2014

Taylor Capital Group Reports Net Income of $14.2 Million for the Third Quarter of 2013 Posts 10% Commercial Loan Growth for the Quarter

Net Interest Margin Increases 25 Basis Points

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 in thousands)

3Q13


2Q13


Change from 2Q13 to 3Q13


3Q12


Change from 3Q12 to 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,

2013


June 30,

2013


December 31,

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,

2013


Jun 30, 2013


Sep 30,

2012


Sep 30,

2013


Sep 30,

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 Quarter


Second Quarter


First Quarter


Fourth

Quarter


Third

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,

2013


Jun 30,

2013


Mar 31,

2013


Dec 31,

2012


Sep 30,

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, 2013



June 30, 2013



December 31, 2012


Loans


Balance


Percent of Gross Loans


Balance


Percent of Gross Loans


Balance


Percent of Gross 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, 2013



June 30, 2013



December 31, 2012


Commercial real estate secured:


Balance


Percent of Total


Balance


Percent of Total


Balance


Percent of 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

        secured         


$

1,113,533



100.0

%


$

1,036,303



100.0

%


$

965,978



100.0

%

 

 

CREDIT QUALITY (unaudited)

(dollars in thousands)




At or for the Three Months Ended



September 30,

2013


June 30,

2013


December 31,

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.

(2)

During the fourth quarter 2012, the Company revised its methodology for calculating these metrics to exclude loans held for sale from total loans. 

 

 

LOAN PORTFOLIO AGING (unaudited)

(dollars in thousands)




As of September 30, 2013



30-89 Days Past Due


>90 Days Past Due and Still Accruing


Nonaccrual


Current


Total Loans


% of Total Loans


Allowance for Loan Loss Allocation

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

        estate secured         


446





34,584



1,078,503



1,113,533



31

%


21,671

















Residential construction and land:















Residential construction








33,680



33,680



1

%


4,366


Land








16,116



16,116



%


2,088


     Total residential

        construction and land        








49,796



49,796



1

%


6,454

















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, 2013



June 30, 2013



September 30, 2012



Average Balance


Percent of Deposits


Average Balance


Percent of Deposits


Average Balance


Percent of 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 30, 2013


June 30,

2013


December 31, 2012

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,

2013


Jun 30,

2013


Mar 31,

2013


Dec 31,

 2012


Sep 30,

 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,

2013


Jun 30,

2013


Mar 31,

2013


Dec 31,

 2012


Sep 30,

 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,

2013


Jun 30,

2013


Mar 31,

2013


Dec 31,

 2012


Sep 30,

 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,

2013


June 30,

2013


March 31,

2013


December 31,

 2012


September 30,

 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,

2013


June 30,

2013


March 31,

 2013


December 31,

 2012


September 30,

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.



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http://www.taylorcapitalgroup.com

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