TAYLOR CAPITAL GROUP INC 
By CHICAGO, Oct. 17, 2013 /PRNewswire/ -- Taylor Capital Group, Inc. (the "Company") (NASDAQ: TAYC), the parent company of Cole Taylor Bank (the "Bank"), today reported results for the third quarter of 2013.
Net income for the third quarter was $14.2 million, compared to $15.6 million for the second quarter of 2013. Net income applicable to common stockholders for the quarter was $10.6 million, or $0.34 per diluted share, compared to $11.8 million, or $0.39 per diluted share, for the second quarter of 2013. The results for the third quarter included $2.0 million of expenses, pre-tax, relating to various corporate initiatives, including the previously announced pending merger with MB Financial, Inc. The following table compares selected financial information for the periods indicated:
(dollars 3Q13 2Q13 Change 3Q12 Change
in from from
thousands) 2Q13 to 3Q12 to
3Q13 3Q13
---- ---- ------- ---- -------
Total
commercial
loans
(period
end) $3,290,407 $3,000,249 9.7% $2,671,101 23.2%
Average
total
deposits $3,829,183 $3,690,246 3.8% $3,275,358 16.9%
Net
interest
income $46,027 $41,082 12.0% $37,196 23.7%
Net
interest
margin 3.41% 3.16% 0.25% 3.22% 0.19%
Mortgage
banking
revenue $25,148 $38,533 (34.7)% $40,676 (38.2)%
Loan
loss
provision $300 $700 (57.1)% $900 (66.7)%
"Our results for the third quarter of 2013 continue to validate our strategy of diversification and core line of business focus," said Mark A. Hoppe, President and Chief Executive Officer of the Company. "Our banking segment achieved strong results across many areas highlighted by robust 10% quarter-over-quarter growth in commercial loans and a broad expansion in net interest margin. Credit costs continued to be low this quarter, despite an increase in nonperforming loans that was the result of two relationships where we expect outcomes consistent with what we have experienced recently from our disciplined credit resolution process. The commercial loan growth, with substantial contributions from all of our lending groups, reflects both new customer relationships and increased activity by existing customers and is our sixth quarter in a row of commercial loan growth. Moreover, the loan growth, combined with improving yields on the investment portfolio and reduced funding costs, drove a solid 25 basis point improvement in our net interest margin."
"While our results for the quarter were impacted by the slowdown in mortgage refinancing, our mortgage segment continued on its path of becoming a full service mortgage banking operation as it began servicing loans this quarter on its in-house platform based out of Wilmington, Ohio," Hoppe commented. "It is worth noting that despite the recent dramatic interest rate swings, our mortgage team has more than doubled its mortgage origination activity for home purchases since the first quarter of 2013 to over $1 billion this quarter highlighting a shift in mix from refinancing. Amid the uncertainty of the near term outlook for mortgage refinancing, we have developed a diverse and adaptive mortgage business with 30 retail locations, originations in 44 states and a mortgage servicing book over $16 billion."
Hoppe continued, "In July we announced the signing of a definitive merger agreement with MB Financial, Inc. to create the Chicago area's premier commercial bank. We are excited about the opportunities this merger presents to all of our stakeholders. In the interim, we remain focused on serving our clients and executing our strategic priorities. Our third quarter results continue to reflect the value of our diversified model and the contributions of our dedicated bankers."
THIRD QUARTER 2013 HIGHLIGHTS - COMPARISON TO SECOND QUARTER 2013
-- Net interest income was $46.0 million for the third quarter of 2013, up
$4.9 million, or 12.0%, from the second quarter of 2013
-- Mortgage banking revenue was $25.1 million for the third quarter of
2013, down $13.4 million, or 34.7%, from the second quarter of 2013
-- Mortgages for home purchases increased to 63% of total originations for
the third quarter of 2013
-- Net interest margin on a tax equivalent basis increased by 25 basis
points to 3.41% for the third quarter of 2013 from 3.16% for the second
quarter of 2013
-- Total commercial loans grew $290.2 million, or 9.7%, from June 30, 2013
-- In July, the Company repurchased $26.2 million of its outstanding Fixed
Rate Cumulative Perpetual Preferred Stock, Series B, in a privately
negotiated transaction
-- As of September 30, 2013, the Company's Tier I Risk Based Capital ratio
was 12.89%, its Total Risk Based Capital ratio was 14.15% and its Tier I
Capital to Average Assets leverage ratio was 10.30%
-- Return on Average Common Equity was 11.69% for the third quarter of 2013
as compared to 12.66% for the second quarter of 2013
Credit quality indicators as compared to the second quarter of 2013
-- Nonperforming loans were $86.0 million and 2.37% of total loans at
September 30, 2013, compared to $69.5 million and 2.11% of total loans
at June 30, 2013
-- At September 30, 2013, commercial criticized and classified loans(1)
totaled $151.7 million, up from $134.2 million at June 30, 2013
-- The allowance for loan losses as a percent of nonperforming loans was
98.80% at September 30, 2013, compared to 120.19% at June 30, 2013
-- Credit costs(2) were a negative $536,000 for the third quarter of 2013,
compared to a negative $498,000 for the second quarter of 2013
THIRD QUARTER 2013 - COMPARISON TO THIRD QUARTER 2012
-- Net interest income increased to $46.0 million for the third quarter of
2013, up $8.8 million, or 23.7%, from the third quarter of 2012
-- Net interest margin on a tax equivalent basis increased by 19 basis
points to 3.41% for the third quarter of 2013 from 3.22% for the third
quarter of 2012
-- Pre-tax, pre-provision operating earnings(3) decreased to $23.1 million
for the third quarter of 2013, down $9.8 million, or 29.8%, as compared
to the third quarter of 2012
-- Total commercial loans increased to $3.29 billion at September 30, 2013,
up $619.3 million, or 23.2%, from September 30, 2012
-- Core deposits grew to $2.75 billion at September 30, 2013, up $307.4
million, or 12.6%, from September 30, 2012
-- Return on Average Common Equity was 11.69% for the third quarter of 2013
as compared to 17.62% for the third quarter of 2012
THIRD QUARTER 2013 PERFORMANCE OVERVIEW
Results of Operations - Comparisons to Second Quarter 2013
Net income for the third quarter of 2013 was $14.2 million, compared to $15.6 million for the second quarter of 2013, a decrease of 9.0%. Net income applicable to common stockholders for the third quarter of 2013 was $10.6 million, compared to $11.8 million for the second quarter of 2013.
Income before income taxes was $23.7 million for the third quarter of 2013, compared to $26.2 million for the second quarter of 2013, a decrease of 9.5%. The decrease was primarily due to a $13.4 million decline in mortgage banking revenue partially offset by a $5.4 million decline in early extinguishment of debt expense and a $4.9 million increase in net interest income. The decrease in mortgage banking revenue was due to an industry-wide slowdown in mortgage refinancing from the robust pace achieved over the prior few quarters and gain on sale margin compression.
Pre-tax, pre-provision operating earnings totaled $23.1 million for the third quarter of 2013, compared to $31.1 million for the second quarter of 2013, a decrease of 25.7%. The decrease was primarily due to a $13.4 million decline in mortgage banking revenue, partially offset by a $4.9 million increase in net interest income.
Revenue(4)
Revenue totaled $78.4 million for the third quarter of 2013, compared to $87.2 million for the second quarter of 2013, a decrease of 10.1%.
Net interest income was $46.0 million for the third quarter of 2013, as compared to $41.1 million for the second quarter of 2013. The increase was primarily due to growth in commercial loan balances, higher municipal bond yields within the tax-exempt investment portfolio and lower cost of interest bearing liabilities, primarily as a result of the prepayment of $37.5 million of the Company's 8% subordinated notes in June 2013 and even with growth in overall interest-bearing deposits, the deposit interest expense decreased due to a 15 basis point reduction in the cost of deposits. The overall tax equivalent net interest margin increased 25 basis points, from 3.16% for the second quarter of 2013 to 3.41% for the third quarter of 2013 due to commercial loan growth, higher yields on both the investment portfolio and loans held for sale, lower funding costs and one-time interest recoveries of approximately 6 basis points.
Noninterest income, excluding investment security gains and losses, was $32.4 million for the third quarter of 2013, compared to $46.1 million for the second quarter of 2013, a decrease of 29.7%. The decrease was primarily due to a $13.4 million decrease in mortgage banking revenue due to a slowdown in mortgage refinancing and lower gain on sale margins. Total mortgage originations were $1.60 billion in the third quarter of 2013 down 14.8% from the second quarter. Approximately 63% of the Company's mortgage originations in the third quarter of 2013 were for home purchases as compared to 38% in the second quarter, highlighting the decline in refinance activity and the growth in purchase activity.
Noninterest Expense
Noninterest expense, excluding nonperforming asset expense and early extinguishment of debt expense, was $55.4 million for the third quarter of 2013, compared to $56.1 million for the second quarter of 2013. The decrease of $711,000, or 1.3%, was primarily the result of a $4.6 million decrease in performance-based incentives attributable to the decline in mortgage banking revenue, partially offset by a $2.4 million increase in employee salaries and benefits. Salary expense increased as employees were added at Cole Taylor Mortgage to establish its in-house servicing platform in Wilmington. Certain expenses at Cole Taylor Mortgage are variable in nature and will likely change with loan production volume in the future. In addition, Cole Taylor Mortgage continuously evaluates its staffing levels relative to expected loan production. Besides employee salaries and benefits expense, legal fees also increased mainly due to the proposed merger with MB Financial and other strategic corporate initiatives.
Results of Operations - Comparisons to Third Quarter 2012
Net income for the third quarter of 2013 was $14.2 million, compared to $16.7 million for the third quarter of 2012, a decrease of 15.0%. Net income applicable to common stockholders for the third quarter of 2013 was $10.6 million, compared to $15.0 million for the third quarter of 2012.
Income before income taxes was $23.7 million for the third quarter of 2013, compared to $27.6 million for the third quarter of 2012, a decrease of 14.1%. The $3.9 million decrease was primarily due to a $15.5 million decline in mortgage banking revenue partially offset by a $8.8 million increase in net interest income. The decline in mortgage banking revenue was primarily due to lower gain on sale margins for mortgage originations from the elevated levels seen in the second half of 2012. The decline in mortgage origination income was partially offset by an increase in servicing revenue. The Company has grown mortgage servicing as part of its strategy to build a complete mortgage operation with diverse revenue sources.
Pre-tax, pre-provision operating earnings totaled $23.1 million for the third quarter of 2013, as compared to $32.8 million in the third quarter of 2012, a decrease of 29.6%, primarily due to the previously mentioned decline in mortgage banking revenue.
Revenue
Revenue totaled $78.4 million for the third quarter of 2013, compared to $84.4 million in the third quarter of 2012, a decrease of 7.1%.
Net interest income was $46.0 million for the third quarter of 2013, compared to $37.2 million for the third quarter of 2012, an increase of 23.7%. The increase was primarily due to growth in commercial loan balances, higher yields and growth in the investment portfolio, the repayment of the Bank's $60.0 million of 10% subordinated notes in the third quarter of 2012 and of the Company's $37.5 million of 8% subordinated notes in the second quarter of 2013 and lower deposit funding costs.
Noninterest income, excluding investment security gains and losses, was $32.4 million for the third quarter of 2013, compared to $47.3 million for the third quarter of 2012, a decrease of 31.5%. The decrease was primarily due to a $15.5 million decrease in mortgage banking revenue due to lower gain on sale margins for mortgage originations from the elevated margins seen in the second half of 2012, partially offset by an increase in mortgage servicing revenue. The increase in servicing revenue was the result of growth in the Company's mortgage servicing rights ("MSR") portfolio resulting from both purchased as well as self-originated MSR.
Noninterest Expense
Noninterest expense, excluding nonperforming asset expense and early extinguishment of debt expense, was $55.4 million for the third quarter of 2013, compared to $51.6 million in the third quarter of 2012, an increase of 7.4%. The net increase of $3.8 million was due to the combination of a $6.2 million increase in employee salary and benefit costs primarily due to headcount growth at Cole Taylor Mortgage, a $2.5 million increase in outside services primarily due to growth in mortgage servicing, a $1.3 million increase in other noninterest expense primarily due to mortgage volume-related costs, a $1.0 million increase in legal fees primarily related to the proposed merger with MB Financial, and a $457,000 increase in occupancy, furniture and equipment costs due to office expansion. Partially offsetting these increases was a $8.1 million decrease in performance-related incentive expense due to declines in mortgage banking revenue.
Credit Quality
Loan Portfolio Performance and Credit Quality
Total commercial criticized and classified loans were $151.7 million at September 30, 2013, up from $134.2 million at June 30, 2013 and $114.7 million at September 30, 2012. The increase in criticized and classified loans was largely attributable to two relationships migrating to nonaccrual status during the third quarter of 2013 partially offset by paydowns of several previously criticized and classified loans.
Nonperforming loans were $86.0 million at September 30, 2013, up from $69.5 million at June 30, 2013, and $62.1 million at September 30, 2012. The increase in nonperforming loans was due to the previously mentioned relationships moving to nonaccrual status in the third quarter of 2013.
Other real estate owned ("OREO") and repossessed assets were $14.4 million at September 30, 2013, down from $19.8 million at June 30, 2013 and $28.9 million at September 30, 2012. The decrease in OREO assets was primarily due to sales as we continue to actively manage the resolution process.
Total nonperforming assets were $100.4 million at September 30, 2013, up from $89.3 million at June 30, 2013 and $91.0 million at September 30, 2012. Nonperforming assets to total assets were 1.67% at September 30, 2013, compared to 1.51% at June 30, 2013 and 1.77% at September 30, 2012.
Allowance and Provision for Loan Losses
The allowance for loan losses was $85.0 million at September 30, 2013 compared to $83.6 million at June 30, 2013 and $79.7 million at September 30, 2012 with the increase primarily due to growth in the loan portfolio. The allowance for loan losses as a percent of nonperforming loans was 98.80% at September 30, 2013, as compared to 120.19% at June 30, 2013 and 128.30% at September 30, 2012.
The provision for loan losses was $300,000 for the third quarter of 2013, compared to $700,000 for the second quarter of 2013 and $900,000 in the third quarter of 2012. The $300,000 loan loss provision in the third quarter of 2013 reflects an increase in the general reserve primarily due to loan growth, partially offset by net recoveries and a decrease in required specific reserves.
Balance Sheet
Assets
Total assets at September 30, 2013 were $6.01 billion, compared to $5.90 billion at June 30, 2013.
Investment securities were $1.42 billion at September 30, 2013, down slightly from $1.43 billion at June 30, 2013.
Loans held for sale were $498.3 million at September 30, 2013, a decrease of 28.2% from June 30, 2013. The decrease was primarily the result of a slowdown in mortgage refinance activity.
Net loans at September 30, 2013 were $3.54 billion, up $324.7 million from $3.22 billion at June 30, 2013. Commercial and Industrial loans were $1.90 billion at September 30, 2013, an increase of 11.4% from $1.71 billion at June 30, 2013. This increase was broadly distributed across the Company's Chicago-based middle market lending, asset based lending and equipment financing groups. Commercial real estate secured loans were $1.11 billion at September 30, 2013, an increase of 7.5% from June 30, 2013. Consumer loans, which consist primarily of residential mortgages, were $348.4 million at September 30, 2013, up $37.2 million from June 30, 2013, as a portion of mortgage originations in the third quarter was retained in portfolio for investment purposes.
MSR increased $38.5 million in the third quarter to $184.2 million as of September 30, 2013. The unpaid principal balance of loans serviced was $16.43 billion as of September 30, 2013, up 29.0% from June 30, 2013. The Company invests in MSR and retains servicing on most mortgage loans originated as part of its strategy to diversify the revenue streams of Cole Taylor Mortgage.
Liabilities and Stockholders' Equity
Total liabilities at September 30, 2013 were $5.47 billion, as compared to $5.34 billion at June 30, 2013.
Total deposits were $3.70 billion at September 30, 2013, compared to $3.69 billion at June 30, 2013. Total deposits increased in the third quarter, despite the end of a deposit relationship with an organization that provides financial services to the higher education industry, through growth in both interest-bearing demand and time deposits as part of the Company's on-going deposit gathering efforts.
Average total deposits for the third quarter of 2013 increased to $3.83 billion from $3.69 billion in the second quarter of 2013, primarily due to growth in both interest-bearing demand and time deposits, partially offset by a decrease in noninterest-bearing deposits.
Short-term borrowings increased $136.8 million in the third quarter to $1.57 billion as of September 30, 2013, due to increased funding needs to support commercial loan growth.
Total stockholders' equity decreased $15.6 million from $560.3 million at June 30, 2013, to $544.7 million at September 30, 2013, primarily due to the repurchase of $26.2 million of the Series B preferred in the third quarter. The decline was partially offset by retaining the net income available to common stockholders earned in the third quarter.
Capital
At September 30, 2013, the Company's Tier I Risk Based Capital ratio was 12.89%, its Total Risk Based Capital ratio was 14.15% and its Tier I Capital to Average Assets leverage ratio was 10.30%.
Each of these Company ratios exceeded the regulatory requirements for well-capitalized banks of 6.00% for the Tier I Risk Based Capital ratio, 10.00% for the Total Risk Based Capital ratio and 5.00% for the Tier I Capital to Average Assets leverage ratio.
Accompanying Financial Statements and Tables
This press release is accompanied by the following unaudited financial information:
-- Condensed Consolidated Balance Sheets
-- Consolidated Statements of Income
-- Summary of Key Quarterly Financial Data
-- Summary of Key Year-to-Date Financial Data
-- Summary of Key Period-End Financial Data
-- Composition of Loan Portfolio
-- Credit Quality
-- Loan Portfolio Aging
-- Funding Liabilities
-- Summary of Quarterly Segment Financial Data
-- Reconciliation of U.S. GAAP Financial Measures
About Taylor Capital Group, Inc. (NASDAQ: TAYC)
Taylor Capital Group, Inc. is the holding company of Cole Taylor Bank, a commercial bank headquartered in Chicago with assets of $6.0 billion as of September 30, 2013. For more than 80 years, Cole Taylor Bank has been successfully meeting the banking needs of closely-held companies and the people who own and manage them by focusing on a relationship-based approach to business. Through its national businesses, Cole Taylor provides a full range of financial services, including asset based lending, commercial equipment financing, and residential mortgage lending.
Endnotes:
(1) Commercial criticized and classified loans are defined as special mention, substandard, and nonaccrual loans in commercial and industrial, commercial real estate, residential construction and land, and commercial construction and land, excluding consumer loans.
(2) Credit costs are defined as provision for loan losses plus nonperforming asset expense.
(3) Schedules reconciling earnings in accordance with U.S. Generally Accepted Accounting Principles ("GAAP") to the non-GAAP measurement of revenue and pre-tax, pre-provision operating earnings are provided in the attached tables.
(4) Revenue is defined as net interest income plus noninterest income less investment securities gains and losses and impairment of investment securities.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This press release includes forward-looking statements that reflect our current expectations and projections about our future results, performance, prospects and opportunities. We have tried to identify these forward-looking statements by using words including "may," "might," "contemplate," "plan," "predict," "potential," "should," "will," "expect," "anticipate," "believe," "intend," "could," "estimate" and similar expressions. These forward-looking statements are based on information currently available to us and are subject to a number of risks, uncertainties and other factors that could cause our actual results, performance, prospects or opportunities in 2013 and beyond to differ materially from those expressed in, or implied by, these forward-looking statements.
These risks, uncertainties and other factors include, without limitation:
-- The Agreement and Plan of Merger (the "Merger Agreement") with MB
Financial, Inc. ("MB") may be terminated in accordance with its terms,
and the merger contemplated thereby (the "Merger") may not be completed.
-- Termination of the Merger Agreement could negatively impact us.
-- We will be subject to business uncertainties and contractual
restrictions while the Merger is pending.
-- Two stockholder actions have been filed against us, our Board of
Directors and MB challenging the Merger, and additional suits may be
filed in the future. An adverse ruling in any of these lawsuits may
prevent the Merger from being completed or from being completed within
the expected timeframe.
-- The Merger Agreement limits our ability to pursue an alternative
acquisition proposal and requires us to pay a termination fee of $20.0
million under limited circumstances relating to alternative acquisition
proposals.
-- We may be materially and adversely affected by the highly regulated
environment in which we operate.
-- Increasing dependence on our mortgage business may increase volatility
in our consolidated revenues and earnings, and our residential mortgage
lending profitability could be significantly reduced if we are not able
to originate and sell mortgage loans at profitable margins.
-- Changes in interest rates may change the value of our mortgage servicing
rights ("MSRs") portfolio, which may increase the volatility of our
earnings.
-- Certain hedging strategies that we use to manage investment in MSR,
mortgage loans held for sale and interest rate lock commitments may be
ineffective to offset any adverse changes in the fair value of these
assets due to changes in interest rates and market liquidity.
-- Our mortgage loan repurchase reserve for losses could be insufficient.
-- A significant increase in certain loan balances associated with our
mortgage business may result in liquidity risk related to the funding of
these loans.
-- We are subject to interest rate risk, including interest rate
fluctuations that could have a material adverse effect on us.
-- Competition from financial institutions and other financial services
providers may adversely affect our growth and profitability and have a
material adverse effect on us.
-- Our business is subject to the conditions of the economies in which we
operate and continued weakness in those economies and the real estate
markets may materially and adversely affect us.
-- Our business is subject to domestic and, to a lesser extent,
international economic conditions and other factors, many of which are
beyond our control and could materially and adversely affect us.
-- The preparation of our consolidated financial statements requires us to
make estimates and judgments, including the use of models, which are
subject to an inherent degree of uncertainty and which may differ from
actual results.
-- We must manage credit risk and, if we are unable to do so, our allowance
for loan losses may prove to be insufficient to absorb losses in our
loan portfolio, which could have a material adverse effect on us.
-- We may not be able to access sufficient and cost-effective sources of
liquidity.
-- We are subject to liquidity risk, including unanticipated deposit
volatility.
-- The repeal of federal prohibitions on payment of interest on business
demand deposits could increase our interest expense and have a material
adverse effect on us.
-- Changes in certain ratings related to us or our credit could increase
our financing costs or make it more difficult for us to obtain funding
or capital on commercially acceptable terms.
-- As a bank holding company, our sources of funds are limited.
-- We are subject to certain operational risks, including, but not limited
to, data processing system failures and errors and customer or employee
fraud. Our controls and procedures may fail or be circumvented.
-- We are dependent on outside third parties for processing and handling of
our records and data.
-- System failure or breaches of our network security, including with
respect to our internet banking activities, could subject us to
increased operating costs as well as litigation and other liabilities.
-- We have counterparty risk and therefore we may be materially and
adversely affected by the soundness of other financial institutions.
-- We are subject to lending concentration risks.
-- We are subject to mortgage asset concentration risks.
-- Our business strategy is dependent on our continued ability to attract,
develop and retain highly qualified and experienced personnel in senior
management and customer relationship positions.
-- Our reputation could be damaged by negative publicity.
-- New lines of business, new products and services or new customer
relationships may subject us to certain additional risks.
-- We may experience difficulties in managing our future growth.
-- We and our subsidiaries are subject to changes in federal and state tax
laws and changes in interpretation of existing laws.
-- Regulatory requirements, including rules recently adopted by the U.S.
federal bank regulatory agencies to implement Basel III, growth plans or
operating results may require us to raise additional capital, which may
not be available on favorable terms or at all.
-- We have not paid a dividend on our common stock since the third quarter
of 2008. In addition, regulatory restrictions and liquidity constraints
at the holding company level could impair our ability to make
distributions on our outstanding securities.
For further information about these and other risks, uncertainties and factors, please review the disclosure included in the section captioned "Risk Factors" in our December 31, 2012 Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 8, 2013, as updated by our quarterly reports on Form 10-Q, Current Reports on Form 8-K and other filings we have made with the SEC. You should not place undue reliance on any forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements or risk factors, whether as a result of new information, future events, changed circumstances or any other reason after the date of this press release.
Additional Information
This document does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. In connection with the proposed merger between MB Financial, Inc. ("MB Financial") and Taylor Capital Group, Inc. ("Taylor Capital"), MB Financial has filed a registration statement on Form S-4 with the Securities and Exchange Commission (the "SEC"). The registration statement includes a preliminary joint proxy statement of MB Financial and Taylor Capital that also constitutes a preliminary prospectus of MB Financial, which, when finalized, will be sent to the stockholders of MB Financial and Taylor Capital. Stockholders are advised to read the preliminary joint proxy statement/prospectus regarding the proposed merger, the definitive joint proxy statement/prospectus (when it becomes available) and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they contain, or will contain, as the case may be, important information about MB Financial, Taylor Capital and the proposed transaction. Copies of all documents relating to the merger filed by MB Financial and Taylor Capital can be obtained free of charge from the SEC's website at www.sec.gov. These documents also can be obtained free of charge by accessing MB Financial's website at www.mbfinancial.com under the tab "Investor Relations" and then under "SEC Filings" or by accessing Taylor Capital's website at www.taylorcapitalgroup.com under the tab "SEC Filings" and then under "Documents." Alternatively, these documents can be obtained free of charge from MB Financial upon written request to MB Financial, Inc., Secretary, 6111 North River Road, Rosemont, Illinois 60018 or by calling (847) 653-1992, or from Taylor Capital, upon written request to Taylor Capital Group, Inc., Investor Relations, 9550 West Higgins Road, Rosemont, Illinois 60018 or by calling (847) 653-7978.
Participants in this Transaction
MB Financial, Taylor Capital and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from stockholders in connection with the proposed transaction under the rules of the SEC. Information about these participants may be found in the definitive proxy statement of MB Financial relating to its 2013 Annual Meeting of Stockholders filed with the SEC by MB Financial on April 12, 2013 and the definitive proxy statement of Taylor Capital relating to its 2013 Annual Meeting of Stockholders filed with the SEC on April 24, 2013. These definitive proxy statements can be obtained free of charge from the sources indicated above. Additional information regarding the interests of these participants can be found in the joint proxy statement/prospectus regarding the proposed transaction, copies of which may also be obtained free of charge from the sources indicated above.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(Unaudited) (Unaudited)
September 30, June 30, December 31,
2013 2013 2012
---- ---- ----
ASSETS
Cash and cash
equivalents $122,407 $97,832 $166,385
Investment securities 1,420,906 1,434,326 1,267,757
Loans held for sale 498,276 693,937 938,379
Loans, net of allowance
for loan losses of
$85,013 at September
30, 2013, $83,576 at
June 30, 2013 and
$82,191 at December
31, 2012 3,543,645 3,218,972 3,086,112
Premises, leasehold
improvements and
equipment, net 25,391 23,941 16,062
Investment in Federal
Home Loan Bank and
Federal Reserve Bank
stock 74,342 79,726 74,950
Mortgage servicing
rights 184,237 145,729 78,917
Other real estate and
repossessed assets,
net 14,389 19,794 24,259
Other assets 131,101 187,113 149,589
------- ------- -------
Total assets $6,014,694 $5,901,370 $5,802,410
========== ========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing $1,010,789 $1,138,839 $1,179,724
Interest-bearing 2,686,407 2,553,587 2,348,618
--------- --------- ---------
Total deposits 3,697,196 3,692,426 3,528,342
Accrued interest, taxes
and other liabilities 120,521 133,208 131,473
Short-term borrowings 1,565,651 1,428,855 1,463,019
Long-term borrowings - - -
Junior subordinated
debentures 86,607 86,607 86,607
Subordinated notes, net - - 33,366
---
Total liabilities 5,469,975 5,341,096 5,242,807
--------- --------- ---------
Stockholders' equity:
Preferred stock, Series
A 100,000 100,000 100,000
Preferred stock, Series
B 78,927 104,745 103,813
Nonvoting preferred
stock 13 13 13
Common stock 307 305 302
Surplus 417,202 416,420 412,391
Accumulated deficit (27,518) (38,104) (63,537)
Accumulated other
comprehensive income,
net 5,373 6,480 36,206
Treasury stock (29,585) (29,585) (29,585)
------- -------
Total stockholders'
equity 544,719 560,274 559,603
------- ------- -------
Total liabilities and
stockholders' equity $6,014,694 $5,901,370 $5,802,410
========== ========== ==========
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(dollars in thousands, except per share data)
For the Three Months Ended For the Nine Months
Ended
-------------------------- -------------------
Sep 30, Jun 30,
2013 Sep 30, Sep 30, Sep 30,
2013 2012 2013 2012
---- ---- ---- ----
Interest income:
Interest and fees
on loans $40,501 $37,499 $36,561 $115,629 $107,266
Interest and dividends on
investment securities:
Taxable 8,332 8,398 8,897 25,347 29,104
Tax-exempt 2,826 2,077 733 6,330 2,087
Interest on cash
equivalents 2 1 1 4 7
--- --- --- --- ---
Total interest
income 51,661 47,975 46,192 147,310 138,464
------ ------ ------ ------- -------
Interest expense:
Deposits 3,697 4,213 4,399 12,174 14,748
Short-term
borrowings 491 473 564 1,384 1,756
Long-term
borrowings - - 32 - 601
Junior
subordinated
debentures 1,446 1,444 1,466 4,333 4,402
Subordinated
notes - 763 2,535 1,627 7,581
--- --- ----- ----- -----
Total interest
expense 5,634 6,893 8,996 19,518 29,088
----- ----- ----- ------ ------
Net interest
income 46,027 41,082 37,196 127,792 109,376
Provision for
loan losses 300 700 900 1,300 8,350
--- --- --- ----- -----
Net interest
income after
provision for
loan losses 45,727 40,382 36,296 126,492 101,026
------ ------ ------ ------- -------
Noninterest income:
Service charges 3,572 3,505 3,423 10,568 10,069
Mortgage banking
revenue 25,148 38,533 40,676 95,711 81,220
Gain on sales of
investment
securities 61 6 - 68 3,976
Other derivative
income 1,855 1,704 1,790 5,119 3,166
Other noninterest
income 1,836 2,353 1,361 6,826 4,654
----- ----- ----- ----- -----
Total noninterest
income 32,472 46,101 47,250 118,292 103,085
------ ------ ------ ------- -------
Noninterest expense:
Salaries and
employee
benefits 35,100 37,322 37,024 106,450 88,939
Occupancy of
premises,
furniture and
equipment 3,703 3,519 3,246 10,527 8,958
Nonperforming
asset expense (836) (1,198) 613 (1,475) 2,135
Early
extinguishment
of debt - 5,380 3,670 5,380 7,658
FDIC assessment 1,963 1,759 1,766 5,746 4,965
Legal fees, net 2,001 1,117 1,020 3,976 2,633
Loan expense, net 2,195 2,895 1,862 7,461 4,405
Outside services 3,535 2,818 1,082 8,849 2,369
Other noninterest
expense 6,881 6,659 5,616 19,654 14,391
----- ----- ----- ------ ------
Total noninterest
expense 54,542 60,271 55,899 166,568 136,453
------ ------ ------ ------- -------
Income before
income taxes 23,657 26,212 27,647 78,216 67,658
Income tax
expense 9,488 10,595 10,898 31,173 27,215
----- ------ ------ ------ ------
Net income 14,169 15,617 16,749 47,043 40,443
Preferred
dividends and
discounts (3,583) (3,780) (1,757) (11,024) (5,247)
Net income
applicable to
common
stockholders $10,586 $11,837 $14,992 $36,019 35,196
$
===
Basic income per
common share $0.35 $0.39 $0.50 $1.19 1.18
$
Diluted income
per common share 0.34 0.39 0.49 1.17 1.15
Weighted-average
common shares
outstanding 28,936,361 28,687,406 28,430,871 28,741,025 28,220,962
Weighted-average
diluted common
shares
outstanding 29,176,070 28,995,753 28,931,235 29,062,538 28,989,066
SUMMARY OF KEY QUARTERLY FINANCIAL DATA
(dollars in thousands)
Unaudited
---------
2013 2012
---- ----
Third Second First
Quarter Quarter Quarter Fourth Third
Quarter Quarter
-------
Condensed Income Data:
----------------------
Net interest
income $46,027 $41,082 $40,683 $40,510 $37,196
Provision for
loan losses 300 700 300 1,200 900
Total
noninterest
income 32,472 46,101 39,719 51,962 47,250
Total
noninterest
expense 54,542 60,271 51,755 55,284 55,899
------ ------ ------ ------ ------
Income before
income taxes 23,657 26,212 28,347 35,988 27,647
Income tax
expense 9,488 10,595 11,090 14,530 10,898
----- ------ ------ ------ ------
Net income 14,169 15,617 17,257 21,458 16,749
Preferred
dividends and
discounts (3,583) (3,780) (3,661) (1,765) (1,757)
Net income
applicable to
common
stockholders $10,586 $11,837 $13,596 $19,693 $14,992
======= ======= ======= ======= =======
Non-GAAP Measures of
Performance: (1)
--------------------
Revenue $78,438 $87,177 $80,401 $90,984 $84,446
Pre-tax, pre-
provision
operating
earnings 23,060 31,088 29,205 38,579 32,830
Per Share Data:
---------------
Basic income
per common
share $0.35 $0.39 $0.45 $0.66 $0.50
Diluted income
per common
share 0.34 0.39 0.44 0.65 0.49
Tangible book
value per
common share 12.47 12.22 12.69 12.36 11.97
Weighted
average common
shares-basic 28,936,361 28,687,406 28,595,562 28,515,040 28,430,871
Weighted
average common
shares-
diluted 29,176,070 28,995,753 28,961,395 28,895,719 28,931,235
Common shares
outstanding-
end of period 29,333,540 29,098,639 29,088,735 28,792,042 28,756,717
Performance Ratios
(annualized):
------------------
Return on
average assets 0.96% 1.09% 1.22% 1.59% 1.33%
Return on
average common
equity 11.69% 12.66% 14.82% 22.40% 17.62%
Efficiency
ratio (2) 69.54% 69.14% 64.37% 60.76% 66.19%
Average Balance Sheet Data:
(3)
---------------------------
Total assets $5,893,140 $5,747,219 $5,642,192 $5,389,566 $5,026,706
Investments 1,491,554 1,472,316 1,360,213 1,213,422 1,230,953
Cash
equivalents 541 237 555 985 304
Loans held for
sale 626,043 634,327 691,134 663,759 424,508
Loans 3,442,999 3,254,918 3,177,615 3,090,019 2,997,346
Total interest-
earning assets 5,561,137 5,361,798 5,229,517 4,968,185 4,653,111
Interest-
bearing
deposits 2,767,265 2,494,537 2,424,772 2,282,290 2,193,790
Borrowings 1,425,545 1,397,300 1,219,977 1,241,905 1,224,884
Total interest-
bearing
liabilities 4,192,810 3,891,837 3,644,749 3,524,195 3,418,674
Noninterest-
bearing
deposits 1,061,917 1,195,709 1,333,958 1,257,811 1,081,568
Total
stockholders'
equity 545,391 578,142 570,652 500,727 441,133
Tax Equivalent Net Interest
Margin:
---------------------------
Net interest
income as
stated $46,027 $41,082 $40,683 $40,510 $37,196
Add: Tax
equivalent
adjust. -
investment (4) 1,522 1,119 769 545 395
Tax equivalent
adjust. -
loans (4) 27 29 29 30 30
Tax equivalent
net interest
income $47,576 $42,230 $41,481 $41,085 $37,621
======= ======= ======= ======= =======
Net interest
margin without
tax adjust.
(5) 3.29% 3.07% 3.14% 3.25% 3.19%
Net interest
margin -tax
equivalent (4)
(5) 3.41% 3.16% 3.20% 3.30% 3.22%
Yield on
earning assets
without tax
adjust. (5) 3.70% 3.59% 3.68% 3.83% 3.96%
Yield on
earning assets
-tax
equivalent (4)
(5) 3.81% 3.67% 3.74% 3.87% 3.99%
Yield on
interest-
bearing
liabilities
(5) 0.53% 0.71% 0.78% 0.81% 1.05%
Net interest
spread without
tax adjust.
(5) 3.17% 2.88% 2.90% 3.02% 2.91%
Net interest
spread -tax
equivalent (4)
(5) 3.28% 2.96% 2.96% 3.06% 2.95%
Footnotes:
----------
(1) Refer to Reconciliation of
U.S. GAAP Financial Measures
for a reconciliation to
GAAP.
(2) Efficiency ratio is
determined by dividing
noninterest expense by an
amount equal to net interest
income plus noninterest
income, adjusted for gains
or losses from investment
securities.
(3) Average balances are daily
averages.
(4) Adjustment reflects tax-
exempt interest income on an
equivalent before-tax basis
assuming a tax rate of 35.0%
(5) During the second quarter
2013, the Company revised
its methodology for
calculating these metrics to
exclude the valuation
adjustment on mortgages held
at fair value. Prior period
ratios have been adjusted to
reflect this change.
SUMMARY OF KEY YEAR-TO-DATE FINANCIAL DATA
(dollars in thousands)
Unaudited
---------
For the Nine Months
Ended September 30,
--------------------
2013 2012
---- ----
Condensed
Income Data:
-------------
Net interest
income $127,792 $109,376
Provision for
loan losses 1,300 8,350
Total
noninterest
income 118,292 103,085
Total
noninterest
expense 166,568 136,453
------- -------
Income before
income taxes 78,216 67,658
Income tax
expense 31,173 27,215
------ ------
Net income 47,043 40,443
Preferred
dividends and
discounts (11,024) (5,247)
Net income
applicable to
common
stockholders $36,019 $35,196
======= =======
Non-GAAP
Measures of
Performance:
(1)
-------------
Revenue $246,016 $208,610
Pre-tax, pre-
provision
operating
earnings 83,353 81,950
Per Share
Data:
---------
Basic income
per common
share $1.19 $1.18
Diluted income
per common
share 1.17 1.15
Tangible book
value per
common share 12.47 11.97
Weighted
average
common
shares-basic 28,741,025 28,220,962
Weighted
average
common
shares-
diluted 29,062,538 28,989,066
Common shares
outstanding-
end of period 29,333,540 28,727,580
Performance
Ratios
(Annualized):
--------------
Return on
average
assets 1.09% 1.11%
Return on
average
common equity 13.06% 14.66%
Efficiency
ratio (2) 67.71% 65.41%
Average
Balance Sheet
Data: (3)
--------------
Total assets $5,761,770 $4,852,152
Investments 1,441,842 1,268,040
Cash
equivalents 444 657
Loans held for
sale 650,263 313,827
Loans 3,292,817 2,960,691
Total
interest-
earning
assets 5,385,366 4,543,215
Interest-
bearing
deposits 2,563,447 2,246,633
Borrowings 1,348,360 1,196,942
Total
interest-
bearing
liabilities 3,911,807 3,443,575
Noninterest-
bearing
deposits 1,196,198 910,131
Total
stockholders'
equity 564,636 421,722
Tax Equivalent
Net Interest
Margin:
--------------
Net interest
income as
stated $127,792 $109,376
Add: Tax
equivalent
adjust. -
investment
(4) 3,409 1,124
Tax equivalent
adjust. -
loans (4) 85 94
Tax equivalent
net interest
income $131,286 $110,594
======== ========
Net interest
margin
without tax
adjust. (5) 3.17% 3.21%
Net interest
margin -tax
equivalent
(4) (5) 3.26% 3.25%
Yield on
earning
assets
without tax
adjust. (5) 3.65% 4.07%
Yield on
earning
assets -tax
equivalent
(4) (5) 3.74% 4.10%
Yield on
interest-
bearing
liabilities
(5) 0.67% 1.13%
Net interest
spread -
without tax
adjust. (5) 2.98% 2.94%
Net interest
spread -tax
equivalent
(4) (5) 3.07% 2.97%
Footnotes:
----------
(1) Refer to Reconciliation of
U.S. GAAP Financial Measures
for a reconciliation to
GAAP.
(2) Efficiency ratio is
determined by dividing
noninterest expense by an
amount equal to net interest
income plus noninterest
income, adjusted for gains
or losses from investment
securities.
(3) Average balances are daily
averages.
(4) Adjustment reflects tax-
exempt interest income on an
equivalent before-tax basis
assuming a tax rate of 35.0%
(5) During the second quarter
2013, the Company revised
its methodology for
calculating these metrics to
exclude the valuation
adjustment on mortgages held
at fair value. Prior period
ratios have been adjusted to
reflect this change.
SUMMARY OF KEY PERIOD-END FINANCIAL DATA
(dollars in thousands)
Unaudited
---------
Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
2013 2013 2013 2012 2012
---- ---- ---- ---- ----
Condensed Balance Sheet
Data:
-----------------------
Investment
securities $1,420,906 $1,434,326 $1,429,971 $1,267,757 $1,212,139
Loans held for
sale 498,276 693,937 668,937 938,379 422,621
Loans 3,628,658 3,302,548 3,222,794 3,168,303 3,085,693
Allowance for
loan losses 85,013 83,576 82,150 82,191 79,667
Total assets 6,014,694 5,901,370 5,770,432 5,802,410 5,136,975
Total deposits 3,697,196 3,692,426 3,794,394 3,528,342 3,558,682
Total
borrowings 1,652,258 1,515,462 1,256,653 1,582,992 1,010,315
Total
stockholders'
equity 544,719 560,274 573,332 559,603 447,574
Asset Quality Ratios:
---------------------
Nonperforming
loans $86,045 $69,539 $71,404 $59,537 $62,096
Nonperforming
assets 100,434 89,333 98,622 83,796 90,955
Allowance for
loan losses to
total loans
(excluding
loans held for
sale) 2.34% 2.53% 2.55% 2.59% 2.58%
Allowance for
loan losses to
nonperforming
loans 98.80% 120.19% 115.05% 138.05% 128.30%
Nonperforming
assets to
total loans
plus
repossessed
property (1) 2.76% 2.69% 3.03% 2.62% 2.92%
Capital Resources (Taylor
Capital Group, Inc.):
-------------------------
Total Capital
(to Risk
Weighted
Assets) 14.15% 15.22% 16.50% 16.27% 14.41%
Tier I Capital
(to Risk
Weighted
Assets) 12.89% 13.96% 14.45% 14.21% 12.29%
Leverage (to
average
assets) 10.30% 10.87% 10.91% 11.14% 9.43%
Total Capital $663,917 $679,379 $701,381 $685,998 $553,977
Tier I Capital 604,920 623,221 614,382 599,504 472,221
(1) During the fourth quarter of
2012, the Company revised
its methodology for
calculating this metric to
exclude loans held for sale
from total loans. Prior
period ratios have been
adjusted to reflect this
change.
COMPOSITION OF LOAN PORTFOLIO (unaudited)
(dollars in thousands)
The following table presents the composition of the Company's loan portfolio as of the dates indicated:
September 30, June 30, 2013 December 31,
2013 2012
-------------- ------------- -------------
Loans Balance Percent Balance Percent Balance Percent
of of of
Gross Gross Gross
Loans Loans Loans
----- ------- ------- ------- ------- -------
Commercial and
industrial $1,902,572 52.3% $1,707,502 51.6% $1,590,587 50.1%
Commercial real
estate secured 1,113,533 30.6 1,036,303 31.3 965,978 30.4
Residential
construction
and land 49,796 1.3 42,606 1.3 45,903 1.5
Commercial
construction
and land 115,698 3.2 119,839 3.6 103,715 3.3
Lease
receivables 108,808 3.0 93,999 2.8 50,803 1.6
------- ------
Total
commercial
loans 3,290,407 90.4 3,000,249 90.6 2,756,986 86.9
Consumer 348,362 9.6 311,115 9.4 416,635 13.1
------- --- ------- --- ------- ----
Gross loans 3,638,769 100.0% 3,311,364 100.0% 3,173,621 100.0%
===== ===== =====
Less: Unearned
discount (10,111) (8,816) (5,318)
------- ------ ------
Total loans 3,628,658 3,302,548 3,168,303
Less: Loan
loss allowance (85,013) (83,576) (82,191)
------- ------- -------
Net loans $3,543,645 $3,218,972 $3,086,112
======== ======== ========
Loans Held for
Sale $498,276 $693,937 $938,379
======== ======== ========
The following table provides details of the Company's commercial real estate portfolio:
September 30, June 30, 2013 December 31,
2013 2012
-------------- ------------- -------------
Commercial real Balance Percent Balance Percent Balance Percent
estate of of of
secured: Total Total Total
--------------- ------- ------- ------- ------- ------- -------
Commercial non-
owner
occupied:
Retail strip
centers or
malls $104,595 9.4% $105,305 10.2% $109,266 11.3%
Office/mixed
use property 121,683 10.9 110,174 10.6 113,216 11.7
Commercial
properties 102,683 9.2 99,855 9.6 111,852 11.6
Specialized -
other 99,409 8.9 73,133 7.1 69,827 7.2
Other
commercial
properties 20,739 1.9 24,806 2.4 28,870 3.0
Farmland 2,285 0.3 2,314 0.2 - -
----- --- ----- --- --- ---
Subtotal
commercial
non-owner
occupied 451,394 40.6 415,587 40.1 433,031 44.8
Commercial
owner-
occupied 537,208 48.2 498,057 48.1 425,723 44.1
Multi-family
properties 124,931 11.2 122,659 11.8 107,224 11.1
------- ---- ------- ---- ------- ----
Total
commercial
real estate $1,113,533 100.0% $1,036,303 100.0% $965,978 100.0%
secured
CREDIT QUALITY (unaudited)
(dollars in thousands)
At or for the Three Months Ended
--------------------------------
September 30, June 30, December 31,
2013 2013 2012
---- ---- ----
Nonperforming
Assets:
-------------
Loans contractually
past due 90 days or
more but still
accruing interest $ - $ - $ -
Nonaccrual loans:
Commercial and
industrial $19,893 $16,577 $16,705
Commercial real
estate secured 34,584 20,900 14,530
Residential
construction and
land - - 4,495
Commercial
construction and
land 25,746 26,272 15,220
Consumer 5,822 5,790 8,587
----- ----- -----
Total nonaccrual
loans 86,045 69,539 59,537
------ ------ ------
Total nonperforming
loans 86,045 69,539 59,537
Other real estate
owned and
repossessed assets 14,389 19,794 24,259
------ ------ ------
Total nonperforming
assets $100,434 $89,333 $83,796
======== ======= =======
Other Credit Quality
Information:
--------------------
Commercial
criticized and
classified loans
(1)
Special mention $47,919 $43,938 $58,025
Substandard 23,547 26,514 22,608
Nonaccrual 80,223 63,749 50,950
Total commercial
criticized and
classified loans $151,689 $134,201 $131,583
======== ======== ========
Loans contractually
past due 30 - 89
days and still
accruing $5,658 $4,522 $6,111
Performing
restructured loans 20,031 21,928 17,456
Recorded balance of
impaired loans 100,464 86,700 70,343
Allowance for loan
losses related to
impaired loans 16,169 16,330 12,057
Allowance for Loan
Losses Summary:
------------------
Allowance at
beginning of period $83,576 $82,150 $79,667
(Charge-offs), net
of recoveries:
Commercial and
commercial real
estate 1,291 870 1,793
Real estate -
construction and
land - 48 125
Consumer (154) (192) (594)
Total net (charge-
offs) recoveries 1,137 726 1,324
Provision for loan
losses 300 700 1,200
Allowance at end of
period $85,013 $83,576 $82,191
======= ======= =======
Key Credit Ratios:
------------------
Nonperforming loans
to total loans (2) 2.37% 2.11% 1.88%
Nonperforming assets
to total loans plus
repossessed
property (2) 2.76% 2.69% 2.62%
Nonperforming assets
to total assets 1.67% 1.51% 1.44%
Annualized net
charge-offs
(recoveries) to
average total loans
(2) (0.13)% (0.09)% (0.17)%
Allowance to total
loans at end of
period (excluding
loans held for
sale) 2.34% 2.53% 2.59%
Allowance to
nonperforming loans 98.80% 120.19% 138.05%
30 - 89 days past
due to total loans
(2) 0.16% 0.14% 0.19%
(1) Commercial criticized and
classified loans excludes
consumer loans.
During the fourth quarter
2012, the Company revised
its methodology for
calculating these metrics
to exclude loans held for
(2) sale from total loans.
LOAN PORTFOLIO AGING (unaudited)
(dollars in thousands)
As of September 30, 2013
------------------------
30-89 >90 Days Total % of Allowance
Days Past Loans Total for Loan
Past Due and Loans Loss
Due Still Allocation
Accruing Nonaccrual Current
------ -------- ---------- ------- ------ ----- ---------
Commercial and
industrial $ - $ - $19,893 $1,882,679 $1,902,572 52% $38,092
Commercial real
estate
secured:
Commercial non-
owner
occupied:
Retail strip
centers or
malls - - 15,854 88,741 104,595 3% 4,428
Office/mixed
use property - - 1,177 120,506 121,683 3% 2,166
Commercial
properties - - 408 102,275 102,683 3% 2,113
Specialized -
other - - 4,541 94,868 99,409 3% 1,489
Other
commercial
properties - - - 20,739 20,739 1% 326
Farmland - - - 2,285 2,285 - % 36
--- --- --- ----- ----- --- --- ---
Subtotal
commercial
non-owner
occupied - - 21,980 429,414 451,394 13% 10,558
Commercial
owner-
occupied 290 - 12,355 524,563 537,208 15% 8,918
Multi-family
properties 156 - 249 124,526 124,931 3% 2,195
--- --- --- ------- ------- --- -----
Total
commercial
real 446 - 34,584 1,078,503 1,113,533 31% 21,671
estate secured
Residential
construction
and land:
Residential
construction - - - 33,680 33,680 1% 4,366
Land - - - 16,116 16,116 - % 2,088
--- --- --- ------ ------ --- --- -----
Total
residential - - - 49,796 49,796 1% 6,454
construction
and land
Commercial
construction
and land - - 25,746 89,952 115,698 3% 10,251
Lease
receivables,
net of
unearned
discount - - - 98,697 98,697 3% 592
--- --- --- ------ ------ --- ---
Total
commercial
loans 446 - 80,223 3,199,627 3,280,296 90% 77,060
Consumer loans 5,212 - 5,822 337,328 348,362 10% 7,953
----- --- ----- ------- ------- --- -----
Total loans $5,658 $ - $86,045 $3,536,955 $3,628,658 100% $85,013
====== === === ======= ======== ======== === =======
FUNDING LIABILITIES (unaudited)
(dollars in thousands)
The following table presents the distribution of the Company's average deposit account balances for the periods indicated:
For the Three Months Ended
--------------------------
September 30, June 30, 2013 September 30,
2013 2012
-------------- ------------- --------------
Average Percent Average Percent Average Percent
Balance of Balance of Balance of
Deposits Deposits Deposits
-------- -------- -------- -------- -------- --------
Noninterest-
bearing
deposits $1,061,917 27.7% $1,195,709 32.4% $1,081,568 33.0%
Interest-bearing
deposits:
Commercial
interest
checking 315,722 8.2 159,627 4.3 - -
NOW
accounts 597,461 15.6 674,375 18.3 376,980 11.5
Savings
deposits 41,236 1.1 40,920 1.1 39,690 1.2
Money
market
accounts 783,974 20.5 768,425 20.8 700,357 21.4
Brokered
money
market
deposits - - - - 32,365 1.0
Certificates
of
deposit 546,152 14.3 550,454 14.9 560,962 17.1
Brokered
certificates
of
deposit 220,323 5.8 162,299 4.4 255,219 7.8
CDARS time
deposits 224,083 5.9 127,802 3.5 206,674 6.3
Public
time
deposits 38,315 0.9 10,635 0.3 21,543 0.7
------ --- ------ --- ------ ---
Total
interest-
bearing
deposits 2,767,266 72.3 2,494,537 67.6 2,193,790 67.0
--------- ---- --------- ---- --------- ----
Total
deposits $3,829,183 100.0% $3,690,246 100.0% $3,275,358 100.0%
======== ===== ======== ===== ======== =====
The following table sets forth the period end balances of total deposits as of each
of the dates indicated below.
September June 30, December
30, 2013 31, 2012
2013
----
Noninterest-
bearing
deposits $1,010,789 $1,138,839 $1,179,724
Interest-
bearing
deposits:
Commercial
interest
checking 305,111 336,903 -
NOW
accounts 632,105 537,103 573,133
Savings
accounts 40,166 41,576 39,915
Money
market
accounts 761,590 771,382 744,791
Brokered
money
market
deposits - - 27,840
Certificates
of
deposit 522,433 557,656 561,998
Brokered
certificates
of
deposit 235,405 160,408 199,604
CDARS time
deposits 135,013 132,552 186,187
Public
time
deposits 54,584 16,007 15,150
------ ------ ------
Total
interest-
bearing
deposits 2,686,407 2,553,587 2,348,618
--------- --------- ---------
Total
deposits $3,697,196 $3,692,426 $3,528,342
========== ======== ========
SUMMARY OF QUARTERLY SEGMENT FINANCIAL DATA (unaudited)
(dollars in thousands)
For the Three Months Ended
--------------------------
Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
2013 2013 2013 2012 2012
---- ---- ---- ---- ----
BANKING:
--------
Net
interest
income $40,780 $37,175 $36,181 $36,696 $36,530
Provision
for loan
losses 233 946 292 1,200 805
Total
noninterest
income 7,284 7,528 7,647 7,518 6,527
Total
noninterest
expense 23,473 25,770 25,468 25,817 26,389
Income
before
income
taxes 24,358 17,987 18,068 17,197 15,863
Income tax
expense 9,621 7,105 7,136 6,793 6,266
----- -----
Net income $14,737 $10,882 $10,932 $10,404 $9,597
======= ======= ======= ======= ======
For the Three Months Ended
--------------------------
Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
2013 2013 2013 2012 2012
---- ---- ---- ---- ----
MORTGAGE
BANKING:
---------
Net
interest
income $6,499 $5,742 $6,414 $5,902 $4,575
Provision
for loan
losses 67 (246) 8 - 95
Noninterest
income:
Loan
origination
income 17,249 29,355 26,430 38,906 39,640
Net
servicing
income 7,896 9,176 5,600 5,495 1,040
----- ----- ----- ----- -----
Total
noninterest
income 25,145 38,531 32,030 44,401 40,680
Total
noninterest
expense 29,063 29,086 26,287 29,466 25,840
Income
before
income
taxes 2,514 15,433 12,149 20,837 19,320
Income tax
expense
(benefit) (19) 4,928 3,375 7,540 7,060
----- -----
Net income $2,533 $10,505 $8,774 $13,297 $12,260
====== ======= ====== ======= =======
Origination
Volume $1,596,431 $1,874,248 $1,907,642 $1,947,356 $1,384,726
Refinance % 37% 62% 77% 77% 69%
Purchase % 63% 38% 23% 23% 31%
Period End Balances
-------------------
Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
2013 2013 2013 2012 2012
---- ---- ---- ---- ----
Mortgage
servicing
book $16,431,269 $12,740,176 $10,506,034 $8,533,785 $6,237,912
Mortgage
servicing
rights 184,237 145,729 106,576 78,917 53,218
The Company has identified two operating segments for purposes of financial reporting: Banking and Mortgage Banking. The Banking operating segment includes commercial banking, asset-based lending, equipment finance, retail banking and all other functions that support those units. The Mortgage Banking operating segment originates mortgage loans for sale to investors and for the Company's portfolio through its retail and broker channels. This segment also services mortgage loans for various investors and for loans owned by the Company. Segment results are presented based on our management accounting practices. The information presented in our segment reporting is based on internal allocations, which involve management judgment and is subject to periodic adjustments and enhancements. In addition, the Company utilizes an Other category that includes certain parent company activities and residual income tax expense or benefit.
RECONCILIATION OF U.S. GAAP FINANCIAL MEASURES (unaudited)
(dollars in thousands)
The following, as of the dates indicated, reconciles the income before income taxes to pre-tax, pre-provision operating earnings.
For the Three Months Ended
--------------------------
September 30, June March
30, 31, December 31, September 30,
2013 2013 2013 2012 2012
---- ---- ---- ---- ----
Income before
income taxes $23,657 $26,212 $28,347 $35,988 $27,647
Add back
(subtract):
Credit costs:
Provision for
loan losses 300 700 300 1,200 900
Nonperforming
asset expense (836) (1,198) 559 2,816 613
Credit costs
subtotal (536) (498) 859 4,016 1,513
Other:
Gain on sales of
investment
securities (61) (6) (1) (1,488) -
Early
extinguishment
of debt - 5,380 - 63 3,670
Other subtotal (61) 5,374 (1) (1,425) 3,670
--- ----- --- ------ -----
Pre-tax, pre-
provision
operating
earnings $23,060 $31,088 $29,205 $38,579 $32,830
======= ======= ======= ======= =======
The following, as of the dates indicated, details the components of revenue.
For the Three Months Ended
--------------------------
September 30, June March
30, 31, December 31, September 30,
2013 2013 2013 2012 2012
---- ---- ---- ---- ----
Net interest
income $46,027 $41,082 $40,683 $40,510 $37,196
Noninterest
income 32,472 46,101 39,719 51,962 47,250
Add back
(subtract):
Gain on sales of
investment
securities (61) (6) (1) (1,488) -
Revenue $78,438 $87,177 $80,401 $90,984 $84,446
======= ======= ======= ======= =======
The Company's accounting and reporting policies conform to U.S. generally accepted accounting principles ("GAAP") and general practice within the banking industry. Management uses certain non-GAAP financial measures to evaluate the Company's financial performance and has provided the non-GAAP measures of pre-tax, pre-provision operating earnings and of revenue. In the pre-tax, pre-provision operating earnings non-GAAP financial measure, the provision for loan losses, nonperforming asset expense and certain non-recurring items, such as gains and losses on investment securities and early extinguishment of debt are excluded from the determination of operating results. The non-GAAP measure of revenue is calculated as the sum of net interest income and noninterest income adjusted by investment securities gains and losses. Management believes that these measures are useful because they provide a more comparable basis for evaluating financial performance from period to period.
SOURCE Taylor Capital Group, Inc.
