247,455 248,082 249,578 252,271 Total amortized cost $ 1,005,349 $ 1,241,392 $ 1,188,692 $ 1,182,533 $ 1,193,544During the third quarter of 2014, the Company repositioned its balance sheet subsequent to the Taylor Capital merger and sold certain longer-term and lower-coupon investment securities with an approximate carrying amount of $468.7 million. These investment security sales shortened the overall duration of the investment securities portfolio to pre-merger levels. Also as a part of the balance sheet repositioning, securities of states and political subdivisions with an approximate fair value of $291.2 million were transferred from held to maturity to available for sale during the third quarter of 2014. As a result of the repositioning, we recognized a net loss of $3.2 million.
DEPOSIT MIX
The following table shows the composition of deposits based on period end balances as of the dates indicated (dollars in thousands):
9/30/2014 6/30/2014 9/30/2013 % of % of % of LegacyAcquired (1)
Total Total Amount Total Amount Total Low cost deposits: Noninterest bearing deposits $ 2,658,102 $ 1,149,452 $ 3,807,554 34 % $ 2,605,367 34 % $ 2,269,367 31 % Money market and NOW accounts 2,884,296 1,312,870 4,197,166 37 2,932,089 38 2,680,127 37 Savings accounts 892,183 39,802 931,985 8 872,324 11 843,671 12 Total low cost deposits 6,434,581 2,502,124 8,936,705 79 6,409,780 83 5,793,165 80 Certificates of deposit: Certificates of deposit 1,114,292 531,708 1,646,000 15 1,137,262 14 1,266,989 17 Brokered deposit accounts 189,135 466,708 655,843 6 216,022 3 238,532 3 Total certificates of deposit 1,303,427 998,416 2,301,843 21 1,353,284 17 1,505,521 20 Total deposits $ 7,738,008 $ 3,500,540 $ 11,238,548 100 % $ 7,763,064 100 % $ 7,298,686 100 %(1) Acquired deposits refer to the September 30, 2014 balance for deposits acquired in the Taylor Capital transaction.
Total legacy deposits decreased $25.1 million from $7.8 billion at June 30, 2014 primarily due to the decrease in certificates of deposit. Legacy low cost deposits increased by $24.8 million from June 30, 2014. Shortly after the acquisition the rates paid on the Taylor Capital deposit products, primarily affecting money markets and certificates of deposit, were reduced to align with the Company’s current rate offerings. We expect to see a decline in balances from rate sensitive customers over the next few quarters.
CAPITAL
Tangible book value per common share decreased to $15.36 at September 30, 2014 compared to $15.83 a year ago and $16.81 last quarter.
Our regulatory capital ratios remain strong. MB Financial Bank, N.A. was categorized as “well capitalized” at September 30, 2014 under the Prompt Corrective Action (“PCA”) provisions.
FORWARD-LOOKING STATEMENTS
When used in this press release and in reports filed with or furnished to the Securities and Exchange Commission, in other 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 the recently completed MB Financial-Taylor Capital merger and our other 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 other acquisition 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, the Federal Reserve Board, the Consumer Financial Protection Bureau 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 possibility that our mortgage banking business may increase volatility in our revenues and earnings and the possibility that the profitability of our mortgage banking business could be significantly reduced if we are unable to originate and sell mortgage loans at profitable margins; (8) the impact of repricing and competitors’ pricing initiatives on loan and deposit products; (9) fluctuations in real estate values; (10) the ability to adapt successfully to technological changes to meet customers’ needs and developments in the market-place; (11) our ability to realize the residual values of our direct finance, leveraged, and operating leases; (12) our ability to access cost-effective funding; (13) changes in financial markets; (14) changes in economic conditions in general and in the Chicago metropolitan area in particular; (15) the costs, effects and outcomes of litigation; (16) new legislation or regulatory changes, including but not limited to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) and regulations adopted thereunder, changes in capital requirements pursuant to the Dodd-Frank Act and the implementation of the Basel III capital standards, other governmental initiatives affecting the financial services industry and changes in federal and/or state tax laws or interpretations thereof by taxing authorities; (17) changes in accounting principles, policies or guidelines; (18) our future acquisitions of other depository institutions or lines of business; and (19) future goodwill impairment due to changes in our business, changes in market conditions, or other factors.
We do not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date on which the forward-looking statement is made.
TABLES TO FOLLOW
MB FINANCIAL, INC. & SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) As of the dates indicated (In thousands) 9/30/2014 6/30/2014 3/31/2014 12/31/2013 9/30/2013 ASSETS Cash and due from banks $ 267,405 $ 294,475 $ 268,803 $ 205,193 $ 215,017 Interest earning deposits with banks 179,391 466,820 244,819 268,266 41,700 Total cash and cash equivalents 446,796 761,295 513,622 473,459 256,717 Federal funds sold — 10,000 7,500 42,950 47,500 Investment securities: Securities available for sale, at fair value 1,758,650 1,154,958 1,082,050 1,118,912 1,090,123 Securities held to maturity, at amortized cost 1,005,349 1,241,392 1,188,692 1,182,533 1,193,544 Non-marketable securities - FHLB and FRB Stock 75,569 51,432 51,432 51,417 50,870 Total investment securities 2,839,568 2,447,782 2,322,174 2,352,862 2,334,537 Loans held for sale 553,627 1,219 802 629 1,120 Loans: Total loans, excluding purchased credit impaired and covered loans 8,714,915 5,421,758 5,394,638 5,476,831 5,313,235 Purchased credit impaired including covered loans 268,102 134,966 173,677 235,720 273,497 Total loans 8,983,017 5,556,724 5,568,315 5,712,551 5,586,732 Less: Allowance for loan losses 102,810 100,910 106,752 111,746 118,031 Net loans 8,880,207 5,455,814 5,461,563 5,600,805 5,468,701 Lease investments, net 137,120 127,194 122,589 131,089 112,491 Premises and equipment, net 244,314 224,245 221,711 221,065 220,574 Cash surrender value of life insurance 132,697 131,842 131,008 130,181 129,332 Goodwill 698,946 423,369 423,369 423,369 423,369 Other intangibles 44,544 21,014 22,188 23,428 24,917 Mortgage servicing rights, at fair value 249,376 344 378 413 430 Other real estate owned, net 19,179 20,306 20,928 23,289 31,356 Other real estate owned related to FDIC transactions 22,028 15,349 22,682 20,472 24,792 FDIC indemnification asset 2,205 4,607 8,055 11,675 11,074 Other assets 235,436 174,311 158,734 185,741 170,708 Total assets $ 14,506,043 $ 9,818,691 $ 9,437,303 $ 9,641,427 $ 9,257,618 LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Deposits: Noninterest bearing $ 3,807,554 $ 2,605,367 $ 2,435,868 $ 2,375,863 $ 2,269,367 Interest bearing 7,430,994 5,157,697 5,049,879 5,005,396 5,029,319 Total deposits 11,238,548 7,763,064 7,485,747 7,381,259 7,298,686 Short-term borrowings 667,160 229,809 189,872 493,389 240,600 Long-term borrowings 77,269 71,473 65,664 62,159 62,428 Junior subordinated notes issued to capital trusts 185,681 152,065 152,065 152,065 152,065 Accrued expenses and other liabilities 346,017 236,964 200,175 225,873 194,371 Total liabilities 12,514,675 8,453,375 8,093,523 8,314,745 7,948,150 Stockholders' Equity Preferred stock 115,280 — — — — Common stock 751 553 553 551 551 Additional paid-in capital 1,256,050 742,824 740,245 738,053 736,294 Retained earnings 606,097 611,741 595,301 581,998 564,779 Accumulated other comprehensive income 18,431 13,034 10,362 8,383 9,918 Treasury stock (6,692 ) (4,295 ) (4,132 ) (3,747 ) (3,525 ) Controlling interest stockholders' equity 1,989,917 1,363,857 1,342,329 1,325,238 1,308,017 Noncontrolling interest 1,451 1,459 1,451 1,444 1,451 Total stockholders' equity 1,991,368 1,365,316 1,343,780 1,326,682 1,309,468 Total liabilities and stockholders' equity $ 14,506,043 $ 9,818,691 $ 9,437,303 $ 9,641,427 $ 9,257,618 MB FINANCIAL, INC. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands, except share and per share data) (Unaudited) Nine Months Ended September 30, 3Q14 2Q14 1Q14 4Q13 3Q13 2014 2013 Interest income: Loans $ 82,167 $ 55,905 $ 56,244 $ 58,053 $ 60,115 $ 194,316 $ 180,489 Investment securities: Taxable 11,028 8,794 8,146 7,334 6,330 27,968 18,749 Nontaxable 9,041 8,285 8,067 8,166 8,175 25,393 24,399 Federal funds sold and other interest earning accounts 225 281 118 276 200 624 429 Total interest income 102,461 73,265 72,575 73,829 74,820 248,301 224,066 Interest expense: Deposits 4,615 3,754 3,769 3,966 4,433 12,138 15,274 Borrowings 2,234 1,439 1,478 1,600 1,479 5,151 4,719 Total interest expense 6,849 5,193 5,247 5,566 5,912 17,289 19,993 Net interest income 95,612 68,072 67,328 68,263 68,908 231,012 204,073 Provision for credit losses 3,109 (1,950 ) 1,150 (3,000 ) (3,304 ) 2,309 (2,804 ) Net interest income after provision for credit losses 92,503 70,022 66,178 71,263 72,212 228,703 206,877 Non-interest income: Lease financing, net 17,719 14,853 13,196 15,808 14,070 45,768 45,435 Mortgage banking revenue 16,823 187 59 342 177 17,069 1,322 Commercial deposit and treasury management fees 9,345 7,106 7,144 6,545 6,327 23,595 18,322 Trust and asset management fees 5,712 5,405 5,207 4,975 4,799 16,324 14,167 Card fees 3,836 3,304 2,701 2,838 2,745 9,841 8,175 Capital markets and international banking service fees 1,472 1,360 978 841 972 3,810 2,719 Consumer and other deposit service fees 3,362 3,156 2,935 3,481 3,648 9,453 10,487 Brokerage fees 1,145 1,356 1,325 1,227 1,289 3,826 3,680 Loan service fees 1,069 916 965 1,214 1,427 2,950 4,349 Increase in cash surrender value of life insurance 855 834 827 848 851 2,516 2,537 Net (loss) gain on investment securities (3,246 ) (87 ) 317 (15 ) 1 (3,016 ) 14 Net (loss) gain on sale of assets (7 ) (24 ) 7 (323 ) — (24 ) — Gain on early extinguishment of debt 1,895 — — — — 1,895 — Other operating income 1,107 1,562 951 1,264 1,401 3,620 4,142 Total non-interest income 61,087 39,928 36,612 39,045 37,707 137,627 115,349 Non-interest expense: Salaries and employee benefits 79,492 46,622 44,377 45,517 44,918 170,491 132,341 Occupancy and equipment expense 11,742 9,518 9,592 9,269 8,797 30,852 27,609 Computer services and telecommunication expense 11,506 5,079 5,084 5,509 4,870 21,669 13,374 Advertising and marketing expense 2,235 2,221 2,081 2,085 1,917 6,537 6,187 Professional and legal expense 8,864 1,567 1,779 3,057 3,102 12,210 5,750 Other intangible amortization expense 1,470 1,174 1,240 1,489 1,513 3,884 4,595 Net loss (gain) recognized on other real estate owned and other expense 2,178 528 583 (459 ) 1,031 3,289 (322 ) Other operating expenses 24,714 11,321 11,311 10,174 10,117 47,346 28,413 Total non-interest expense 142,201 78,030 76,047 76,641 76,265 296,278 217,947 Income before income taxes 11,389 31,920 26,743 33,667 33,654 70,052 104,279 Income tax expense 4,488 8,814 6,774 9,811 9,254 20,076 29,680 Net income 6,901 23,106 19,969 23,856 24,400 49,976 74,599 Dividends on preferred shares 2,000 — — — — 2,000 — Net income available to common stockholders $ 4,901 $ 23,106 $ 19,969 $ 23,856 $ 24,400 $ 47,976 $ 74,599 Nine Months Ended September 30, 3Q14 2Q14 1Q14 4Q13 3Q13 2014 2013 Common share data: Basic earnings per common share $ 0.08 $ 0.42 $ 0.37 $ 0.44 $ 0.45 $ 0.83 $ 1.37 Diluted earnings per common share 0.08 0.42 0.36 0.43 0.44 0.82 1.36Weighted average common shares outstanding forbasic earnings per common share
63,972,902 54,669,868 54,639,951 54,622,584 54,565,089 57,795,094 54,471,541Weighted average common shares outstanding fordiluted earnings per common share
64,457,978 55,200,054 55,265,188 55,237,160 55,130,653 58,341,927 54,912,352 Selected Financial Data: Nine Months Ended September 30, 3Q14 2Q14 1Q14 4Q13 3Q13 2014 2013 Performance Ratios: Annualized return on average assets 0.22 % 0.97 % 0.86 % 0.99 % 1.05 % 0.64 % 1.07 % Annualized operating return on average assets (1) 1.16 0.99 0.93 1.02 1.11 1.04 1.09 Annualized return on average common equity 1.21 6.86 6.07 7.19 7.46 4.47 7.72 Annualized operating return on average common equity(1) 8.29 6.98 6.53 7.43 7.95 7.34 7.88 Annualized cash return on average tangible common equity(2) 2.23 10.47 9.39 11.23 11.74 7.09 12.19 Annualized cash operating return on average tangible common equity(3) 13.19 10.66 10.08 11.59 12.48 11.42 12.44 Net interest rate spread 3.66 3.40 3.51 3.37 3.52 3.54 3.48 Cost of funds(4) 0.26 0.26 0.27 0.27 0.30 0.27 0.34 Efficiency ratio(5) 63.46 67.68 66.84 66.56 65.81 65.65 63.89 Annualized net non-interest expense to average assets(6) 1.35 1.55 1.58 1.50 1.56 1.48 1.43 Core non-interest income to revenues (7) 38.23 35.22 33.41 34.68 33.51 35.99 34.36 Net interest margin 3.56 3.26 3.36 3.23 3.37 3.41 3.34 Tax equivalent effect 0.22 0.27 0.28 0.27 0.29 0.25 0.28 Net interest margin - fully tax equivalent basis(8) 3.78 3.53 3.64 3.50 3.66 3.66 3.62 Loans to deposits 79.93 71.58 74.39 77.39 76.54 79.93 76.54 Asset Quality Ratios: Non-performing loans(9) to total loans 1.12 % 1.99 % 2.13 % 1.87 % 1.83 % 1.12 % 1.83 % Non-performing assets(9) to total assets 0.82 1.34 1.49 1.36 1.45 0.82 1.45 Allowance for loan losses to non-performing loans(9) 102.54 91.09 89.88 104.87 115.21 102.54 115.21 Allowance for loan losses to total loans 1.14 1.82 1.92 1.96 2.11 1.14 2.11 Net loan charge-offs to average loans (annualized) 0.04 0.18 0.45 0.23 0.18 0.21 0.14 Capital Ratios: Tangible equity to tangible assets(10) 9.17 % 9.89 % 10.07 % 9.65 % 9.87 % 9.17 % 9.87 % Tangible common equity to tangible assets(11) 8.33 9.89 10.07 9.65 9.87 8.33 9.87 Tangible common equity to risk weighted assets(12) 10.33 13.97 13.82 13.27 13.40 10.33 13.40 Book value per common share(13) $ 25.09 $ 24.73 $ 24.37 $ 24.14 $ 23.82 $ 25.09 $ 23.82 Less: goodwill and other intangible assets, net of benefit, per common share 9.73 7.92 7.94 7.98 7.99 9.73 7.99 Tangible book value per common share(14) $ 15.36 $ 16.81 $ 16.43 $ 16.16 $ 15.83 $ 15.36 $ 15.83 Total capital (to risk-weighted assets) 13.58 % 17.18 % 17.09 % 16.53 % 16.70 % 13.58 % 16.70 % Tier 1 capital (to risk-weighted assets) 12.62 15.92 15.84 15.28 15.44 12.62 15.44 Tier 1 capital (to average assets) 12.27 11.61 11.65 11.22 11.39 12.27 11.39 Tier 1 common capital (to risk-weighted assets) 9.90 13.71 13.59 13.07 13.17 9.90 13.17(1)
Annualized operating return on average assets is computed by dividing annualized operating earnings by average total assets. Annualized operating return on average common equity is computed by dividing annualized operating earnings by average common equity. Operating earnings is defined as net income as reported less non-core items, net of tax.(2)
Net cash flow (net income available to common stockholders, plus other intangibles amortization expense, net of tax benefit) divided by average tangible equity (average common stockholders' equity less average goodwill and average other intangibles, net of tax benefit).(3)
Annualized cash operating return on average tangible common equity is computed by dividing annualized cash operating earnings (operating earnings plus other intangibles amortization expense, net of tax benefit, less dividends on preferred shares) by average tangible common equity. Operating earnings is defined as net income as reported less non-core items, net of tax.(4)
Equals total interest expense divided by the sum of average interest bearing liabilities and noninterest bearing deposits.(5)
Equals total non-interest expense excluding non-core items divided by the sum of net interest income on a fully tax equivalent basis, total non-interest income less non-core items, and tax equivalent adjustment on the increase in cash surrender value of life insurance.(6)
Equals total non-interest expense excluding non-core items less total non-interest income excluding non-core items, and including tax equivalent adjustment on the increase in cash surrender value of life insurance divided by average assets.(7)
Equals total non-interest income excluding non-core items and tax equivalent adjustment on the increase in cash surrender value of life insurance divided by the sum of net interest income on a fully tax equivalent basis, total non-interest income less non-core items, and tax equivalent adjustment on the increase in cash surrender value of life insurance.(8)
Represents net interest income on a fully tax equivalent basis assuming a 35% tax rate, as a percentage of average interest earning assets.(9)
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.(10)
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.(11)
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.(12)
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.(13)
Equals total ending stockholders’ equity divided by common shares outstanding.(14)
Equals total ending stockholders’ equity less goodwill and other intangibles, net of tax benefit, divided by common shares outstanding.NON-GAAP FINANCIAL INFORMATION
This press release contains certain financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (GAAP). These measures include operating earnings, core non-interest income, core non-interest income to revenues (with non-core items excluded from both core non-interest income and revenues), core non-interest expense, non-core non-interest income and non-core non-interest expense, net interest income on a fully tax equivalent basis, net interest margin on a fully tax equivalent basis, efficiency ratio and the ratio of annualized net non-interest expense to average assets with net gains and losses on investment securities, net gains and losses on sale of other assets, gain on extinguishment of debt and increase in market value of assets held in trust for deferred compensation excluded from the non-interest income components of these ratios, and contingent consideration expense, merger related expenses, loss on low to moderate income real estate investment and increase in market value of assets held in trust for deferred compensation excluded from the non-interest expense components of these ratios, with tax equivalent adjustment for tax-exempt interest income and increase in cash surrender value of life insurance, as applicable; ratios of tangible equity to tangible assets, tangible common equity to risk-weighted 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 operating earnings, core and non-core non-interest income and non-interest expense are useful in assessing our core operating performance and in understanding the primary drivers of our non-interest income and non-interest 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 that 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 investment securities, net gains and losses on sale of other assets, gain on extinguishment of debt and increase in market value of assets held in trust for deferred compensation from the non-interest income components, and excluding contingent consideration expense, merger-related expenses, loss on low to moderate income real estate investment and increase in market value of assets held in trust for deferred compensation from the non-interest expense components, of the efficiency ratio and the ratio of annualized net non-interest expense to average assets, these ratios better reflect our core operating performance, as the excluded items do not pertain to our core business operations and their exclusion makes these ratios more meaningful when comparing our operating results from period to period.
In addition, management believes that presenting the ratio of Tier 1 common equity to risk-weighted assets is useful for assessing our capital strength and for peer comparison purposes. The other measures exclude the acquisition-related goodwill and other intangible assets, net of tax benefit, in determining tangible assets, tangible equity, tangible common equity and average tangible common equity and exclude other intangible amortization expense, net of tax benefit, in determining net cash flow available to common stockholders. Management believes the presentation of these other financial measures, excluding the impact of such items, provides useful supplemental information that is helpful in understanding our financial results, as they provide a method to assess management’s success in utilizing our tangible capital, as well as our capital strength. Management also believes that providing measures that exclude balances of acquisition-related goodwill and other intangible assets, which are subjective components of valuation, facilitates the comparison of our performance with the performance of our peers. In addition, management believes that these are standard financial measures used in the banking industry to evaluate performance.
The non-GAAP disclosures contained herein should not be viewed as substitutes for the results determined to be in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.
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 non-interest income and non-interest expense to non-interest income and non-interest expense are contained in the tables under “Results of Operations—Third Quarter Results.”
The following table presents a reconciliation of tangible equity to stockholders' equity (in thousands):
9/30/2014 6/30/2014 3/31/2014 12/31/2013 9/30/2013 Stockholders' equity - as reported $ 1,991,368 $ 1,365,316 $ 1,343,780 $ 1,326,682 $ 1,309,468 Less: goodwill 698,946 423,369 423,369 423,369 423,369 Less: other intangible assets, net of tax benefit 28,954 13,659 14,422 15,228 16,196 Tangible equity $ 1,263,468 $ 928,288 $ 905,989 $ 888,085 $ 869,903The following table presents a reconciliation of tangible assets to total assets (in thousands):
9/30/2014 6/30/2014 3/31/2014 12/31/2013 9/30/2013 Total assets - as reported $ 14,506,043 $ 9,818,691 $ 9,437,303 $ 9,641,427 $ 9,257,618 Less: goodwill 698,946 423,369 423,369 423,369 423,369 Less: other intangible assets, net of tax benefit 28,954 13,659 14,422 15,228 16,196 Tangible assets $ 13,778,143 $ 9,381,663 $ 8,999,512 $ 9,202,830 $ 8,818,053The following table presents a reconciliation of tangible common equity to common stockholders' equity (in thousands):
9/30/2014 6/30/2014 3/31/2014 12/31/2013 9/30/2013 Common stockholders' equity - as reported $ 1,876,088 $ 1,365,316 $ 1,343,780 $ 1,326,682 $ 1,309,468 Less: goodwill 698,946 423,369 423,369 423,369 423,369 Less: other intangible assets, net of tax benefit 28,954 13,659 14,422 15,228 16,196 Tangible common equity $ 1,148,188 $ 928,288 $ 905,989 $ 888,085 $ 869,903The following table presents a reconciliation of average tangible equity to average common stockholders’ equity (in thousands):
Nine Months Ended September 30, 3Q14 2Q14 1Q14 4Q13 3Q13 2014 2013 Average common stockholders' equity - as reported $ 1,613,277 $ 1,351,604 $ 1,335,223 $ 1,315,804 $ 1,297,498 $ 1,434,387 $ 1,291,988 Less: average goodwill 550,581 423,369 423,369 423,369 423,369 466,239 423,369 Less: average other intangible assets, net of tax benefit 19,769 13,990 14,758 15,647 16,620 16,191 17,605 Average tangible common equity $ 1,042,927 $ 914,245 $ 897,096 $ 876,788 $ 857,509 $ 951,957 $ 851,014The following table presents a reconciliation of net cash flow available to common stockholders to net income available to common stockholders (in thousands):
Nine Months Ended September 30, 3Q14 2Q14 1Q14 4Q13 3Q13 2014 2013 Net income available to common stockholders - as reported $ 4,901 $ 23,106 $ 19,969 $ 23,856 $ 24,400 $ 47,976 $ 74,599 Add: other intangible amortization expense, net of tax benefit 956 763 806 968 983 2,525 2,987 Net cash flow available to common stockholders $ 5,857 $ 23,869 $ 20,775 $ 24,824 $ 25,383 $ 50,501 $ 77,586The following table presents a reconciliation of net income to operating earnings (in thousands):
Nine Months Ended September 30, 3Q14 2Q14 1Q14 4Q13 3Q13 2014 2013 Net income - as reported $ 6,901 $ 23,106 $ 19,969 $ 23,856 $ 24,400 $ 49,976 $ 74,599 Less non-core items: Net gain (loss) on investment securities (3,246 ) (87 ) 317 (15 ) 1 (3,016 ) 14 Net (loss) gain on sale of other assets (7 ) (24 ) 7 (323 ) — (24 ) — Gain on extinguishment of debt 1,895 — — — — 1,895 — Merger related expenses (27,161 ) (488 ) (680 ) (724 ) (1,759 ) (28,329 ) (1,759 ) Loss on low-income housing investment — (96 ) (2,028 ) — — (2,124 ) — Contingent consideration expense - Celtic acquisition (10,600 ) — — — — (10,600 ) — Total non-core items (39,119 ) (695 ) (2,384 ) (1,062 ) (1,758 ) (42,198 ) (1,745 ) Income tax expense on non-core items (10,295 ) (266 ) (855 ) (281 ) (174 ) (11,416 ) (168 ) Non-core items, net of tax (28,824 ) (429 ) (1,529 ) (781 ) (1,584 ) (30,782 ) (1,577 ) Operating earnings $ 35,725 $ 23,535 $ 21,498 $ 24,637 $ 25,984 $ 80,758 $ 76,176The following table presents a reconciliation of Tier 1 common capital to Tier 1 capital (in thousands):
9/30/2014 6/30/2014 3/31/2014 12/31/2013 9/30/2013 Tier 1 capital - as reported $ 1,402,796 $ 1,058,504 $ 1,038,600 $ 1,022,512 $ 1,002,883 Less: qualifying trust preferred securities 187,500 147,500 147,500 147,500 147,500 Less: preferred stock 115,280 — — — — Tier 1 common capital $ 1,100,016 $ 911,004 $ 891,100 $ 875,012 $ 855,383Efficiency Ratio Calculation (Dollars in Thousands)
Nine Months Ended September 30, 3Q14 2Q14 1Q14 4Q13 3Q13 2014 2013 Non-interest expense $ 142,201 $ 78,030 $ 76,047 $ 76,641 $ 76,265 $ 296,278 $ 217,947 Less merger related expenses 27,161 488 680 724 1,759 28,329 1,759 Less loss on low to moderate income real estate investment — 96 2,028 — — 2,124 — Less contingent consideration expense 10,600 — — — — 10,600 — Less (decrease) increase in market value of assets held in trust for deferred compensation (38 ) 400 152 588 459 514 963 Non-interest expense - as adjusted $ 104,478 $ 77,046 $ 73,187 $ 75,329 $ 74,047 $ 254,711 $ 215,225 Net interest income $ 95,612 $ 68,072 $ 67,328 $ 68,263 $ 68,908 $ 231,012 $ 204,073 Tax equivalent adjustment 6,087 5,677 5,581 5,655 5,905 17,345 17,054 Net interest income on a fully tax equivalent basis 101,699 73,749 72,909 73,918 74,813 248,357 221,127 Plus non-interest income 61,087 39,928 36,612 39,045 37,707 137,627 115,349 Plus tax equivalent adjustment on the increase in cash surrender value of life insurance 460 449 445 457 458 1,355 1,366 Less net (loss) gain on investment securities (3,246 ) (87 ) 317 (15 ) 1 (3,016 ) 14 Less net (loss) gain on sale of other assets (7 ) (24 ) 7 (323 ) — (24 ) — Gain on extinguishment of debt 1,895 — — — — 1,895 — Less (decrease) increase in market value of assets held in trust for deferred compensation (38 ) 400 152 588 459 514 963 Net interest income plus non-interest income - as adjusted $ 164,642 $ 113,837 $ 109,490 $ 113,170 $ 112,518 $ 387,970 $ 336,865 Efficiency ratio 63.46 % 67.68 % 66.84 % 66.56 % 65.81 % 65.65 % 63.89 % Efficiency ratio (without adjustments) 90.75 % 72.25 % 73.16 % 71.42 % 71.53 % 80.37 % 68.23 %Annualized Net Non-interest Expense to Average Assets Calculation (Dollars in Thousands)
Nine Months Ended September 30, 3Q14 2Q14 1Q14 4Q13 3Q13 2014 2013 Non-interest expense $ 142,201 $ 78,030 $ 76,047 $ 76,641 $ 76,265 $ 296,278 $ 217,947 Less merger related expenses 27,161 488 680 724 1,759 28,329 1,759 Less loss on low to moderate income real estate investment — 96 2,028 — — 2,124 — Less contingent consideration expense 10,600 — — — — 10,600 — Less (decrease) increase in market value of assets held in trust for deferred compensation (38 ) 400 152 588 459 514 963 Non-interest expense - as adjusted 104,478 77,046 73,187 75,329 74,047 254,711 215,225 Non-interest income 61,087 39,928 36,612 39,045 37,707 137,627 115,349 Less net (loss) gain on investment securities (3,246 ) (87 ) 317 (15 ) 1 (3,016 ) 14 Less net (loss) gain on sale of other assets (7 ) (24 ) 7 (323 ) — (24 ) — Gain on extinguishment of debt 1,895 — — — — 1,895 — Less (decrease) increase in market value of assets held in trust for deferred compensation (38 ) 400 152 588 459 514 963 Non-interest income - as adjusted 62,483 39,639 36,136 38,795 37,247 138,258 114,372 Less tax equivalent adjustment on the increase in cash surrender value of life insurance 460 449 445 457 458 1,355 1,366 Net non-interest expense $ 41,535 $ 36,958 $ 36,606 $ 36,077 $ 36,342 $ 115,098 $ 99,487 Average assets $ 12,206,030 $ 9,575,896 $ 9,367,942 $ 9,567,388 $ 9,261,291 $ 10,393,719 $ 9,332,730 Annualized net non-interest expense to average assets 1.35 % 1.55 % 1.58 % 1.50 % 1.56 % 1.48 % 1.43 % Annualized net non-interest expense to average assets (without adjustments) 2.64 % 1.60 % 1.71 % 1.56 % 1.65 % 2.04 % 1.47 %Core Non-interest Income to Revenues Ratio Calculation (Dollars in Thousands)
Nine Months Ended September 30, 3Q14 2Q14 1Q14 4Q13 3Q13 2014 2013 Non-interest income $ 61,087 $ 39,928 $ 36,612 $ 39,045 $ 37,707 $ 137,627 $ 115,349 Plus tax equivalent adjustment on the increase in cash surrender value of life insurance 460 449 445 457 458 1,355 1,366 Less net (loss) gain on investment securities (3,246 ) (87 ) 317 (15 ) 1 (3,016 ) 14 Less net (loss) gain on sale of other assets (7 ) (24 ) 7 (323 ) — (24 ) — Gain on extinguishment of debt 1,895 — — — — 1,895 — Less (decrease) increase in market value of assets held in trust for deferred compensation (38 ) 400 152 588 459 514 963 Non-interest income - as adjusted $ 62,943 $ 40,088 $ 36,581 $ 39,252 $ 37,705 $ 139,613 $ 115,738 Net interest income $ 95,612 $ 68,072 $ 67,328 $ 68,263 $ 68,908 $ 231,012 $ 204,073 Tax equivalent adjustment 6,087 5,677 5,581 5,655 5,905 17,345 17,054 Net interest income on a fully tax equivalent basis 101,699 73,749 72,909 73,918 74,813 248,357 221,127 Plus non-interest income 61,087 39,928 36,612 39,045 37,707 137,627 115,349 Plus tax equivalent adjustment on the increase in cash surrender value of life insurance 460 449 445 457 458 1,355 1,366 Less net (loss) gain on investment securities (3,246 ) (87 ) 317 (15 ) 1 (3,016 ) 14 Less net (loss) gain on sale of other assets (7 ) (24 ) 7 (323 ) — (24 ) — Gain on extinguishment of debt 1,895 — — — — 1,895 — Less (decrease) increase in market value of assets held in trust for deferred compensation (38 ) 400 152 588 459 514 963 Total revenue - as adjusted and on a fully tax equivalent basis $ 164,642 $ 113,837 $ 109,490 $ 113,170 $ 112,518 $ 387,970 $ 336,865 Total revenue - unadjusted $ 156,699 $ 108,000 $ 103,940 $ 107,308 $ 106,615 $ 368,639 $ 319,422 Core non-interest income to revenues ratio 38.23 % 35.22 % 33.41 % 34.68 % 33.51 % 35.99 % 34.36 % Non-interest income to revenues ratio (without adjustments) 38.98 % 36.97 % 35.22 % 36.39 % 35.37 % 37.33 % 36.11 %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):
3Q14 3Q13 2Q14 Average Yield/ Average Yield/ Average Yield/ Balance Interest Rate Balance Interest Rate Balance Interest Rate Interest Earning Assets: Loans held for sale $ 313,695 $ 2,826 3.60 % $ 1,972 $ — — % $ 497 $ — — % Loans (1) (2) (3): Commercial related credits Commercial 2,179,924 24,446 4.39 1,166,887 12,263 4.11 1,229,799 11,912 3.83 Commercial loans collateralized by assignment of lease payments 1,561,414 14,669 3.76 1,429,169 13,726 3.84 1,476,618 14,693 3.98 Real estate commercial 2,138,485 24,783 4.53 1,652,339 19,996 4.73 1,620,658 17,008 4.15 Real estate construction 183,535 2,820 6.01 128,115 1,324 4.04 133,557 1,274 3.77 Total commercial related credits 6,063,358 66,718 4.31 4,376,510 47,309 4.23 4,460,632 44,887 3.98 Other loans Real estate residential 409,119 4,608 4.51 307,555 2,961 3.85 309,848 2,809 3.62 Home equity 252,250 2,556 4.02 277,122 2,993 4.28 252,891 2,678 4.25 Indirect 274,493 3,647 5.27 250,003 3,365 5.34 269,556 3,579 5.33 Consumer loans 68,186 774 4.50 61,950 599 3.84 65,437 725 4.44 Total other loans 1,004,048 11,585 4.58 896,630 9,918 4.39 897,732 9,791 4.37 Total loans, excluding covered loans 7,067,406 78,303 4.40 5,273,140 57,227 4.30 5,358,364 54,678 4.09 Covered loans 114,686 2,258 7.81 281,896 4,391 6.18 158,371 2,441 6.18 Total loans 7,182,092 80,561 4.45 5,555,036 61,618 4.40 5,516,735 57,119 4.15 Taxable investment securities 1,726,352 11,028 2.56 1,292,366 6,330 1.96 1,434,300 8,794 2.45 Investment securities exempt from federal income taxes (3) 1,087,340 13,908 5.12 946,396 12,577 5.32 966,518 12,748 5.28 Federal funds sold 15,460 14 0.38 6,793 7 0.40 4,359 4 0.36 Other interest earning deposits 341,758 211 0.24 316,210 193 0.24 448,173 277 0.25 Total interest earning assets $ 10,666,697 $ 108,548 4.04 % $ 8,118,773 $ 80,725 3.94 % $ 8,370,582 $ 78,942 3.78 % Non-interest earning assets 1,539,333 1,142,518 1,205,314 Total assets $ 12,206,030 $ 9,261,291 $ 9,575,896 Interest Bearing Liabilities: Core funding: Money market and NOW accounts $ 3,518,314 $ 1,469 0.17 % $ 2,695,479 $ 862 0.13 % $ 2,880,910 $ 899 0.13 % Savings accounts 906,630 128 0.06 844,647 137 0.06 868,694 97 0.04 Certificates of deposit 1,411,407 1,375 0.40 1,309,539 1,444 0.44 1,157,805 1,124 0.40 Customer repurchase agreements 210,543 102 0.19 205,946 113 0.22 184,178 95 0.21 Total core funding 6,046,894 3,074 0.20 5,055,611 2,556 0.20 5,091,587 2,215 0.17 Wholesale funding: Brokered accounts (includes fee expense) 417,346 1,643 1.56 263,448 1,990 3.00 220,396 1,634 2.97 Other borrowings 632,163 2,132 1.32 215,041 1,366 2.49 236,292 1,344 2.25 Total wholesale funding 1,049,509 3,775 1.33 478,489 3,356 2.47 456,688 2,978 2.33 Total interest bearing liabilities $ 7,096,403 $ 6,849 0.38 % $ 5,534,100 $ 5,912 0.42 % $ 5,548,275 $ 5,193 0.38 % Non-interest bearing deposits 3,175,513 2,258,357 2,476,396 Other non-interest bearing liabilities 268,028 171,336 199,621 Stockholders' equity 1,666,086 1,297,498 1,351,604 Total liabilities and stockholders' equity $ 12,206,030 $ 9,261,291 $ 9,575,896 Net interest income/interest rate spread (4) $ 101,699 3.66 % $ 74,813 3.52 % $ 73,749 3.40 % Taxable equivalent adjustment 6,087 5,905 5,677 Net interest income, as reported $ 95,612 $ 68,908 $ 68,072 Net interest margin (5) 3.56 % 3.37 % 3.26 % Tax equivalent effect 0.22 % 0.29 % 0.27 % Net interest margin on a fully tax equivalent basis (5) 3.78 % 3.66 % 3.53 % (1) Non-accrual loans are included in average loans. (2) Interest income includes amortization of deferred loan origination fees and costs. (3) Non-taxable loan and investment income is presented on a fully tax equivalent basis assuming a 35% tax rate. (4) Interest rate spread represents the difference between the average yield on interest earning assets and the average cost of interest bearing liabilities and is presented on a fully tax equivalent basis. (5) Net interest margin represents net interest income as a percentage of average interest earning assets.The following table presents, for the periods indicated, the total dollar amount of interest income from average interest earning assets and the resultant yields, as well as the interest expense on average interest bearing liabilities, and the resultant costs, expressed both in dollars and rates (dollars in thousands):
Nine Months Ended September 30, 2014 2013 Average Yield/ Average Yield/ Balance Interest Rate Balance Interest Rate Interest Earning Assets: Loans held for sale $ 105,977 $ 2,826 3.56 % $ 3,259 $ — — % Loans (1) (2) (3): Commercial related credits Commercial 1,550,916 48,670 4.14 1,193,034 37,436 4.14 Commercial loans collateralized by assignment of lease payments 1,506,309 43,681 3.87 1,357,417 39,512 3.88 Real estate commercial 1,798,587 59,123 4.33 1,699,235 60,475 4.69 Real estate construction 152,827 5,372 4.64 125,184 3,714 3.91 Total commercial related credits 5,008,639 156,846 4.13 4,374,870 141,137 4.25 Other loans Real estate residential 343,836 10,409 4.04 309,075 9,288 4.01 Home equity 256,101 7,946 4.15 287,198 9,259 4.31 Indirect 269,226 10,617 5.27 231,383 9,563 5.53 Consumer loans 65,433 2,175 4.44 67,608 1,830 3.62 Total other loans 934,596 31,147 4.46 895,264 29,940 4.47 Total loans, excluding covered loans 5,943,235 187,993 4.23 5,270,134 171,077 4.34 Covered loans 164,455 7,169 5.83 346,721 13,328 4.14 Total loans 6,107,690 195,162 4.27 5,616,855 184,405 4.39 Taxable investment securities 1,516,281 27,968 2.46 1,383,975 18,749 1.81 Investment securities exempt from federal income taxes (3) 997,128 39,066 5.22 930,653 37,537 5.38 Federal funds sold 8,605 23 0.37 3,249 9 0.37 Other interest earning deposits 326,226 601 0.25 232,529 420 0.24 Total interest earning assets $ 9,061,907 $ 265,646 3.92 % $ 8,170,520 $ 241,120 3.95 % Non-interest earning assets 1,331,812 1,162,210 Total assets $ 10,393,719 $ 9,332,730 Interest Bearing Liabilities: Core funding: Money market and NOW accounts $ 3,045,178 $ 3,216 0.14 % $ 2,702,567 $ 2,622 0.13 % Savings accounts 879,336 334 0.05 835,754 409 0.07 Certificates of deposit 1,260,537 3,673 0.40 1,408,866 5,734 0.56 Customer repurchase agreements 195,136 293 0.20 191,789 312 0.22 Total core funding 5,380,187 7,516 0.19 5,138,976 9,077 0.23 Wholesale funding: Brokered accounts (includes fee expense) 287,931 4,915 2.28 283,894 6,509 3.07 Other borrowings 368,220 4,858 1.74 230,021 4,407 2.53 Total wholesale funding 656,151 9,773 1.82 513,915 10,916 2.51 Total interest bearing liabilities $ 6,036,338 $ 17,289 0.38 % $ 5,652,891 $ 19,993 0.47 % Non-interest bearing deposits 2,677,865 2,194,648 Other non-interest bearing liabilities 227,333 193,203 Stockholders' equity 1,452,183 1,291,988 Total liabilities and stockholders' equity $ 10,393,719 $ 9,332,730 Net interest income/interest rate spread (4) $ 248,357 3.54 % $ 221,127 3.48 % Taxable equivalent adjustment 17,345 17,054 Net interest income, as reported $ 231,012 $ 204,073 Net interest margin (5) 3.41 % 3.34 % Tax equivalent effect 0.25 % 0.28 % Net interest margin on a fully tax equivalent basis (5) 3.66 % 3.62 % (1) Non-accrual loans are included in average loans. (2) Interest income includes amortization of deferred loan origination fees and costs. (3) Non-taxable loan and investment income is presented on a fully tax equivalent basis assuming a 35% tax rate. (4) Interest rate spread represents the difference between the average yield on interest earning assets and the average cost of interest bearing liabilities and is presented on a fully tax equivalent basis. (5) Net interest margin represents net interest income as a percentage of average interest earning assets.The table below reflects the impact the purchase accounting loan discount accretion on Taylor Capital loans had on the loan yield and net interest margin on a fully tax equivalent basis for the three and nine months ended September 30, 2014:
Three months ended Nine months ended September 30, 2014 September 30, 2014 Average Yield/ Average Yield/ Balance Interest Rate Balance Interest Rate Loan yield excluding purchase accounting discount accretion on Taylor Capital loans: Total loans, as reported $ 7,182,092 $ 80,561 4.45 % $ 6,107,690 $ 195,162 4.27 % Less purchase accounting discount accretion on non-PCI loans (34,097 ) 5,892 (11,491 ) 5,892 Less purchase accounting discount accretion on PCI loans (15,281 ) 282 (5,150 ) 282 Total loans, excluding purchase accounting discount accretion on Taylor Capital loans $ 7,231,470 $ 74,387 4.08 % $ 6,124,331 $ 188,988 4.13 % Net interest margin on a fully tax equivalent basis, excluding purchase accounting discount accretion on Taylor Capital loans: Total interest earning assets, as reported $ 10,666,697 $ 101,699 3.78 % $ 9,061,907 $ 248,357 3.66 % Less purchase accounting discount accretion on non-PCI loans (34,097 ) 5,892 (11,491 ) 5,892 Less purchase accounting discount accretion on PCI loans (15,281 ) 282 (5,150 ) 282 Total interest earning assets, excluding purchase accounting discount accretion on Taylor Capital loans $ 10,716,075 $ 95,525 3.54 % $ 9,078,548 $ 242,183 3.57 %Provision will be recognized on legacy Taylor Capital loans as they renew and will largely offset the positive impact of the loan discount accretion on non-purchase credit impaired loans. During the third quarter of 2014, a provision of approximately $4.7 million was recorded related to legacy Taylor Capital loans.
MB Financial, Inc.Jill York - Vice President and Chief Financial OfficerE-Mail: jyork@mbfinancial.com(888) 422-6562
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