TAYLOR CAPITAL GROUP INC 
By CHICAGO, April 29, 2014 /PRNewswire/ -- Taylor Capital Group, Inc. (the "Company") (NASDAQ: TAYC), the parent company of Cole Taylor Bank (the "Bank"), today reported results for the first quarter of 2014.
Net income for the quarter was $9.9 million, compared to $15.0 million for the fourth quarter of 2013. Net income applicable to common stockholders for the quarter was $9.9 million, or $0.32 per diluted share, compared to $10.1 million, or $0.33 per diluted share, for the fourth quarter of 2013. The results for the first quarter of 2014 and the fourth quarter of 2013 also included $0.7 million and $4.5 million, respectively, of pre-tax expense relating to the previously announced pending merger with MB Financial, Inc. ("MB Financial") and other strategic initiatives and there were no preferred dividends recorded in the first quarter of 2014 as compared to $4.9 million in the fourth quarter of 2013. The following table compares selected additional financial information for the periods indicated:
(dollars in millions) 1Q14 4Q13 Change 1Q13 Change
from 4Q13 from 1Q13
to 1Q14 to 1Q14
------- -------
Total commercial
loans (period-end) $3,370.4 $3,359.4 0.3% $2,817.4 19.6 %
Average total
deposits $3,837.9 $3,867.4 (0.8)% $3,758.7 2.1 %
Net interest income $43.9 $45.2 (2.9) % $40.7 7.9 %
Net interest margin 3.49 % 3.41% 8 bps 3.20 % 29 bps
Mortgage banking
revenue $23.1 $27.2 (15.1) % $32.0 (27.8) %
Loan loss provision $2.6 $1.1 136.4 % $0.3 766.7 %
Net income $9.9 $15.0 (34.0) % $17.3 (42.8) %
In commenting on the results, Mark A. Hoppe, President and Chief Executive Officer of the Company said, "We continue to benefit from our long-standing diversification strategy. Our national asset based lending and equipment financing businesses grew significantly with asset based lending having their most profitable quarter ever. That growth helped offset the seasonally light demand in the rest of our commercial loan portfolio. Our net interest margin was 3.49% for the quarter despite the highly competitive loan pricing in our markets. We also remain focused and disciplined on credit, and are pleased to report our nonaccrual loans and the ratio of nonperforming assets to total assets are both down from year-end 2013.
In another positive development in the first quarter, Cole Taylor Mortgage completed the transfer of loans to our in-house servicing platform, which provides more flexibility and control of our customers' experience than using a third party servicer," Hoppe continued. "While our mortgage origination volume of $1.1 billion for the quarter was down as compared to the previous quarter, we believe this amount represents an increase in U.S. market share in a difficult residential mortgage environment. We expanded our higher-margin retail origination channel, opening five new retail lending offices this quarter and now have 46 offices in 20 states.
In late February, stockholders of both Taylor Capital and MB Financial overwhelmingly approved the Agreement and Plan of Merger between our two organizations," Hoppe added. "Teams of colleagues from both companies are focused on the transaction, and they are making substantial progress in a collaborative manner. Of course, most of our colleagues remain dedicated to our top priority: providing our clients the same high quality service to which they've grown accustomed. I am excited for the future, knowing that we are extremely well positioned to benefit from the numerous opportunities ahead for our customers, employees and shareholders."
FIRST QUARTER 2014 HIGHLIGHTS - COMPARISON TO FOURTH QUARTER 2013
-- Total commercial loans grew $11.0 million, or 0.3%, from December 31,
2013
-- Net interest margin was 3.49% for the first quarter of 2014, up 8 basis
points from the fourth quarter of 2013
-- Mortgage banking revenue was $23.1 million for the first quarter of
2014, as compared to $27.2 million for the fourth quarter of 2013
-- Mortgage origination volume was $1.05 billion for the first quarter of
2014, as compared to $1.17 billion from the fourth quarter of 2013
-- As of March 31, 2014, the Company's Tier I Risk Based Capital ratio was
11.67%, its Total Risk Based Capital ratio was 12.93% and its Tier I
Capital to Average Assets leverage ratio was 9.73%
-- Return on Average Common Equity was 10.44% for the first quarter of
2014, as compared to 10.84% for the fourth quarter of 2013
-- Return on Average Assets was 0.71% for the first quarter of 2014, as
compared to 1.03% for the fourth quarter of 2013
First quarter 2014 credit quality indicators as compared to the fourth quarter of 2013
-- Nonperforming loans were $72.9 million and 2.00% of total loans at March
31, 2014, down 10.9% from $81.8 million and 2.24% of total loans at
December 31, 2013
-- At March 31, 2014, commercial criticized and classified loans((1))
totaled $184.6 million, compared to $188.0 million at December 31, 2013
-- Other real estate owned ("OREO") and repossessed assets were $10.0
million at March 31, 2014, and $10.0 million at December 31, 2013
-- The allowance for loan losses as a percent of nonperforming loans was
113.6% at March 31, 2014, compared to 100.0% at December 31, 2013
-- Credit costs((2)) were $2.8 million for the first quarter of 2014,
compared to $3.3 million for the fourth quarter of 2013
FIRST QUARTER 2014 - COMPARISON TO FIRST QUARTER 2013
-- Total commercial loans increased to $3.37 billion at March 31, 2014, up
$553.0 million, or 19.6%, from March 31, 2013
-- Core deposits grew to $2.74 billion at March 31, 2014, up 0.3% from
March 31, 2013
-- Mortgage origination volume was $1.05 billion for the first quarter of
2014, as compared to $1.91 billion for the first quarter of 2013
-- Return on Average Common Equity was 10.44% for the first quarter of 2014
as compared to 14.82% for the first quarter of 2013
FIRST QUARTER 2014 PERFORMANCE OVERVIEW
Results of Operations - Comparisons to Fourth Quarter 2013
Net income for the first quarter of 2014 was $9.9 million, compared to $15.0 million for the fourth quarter of 2013, a decrease of 34.0%. Net income applicable to common stockholders for the first quarter of 2014 was $9.9 million, compared to $10.1 million for the fourth quarter of 2013.
Income before income taxes was $15.8 million for the first quarter of 2014, compared to $21.7 million for the fourth quarter of 2013, a decrease of 27.2%. The decrease in income before income taxes was primarily due to a $5.9 million decrease in gain on sales of investment securities and a $4.1 million volume-related decrease in mortgage banking revenue. Partially offsetting these items was a reduction in occupancy of premises, furniture and equipment expense due to the prior quarter including a one-time $3.3 million early lease termination cost related to the pending merger with MB Financial.
Pre-tax, pre-provision operating earnings((3)) were $18.5 million for the first quarter of 2014, compared to $19.1 million for the fourth quarter of 2013, a decrease of 3.1%, primarily due to a volume-related decrease in the mortgage segment.
Revenue((4))
Revenue totaled $72.9 million for the first quarter of 2014, compared to $79.0 million for the fourth quarter of 2013, a decrease of 7.7%.
Net interest income was $43.9 million for the first quarter of 2014, as compared to $45.2 million for the fourth quarter of 2013. The decrease in net interest income of $1.3 million was primarily the result of lower interest income from investment securities due to a planned reduction in the securities portfolio in the fourth quarter of 2013.
Noninterest income, excluding investment security gains and losses, was $29.1 million for the first quarter of 2014, compared to $33.7 million for the fourth quarter of 2013, a decrease of 13.6%. The change in noninterest income, as compared to the fourth quarter of 2013, was primarily due to a $4.1 million decrease in mortgage banking revenue due to both a decline of 10.0% in mortgage origination volume, which led to a $2.7 million decrease in origination income and a $1.5 million decrease in servicing revenue primarily due to a reduction in the fair market value of the servicing asset. In addition, other derivative income decreased $1.5 million due to a reduction in customer swap activity. Partially offsetting these decreases was a $685,000 increase in other noninterest income associated with certain other investments.
Noninterest Expense
Noninterest expense, excluding nonperforming asset expense, was $54.4 million for the first quarter of 2014, compared to $59.8 million for the fourth quarter of 2013, a decrease of $5.4 million, or 9.0%. The decrease was primarily due to the fourth quarter of 2013 including $3.3 million of early lease termination expense, and other costs - which are primarily legal fees - related to the pending merger with MB Financial. In addition, salaries and employee benefits decreased $1.4 million from the fourth quarter of 2013. The decrease in salaries and employee benefits was due to a $3.1 million decrease in performance-based incentive compensation primarily related to a decrease in origination volume at Cole Taylor Mortgage and a $1.4 million decrease in salary costs as staffing levels adjusted to the reduced origination volume. Partially offsetting these decreases was a $3.0 million increase in employee benefits primarily due to certain employment tax expenses that are typically higher in the first quarter of each year.
Preferred Dividends
There were no preferred dividends or discounts in the first quarter of 2014 as compared to $4.9 million in the fourth quarter of 2013. This decrease was due to two reasons. First, as required by the Series A Preferred stock and in connection with the repurchase and redemption of the Series B Preferred stock, the $2.0 million quarterly dividend on the Series A Preferred stock, which typically would have been recorded in the first quarter of 2014, was instead declared and recorded in the fourth quarter of 2013. In addition, the Company's Series B Preferred stock was fully repaid in 2013 and has been cancelled.
Results of Operations - Comparisons to First Quarter 2013
Net income for the first quarter of 2014 was $9.9 million, compared to $17.3 million for the first quarter of 2013, a decrease of 42.8%. Net income applicable to common stockholders for the first quarter of 2014 was $9.9 million, compared to $13.6 million for the first quarter of 2013.
Income before income taxes was $15.8 million for the first quarter of 2014, compared to $28.3 million for the first quarter of 2013, a decrease of 44.2%, primarily due to a $9.0 million volume-related decrease in mortgage banking revenue.
Pre-tax, pre-provision operating earnings totaled $18.5 million for the first quarter of 2014, compared to $29.2 million for the first quarter of 2013, a decrease of 36.6%. The decrease was also primarily due to lower mortgage banking revenue.
Revenue
Revenue totaled $72.9 million for the first quarter of 2014, compared to $80.4 million for the first quarter of 2013, a decrease of 9.3%.
Net interest income was $43.9 million for the first quarter of 2014, as compared to $40.7 million for the first quarter of 2013, an increase of 7.9%. The increase in net interest income was the result of the combination of a $2.0 million reduction in interest expense and a $1.2 million increase in interest income. Interest expense decreased due to lower rates paid on deposit balances and the early retirement of the Company's 8% subordinated notes in June 2013. The increase in interest income was primarily due to growth in the commercial loan portfolio.
Noninterest income, excluding investment security gains and losses, was $29.1 million for the first quarter of 2014, compared to $39.7 million for the first quarter of 2013, a decrease of 26.7%. The decrease was primarily due to a net $9.0 million decrease in mortgage banking revenue. Mortgage loan origination income decreased $15.1 million due to a reduction in mortgage loan origination volume. Partially offsetting this decrease was a $6.2 million increase in net mortgage servicing income. Servicing income increased due to the combination of retention of mortgage servicing rights ("MSRs") on loans originated by Cole Taylor Mortgage, purchases of MSRs and an increase in the valuation of the MSR asset. Total mortgage originations were $1.05 billion in the first quarter of 2014, as compared to $1.91 billion in the first quarter of 2013. In addition, other derivative income decreased $1.6 million due to a reduction in customer swap activity.
Noninterest Expense
Noninterest expense, excluding nonperforming asset expense, was $54.4 million for the first quarter of 2014, compared to $51.2 million for the first quarter of 2013, an increase of 6.2%. The increase was due to a $1.1 million increase in outside services primarily due to one-time costs associated with transferring the bulk of Cole Taylor Mortgage's loan servicing portfolio in-house and a $802,000 increase in computer processing costs primarily related to the expansion of retail mortgage lending offices from 26 offices at the end of the first quarter 2013 to 46 offices at the end of the first quarter 2014.
Credit Quality
Loan Portfolio Performance and Credit Quality
Total commercial criticized and classified loans were $184.6 million at March 31, 2014, as compared to $188.0 million at December 31, 2013 and $138.5 million at March 31, 2013. The $46.1 million increase in commercial criticized and classified loans from March 31, 2013 to March 31, 2014 was primarily due to a $24.7 million net increase in loans classified as substandard and a $20.6 million net increase in special mention loans. The $24.7 million increase in substandard loans was primarily due to migrations into this category net of upgrades and payoffs of $15.1 million of commercial and industrial loans and $7.8 million of commercial real estate secured loans. The $20.6 million increase in special mention loans was primarily due to migrations into this category net of payoffs and upgrades of certain commercial and industrial loans. The decrease in criticized and classified loans from year-end 2013 was largely attributable to net payoffs of certain commercial real estate portfolio loans previously classified as nonaccrual, partially offset by the net migration of certain loans into the substandard category.
Nonperforming loans were $72.9 million at March 31, 2014, as compared to $81.8 million at December 31, 2013 and $71.4 million at March 31, 2013. The decrease in the first quarter of 2014 of $8.9 million was primarily due to payoffs of loans previously classified as nonaccrual.
OREO and repossessed assets were $10.0 million at March 31, 2014, as compared to $10.0 million at December 31, 2013 and $27.2 million at March 31, 2013. We continue to actively manage the resolution process.
Total nonperforming assets were $82.9 million at March 31, 2014, down from $91.9 million at December 31, 2013 and $98.6 million at March 31, 2013. Nonperforming assets to total assets were 1.47% at March 31, 2014, down from 1.62% at December 31, 2013 and 1.71% at March 31, 2013.
Allowance and Provision for Loan Losses
The allowance for loan losses was $82.9 million at March 31, 2014, compared to $81.9 million at December 31, 2013 and $82.2 million at March 31, 2013. The allowance for loan losses as a percent of nonperforming loans was 113.65% at March 31, 2014, as compared to 100.05% at December 31, 2013 and 115.05% at March 31, 2013.
The provision for loan losses was $2.6 million for the first quarter of 2014, compared to $1.1 million for the fourth quarter of 2013 and $300,000 for the first quarter of 2013. The increase of $1.5 million in the first quarter of 2014 as compared to the fourth quarter of 2013 was primarily due to the establishment of specific reserves for certain loans in both the commercial and industrial and commercial real estate secured portfolios.
Balance Sheet
Assets
Total assets at March 31, 2014 were $5.65 billion, down slightly from $5.69 billion at December 31, 2013.
Cash and cash equivalents were $138.6 million as of March 31, 2014, as compared to $90.8 million as of December 31, 2013. The increase of $47.8 million was primarily due to timing as March 31, 2014 was a Monday, which tends to be a higher-balance cash day than other weekdays.
Investment securities were $1.10 billion at March 31, 2014, down 1.8% from $1.12 billion at December 31, 2013.
Loans held for sale were $436.1 million at March 31, 2014, a decrease of 8.0% from December 31, 2013. The decrease was primarily the result of reduced mortgage origination volume for the first quarter 2014 by Cole Taylor Mortgage.
Net loans at March 31, 2014 were $3.57 billion, as compared to $3.57 billion at December 31, 2013. Commercial and industrial loans were $1.94 billion at March 31, 2014, as compared to $1.94 billion at December 31, 2013. Commercial real estate secured loans were $1.11 billion at March 31, 2014, down slightly from $1.12 billion at December 31, 2013. Commercial construction and land loans were $132.7 million at March 31, 2014, up from $121.7 million at December 31, 2013 due to continued diversification of our loan portfolio across several construction sectors. Lease receivables were $143.1 million at March 31, 2014, up $11.1 million, or 8.4%, from December 31, 2013, primarily as a result of new leases sourced by our recently expanded direct sales channel. Consumer loans, which consist primarily of residential mortgages, were $294.5 million at March 31, 2014, down $6.8 million from December 31, 2013.
Investment in Federal Home Loan Bank and Federal Reserve Bank ("FHLB") stock was $49.6 million as of March 31, 2014, as compared to $64.6 million as of December 31, 2013. The decrease of $15.0 million in these investments was due to the reduction in the Bank's use of short term FHLB borrowings.
The MSR asset increased $11.6 million in the first quarter to $227.7 million as of March 31, 2014. The unpaid principal balance of loans serviced was $20.14 billion as of March 31, 2014, up 8.9% from December 31, 2013. The Company invests in MSRs 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 March 31, 2014 were $5.17 billion, as compared to $5.22 billion at December 31, 2013.
Total deposits were $3.95 billion at March 31, 2014, compared to $3.65 billion at December 31, 2013, an increase of 8.3%. Total deposits increased in the first quarter primarily due to a planned increase in time deposits, both brokered and CDARS, for liquidity management purposes. Total time deposits increased $339.4 million to $1.21 billion at March 31, 2014. Partially offsetting this increase, brokered money market deposits decreased $45.0 million to $6.1 million at March 31, 2014, due to timing of customer activity.
Average total deposits for the first quarter of 2014 decreased slightly to $3.84 billion from $3.87 billion in the fourth quarter of 2013.
Short-term borrowings decreased $335.2 million in the first quarter to $1.04 billion as of March 31, 2014, primarily due to a planned shift in the funding mix to reduce short-term borrowings and increase time deposits.
Total stockholders' equity increased $18.0 million from $464.6 million at December 31, 2013 to $482.6 million at March 31, 2014, primarily due to retaining the net income available to common stockholders earned in the first quarter and a $7.5 million increase in accumulated other comprehensive income resulting from an increase in the market value of available for sale securities.
Capital
At March 31, 2014, the Company's Tier I Risk Based Capital ratio was 11.67%, while its Total Risk Based Capital ratio was 12.93% and its Tier I Capital to Average Assets leverage ratio was 9.73%.
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.
Recent Development - Pending Merger Update
As previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2013, we have been notified by our regulators that our Bank subsidiary may be cited with a violation of Section 5 of the Federal Trade Commission Act. The potential violation relates to the checking account opening process associated with a former deposit program relationship with an organization that provides electronic financial disbursements and payment services to the higher education industry. Our Bank exited the relationship in August 2013. As part of the regulatory approval process for the merger, an evaluation of this situation is being conducted by our regulators. That evaluation is ongoing and the closing of the pending merger could be delayed beyond June 30, 2014.
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 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 $5.7 billion as of March 31, 2014. 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 2014 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 may be terminated in accordance with its terms, and the merger
contemplated thereby may not be completed.
-- Termination of the Merger Agreement could negatively impact us.
-- We may be subject to business uncertainties and contractual restrictions
while the Merger is pending.
-- We and MB Financial have entered into a memorandum of understanding with
the plaintiffs to settle two stockholder actions previously filed
against us, our board of directors and MB Financial challenging the
Merger. It is possible that additional suits may be filed in the future.
If the settlement of these existing suits is not approved by the court
or is otherwise voided, an adverse ruling in these or any similar future
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
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.
-- 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 MSR portfolio
which may increase the volatility of our earnings.
-- Certain hedging strategies that we use to manage investment in MSRs,
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 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 may not be able to access sufficient and cost-effective sources of
liquidity.
-- We are subject to liquidity risk, including unanticipated deposit
volatility.
-- Changes in certain credit 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 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 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 and less mature 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 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 second 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, 2013 Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 7, 2014, 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.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(Unaudited)
Mar. 31, Dec. 31,
2014 2013
--------- ---------
ASSETS
Cash and cash
equivalents $138,569 $90,817
Investment securities 1,100,056 1,120,731
Loans held for sale 436,086 473,890
Loans, net of allowance
for loan losses of
$82,891 at March 31,
2014 and $81,864 at
December 31, 2013 3,568,122 3,566,511
Premises, leasehold
improvements and
equipment, net 26,350 26,919
Investment in Federal
Home Loan Bank and
Federal Reserve Bank
stock 49,617 64,612
Mortgage servicing
rights 227,695 216,111
Other real estate and
repossessed assets, net 9,950 10,049
Other assets 96,573 116,178
------ -------
Total assets $5,653,018 $5,685,818
========== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Deposits:
Noninterest-bearing $1,068,207 $1,048,946
Interest-bearing 2,885,178 2,602,037
--------- ---------
Total deposits 3,953,385 3,650,983
Accrued interest, taxes
and other liabilities 87,369 105,350
Short-term borrowings 1,043,097 1,378,327
Junior subordinated
debentures 86,607 86,607
Total liabilities 5,170,458 5,221,267
--------- ---------
Stockholders' equity:
Preferred stock, Series
A 100,000 100,000
Nonvoting preferred
stock 13 13
Common stock 308 307
Surplus 417,984 417,429
Accumulated deficit (7,486) (17,430)
Accumulated other
comprehensive income
(loss), net 1,326 (6,183)
Treasury stock (29,585) (29,585)
------- -------
Total stockholders'
equity 482,560 464,551
------- -------
Total liabilities and
stockholders' equity $5,653,018 $5,685,818
========== ========
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(dollars in thousands, except per share data)
For the Three Months Ended
--------------------------
Mar 31, Dec 31, Mar 31,
2014 2013 2013
---- ---- ----
Interest income:
Interest
and
fees
on
loans $39,811 $39,835 $37,629
Interest and
dividends on
investment
securities:
Taxable 6,486 7,670 8,617
Tax-
exempt 2,545 2,875 1,427
Interest
on
cash
equivalents - - 1
--- --- ---
Total
interest
income 48,842 50,380 47,674
------ ------ ------
Interest
expense:
Deposits 3,169 3,324 4,264
Short-
term
borrowings 382 408 420
Junior
subordinated
debentures 1,437 1,444 1,443
Subordinated
notes - - 864
--- --- ---
Total
interest
expense 4,988 5,176 6,991
----- ----- -----
Net
interest
income 43,854 45,204 40,683
Provision
for
loan
losses 2,600 1,100 300
----- ----- ---
Net
interest
income
after
provision
for
loan
losses 41,254 44,104 40,383
------ ------ ------
Noninterest
income:
Service
charges 3,620 3,571 3,491
Mortgage
banking
revenue 23,057 27,171 32,030
Gain on
sales
of
investment
securities,
net 35 5,891 1
Other
derivative
income
(loss) (31) 1,427 1,560
Letter
of
credit
and
other
loan
fees 1,254 1,102 1,091
Other
noninterest
income 1,163 478 1,546
----- --- -----
Total
noninterest
income 29,098 39,640 39,719
------ ------ ------
Noninterest
expense:
Salaries
and
employee
benefits 34,655 36,099 34,028
Occupancy
of
premises,
furniture
and
equipment 3,957 7,239 3,305
Nonperforming
asset
expense 166 2,246 559
FDIC
assessment 1,862 1,946 2,024
Legal
fees,
net 1,010 1,746 858
Loan
expense,
net 2,189 2,081 2,371
Outside
services 3,559 3,300 2,496
Computer
processing 1,768 1,573 966
Other
noninterest
expense 5,397 5,849 5,148
----- ----- -----
Total
noninterest
expense 54,563 62,079 51,755
------ ------ ------
Income
before
income
taxes 15,789 21,665 28,347
Income
tax
expense 5,845 6,701 11,090
----- ----- ------
Net
income 9,944 14,964 17,257
Preferred
dividends
and
discounts - (4,876) (3,661)
--- ------ ------
Net
income
applicable
to
common
stockholders $9,944 $10,088 $13,596
====== ======= =======
Basic
income
per
common
share $0.32 $0.33 $0.45
Diluted
income
per
common
share 0.32 0.33 0.44
Weighted-
average
common
shares
outstanding 29,075,072 29,004,826 28,598,194
Weighted-
average
diluted
common
shares
outstanding 29,323,756 29,266,098 28,962,425
SUMMARY OF KEY QUARTERLY FINANCIAL DATA
(dollars in thousands)
Unaudited
---------
2014 2013
---- ----
First Fourth Third Second First
Quarter Quarter
Quarter Quarter Quarter
---
Condensed Income Data:
----------------------
Net interest
income $43,854 $45,204 $46,027 $41,082 $40,683
Provision for
loan losses 2,600 1,100 300 700 300
Total
noninterest
income 29,098 39,640 32,472 46,101 39,719
Total
noninterest
expense 54,563 62,079 54,542 60,271 51,755
------ ------ ------ ------ ------
Income before
income taxes 15,789 21,665 23,657 26,212 28,347
Income tax
expense 5,845 6,701 9,488 10,595 11,090
----- ----- ----- ------ ------
Net income 9,944 14,964 14,169 15,617 17,257
Preferred
dividends and
discounts - (4,876) (3,583) (3,780) (3,661)
Net income
applicable to
common
stockholders $9,944 $10,088 $10,586 $11,837 $13,596
====== ======= ======= ======= =======
Non-GAAP Measures of
Performance: (1)
--------------------
Revenue $72,917 $78,953 $78,438 $87,177 $80,401
Pre-tax, pre-
provision
operating
earnings 18,520 19,120 23,060 31,088 29,205
Per Share Data:
---------------
Basic income per
common share $0.32 $0.33 $0.35 $0.39 $0.45
Diluted income
per common
share 0.32 0.33 0.34 0.39 0.44
Tangible book
value per
common share 13.02 12.43 12.47 12.22 12.69
Weighted average
common shares-
basic 29,075,072 29,004,826 28,936,361 28,687,406 28,595,562
Weighted average
common shares-
diluted 29,323,756 29,266,098 29,176,070 28,995,753 28,961,395
Common shares
outstanding-
end of period 29,370,998 29,329,530 29,333,540 29,098,639 29,088,735
Performance Ratios
(annualized):
------------------
Return on
average assets 0.71% 1.03% 0.96% 1.09% 1.22%
Return on
average common
equity 10.44% 10.84% 11.69% 12.66% 14.82%
Efficiency ratio
(2) 74.83% 78.63% 69.54% 69.14% 64.37%
Average Balance Sheet
Data: (3)
---------------------
Total assets $5,599,140 $5,827,825 $5,893,140 $5,747,219 $5,642,192
Investments 1,187,563 1,368,550 1,491,554 1,472,316 1,360,213
Cash equivalents 98 160 541 237 555
Loans held for
sale 420,815 463,756 626,043 634,327 691,134
Loans 3,624,226 3,633,969 3,442,999 3,254,918 3,177,615
Total interest-
earning assets 5,232,702 5,466,435 5,561,137 5,361,798 5,229,517
Interest-
bearing
deposits 2,826,405 2,786,288 2,767,265 2,494,537 2,424,772
Borrowings 1,185,596 1,330,934 1,425,545 1,397,300 1,219,977
Total interest-
bearing
liabilities 4,012,001 4,117,222 4,192,810 3,891,837 3,644,749
Noninterest-
bearing
deposits 1,011,485 1,081,148 1,061,917 1,195,709 1,333,958
Total
stockholders'
equity 480,873 526,313 545,391 578,142 570,652
Tax Equivalent Net
Interest Margin:
------------------
Net interest
income as
stated $43,854 $45,204 $46,027 $41,082 $40,683
Add: Tax
equivalent
adjust. -
investment (4) 1,370 1,548 1,522 1,119 769
Tax equivalent
adjust. -loans
(4) 13 26 27 29 29
Tax equivalent
net interest
income $45,237 $46,778 $47,576 $42,230 $41.481
======= ======= ======= ======= =======
Net interest
margin without
tax adjustment 3.38% 3.29% 3.29% 3.07% 3.14%
Net interest
margin -tax
equivalent (4) 3.49% 3.41% 3.41% 3.16% 3.20%
Yield on earning
assets without
tax adjustment 3.77% 3.67% 3.70% 3.59% 3.68%
Yield on earning
assets -tax
equivalent (4) 3.87% 3.79% 3.81% 3.67% 3.74%
Yield on
interest-
bearing
liabilities 0.50% 0.50% 0.53% 0.71% 0.78%
Net interest
spread without
tax adjustment 3.27% 3.17% 3.17% 2.88% 2.90%
Net interest
spread -tax
equivalent (4) 3.37% 3.29% 3.28% 2.96% 2.96%
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.
Adjustment reflects tax-
exempt interest income on
an equivalent before-tax
basis assuming a tax rate
(4) of 35.0%
SUMMARY OF KEY PERIOD-END FINANCIAL DATA
(dollars in thousands)
Unaudited
---------
Mar. 31, Dec. 31, Sept. 30, Jun. 30, Mar. 31,
2014 2013 2013 2013 2013
--------- --------- ---------- --------- ---------
Condensed Balance Sheet
Data:
-----------------------
Investment
securities $1,100,056 $1,120,731 $1,420,906 $1,434,326 $1,429,971
Loans held for
sale 436,086 473,890 498,276 693,937 668,937
Loans 3,651,013 3,648,375 3,628,658 3,302,548 3,222,794
Allowance for
loan losses 82,891 81,864 85,013 83,576 82,150
Total assets 5,653,018 5,685,818 6,014,694 5,901,370 5,770,432
Total deposits 3,953,385 3,650,983 3,697,196 3,692,426 3,794,394
Total
borrowings 1,129,704 1,464,934 1,652,258 1,515,462 1,256,653
Total
stockholders'
equity 482,560 464,551 544,719 560,274 573,332
Asset Quality Ratios:
---------------------
Nonperforming
loans $72,936 $81,825 $86,045 $69,539 $71,404
Nonperforming
assets 82,886 91,874 100,434 89,333 98,622
Allowance for
loan losses
to total
loans 2.27% 2.24% 2.34% 2.53% 2.55%
Allowance for
loan losses
to
nonperforming
loans 113.65% 100.05% 98.80% 120.19% 115.05%
Nonperforming
assets to
total loans
plus
repossessed
property 2.26% 2.51% 2.76% 2.69% 3.03%
Capital Resources
(Taylor Capital Group,
Inc.):
-----------------------
Total Capital
(to Risk
Weighted
Assets) 12.93% 12.65% 14.15% 15.22% 16.50%
Tier I Capital
(to Risk
Weighted
Assets) 11.67% 11.40% 12.89% 13.96% 14.45%
Leverage (to
average
assets) 9.73% 9.18% 10.30% 10.87% 10.91%
Total Capital $600,876 $591,908 $663,917 $679,379 $701,381
Tier I Capital 542,464 533,123 604,920 623,221 614,382
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:
March 31, 2014 December 31, 2013 March 31, 2013
-------------- ----------------- --------------
Loans Percent Percent Balance Percent
Balance of Gross Balance of Gross of Gross
Loans Loans Loans
--- ----- ----- -----
Commercial
and
industrial $1,940,095 53.0% $1,935,377 52.9% $1,577,241 48.8%
Commercial
real
estate
secured 1,109,042 30.3 1,124,227 30.7 1,013,252 31.4
Residential
construction
and land 45,417 1.2 46,079 1.3 40,620 1.3
Commercial
construction
and land 132,729 3.6 121,682 3.3 121,212 3.7
Lease
receivables 143,091 3.9 132,013 3.6 65,028 2.0
------- ------- --- ------
Total
commercial
loans 3,370,374 92.0 3,359,378 91.8 2,817,353 87.2
Consumer 294,546 8.0 301,377 8.2 411,905 12.8
------- --- ------- --- ------- ----
Gross
loans 3,664,920 100.0% 3,660,755 100.0% 3,229,258 100.0%
===== ===== =====
Less:
Unearned
discount (13,907) (12,380) (6,464)
------- ------- ------
Total
loans 3,651,013 3,648,375 3,222,794
Less:
Loan
loss
allowance (82,891) (81,864) (82,150)
------- ------- -------
Net loans $3,568,122 $3,566,511 $3,140,644
======== ======== ========
Loans
Held for
Sale $436,086 $473,890 $668,937
======== ======== ========
The following table provides details of the Company's commercial real estate portfolio:
March 31, 2014 December 31, 2013 March 31, 2013
-------------- ----------------- --------------
Commercial
real
estate
secured: Percent Percent Percent
Balance of Balance of Balance of
Total Total Total
--- ------- ------- ------- ------- ------- -------
Commercial
non-owner
occupied:
Retail
strip
centers
or malls $95,371 8.6% $102,195 9.1% $107,861 10.6%
Office/
mixed use
property 146,822 13.2 126,662 11.3 124,542 12.3
Commercial
properties 123,796 11.2 126,608 11.3 107,642 10.6
Specialized
- other 102,014 9.2 101,813 9.1 70,271 6.9
Other
commercial
properties 18,639 1.7 25,483 2.3 27,140 2.8
Farmland 2,227 0.2 2,256 0.2 - -
----- --- ----- --- --- ---
Subtotal
commercial
non-
owner
occupied 488,869 44.1 485,017 43.3 437,456 43.2
Commercial
owner-
occupied 491,413 44.3 513,126 45.5 463,166 45.7
Multi-
family
properties 128,760 11.6 126,084 11.2 112,630 11.1
------- ---- ------- ---- ------- ----
Total
commercial
real
estate $1,109,042 100.0% $1,124,227 100.0% $1,013,252 100.0%
secured
CREDIT QUALITY (unaudited)
(dollars in thousands)
At or for the Three Months
Ended
---------------------------
Mar. 31, Dec. 31, Mar. 31,
2014 2013 2013
--------- --------- ---------
Nonperforming
Assets:
-------------
Loans contractually
past due 90 days or
more but still
accruing interest $ - $ - $ -
Nonaccrual loans:
Commercial and
industrial $17,841 $15,879 $16,010
Commercial real
estate secured 26,589 37,474 23,096
Residential
construction and
land - - 742
Commercial
construction and
land 22,550 22,550 26,375
Consumer 5,956 5,922 5,181
----- ----- -----
Total nonaccrual
loans 72,936 81,825 71,404
------ ------ ------
Total nonperforming
loans 72,936 81,825 71,404
Other real estate
owned and
repossessed assets 9,950 10,049 27,218
----- ------ ------
Total nonperforming
assets $82,886 $91,874 $98,622
======= ======= =======
Other Credit Quality
Information:
--------------------
Commercial
criticized and
classified loans
(1)
Special mention $70,227 $73,093 $49,644
Substandard 47,368 39,012 22,649
Nonaccrual 66,980 75,903 66,223
------
Total commercial
criticized and
classified loans $184,575 $188,008 $138,516
====== ====== ======
Loans contractually
past due 30 - 89
days and still
accruing $8,035 $5,189 $4,293
Performing
restructured loans 35,605 20,736 22,739
Recorded balance of
impaired loans 106,066 96,451 90,113
Allowance for loan
losses related to
impaired loans 18,049 13,687 13,670
Allowance for Loan
Losses Summary:
------------------
Allowance at
beginning of period $81,864 $85,013 $82,191
(Charge-offs), net
of recoveries:
Commercial and
commercial real
estate (1,819) (1,713) 114
Real estate -
construction and
land 426 (2,232) 174
Consumer (180) (304) (629)
----
Total net charge-
offs (1,573) (4,249) (341)
Provision for loan
losses 2,600 1,100 300
-----
Allowance at end of
period $82,891 $81,864 $82,150
======= ======= =======
Key Credit Ratios:
------------------
Nonperforming loans
to total loans 2.00% 2.24% 2.22%
Nonperforming assets
to total loans plus
repossessed
property 2.26% 2.51% 3.03%
Nonperforming assets
to total assets 1.47% 1.62% 1.71%
Annualized net
charge-offs to
average total loans 0.17% 0.47% 0.04%
Allowance to total
loans at end of
period 2.27% 2.24% 2.55%
Allowance to
nonperforming loans 113.65% 100.05% 115.05%
30 - 89 days past
due to total loans 0.22% 0.14% 0.13%
(1) Commercial criticized
and classified loans
excludes consumer
loans.
LOAN PORTFOLIO AGING (unaudited)
(dollars in thousands)
As of March 31, 2014
--------------------
30-89 >90 Days Nonaccrual Current Total % of Allowance
for
Days Past Due Loans Total Loan Loss
Past Due and Still Loans Allocation
Accruing
--------
Commercial
and
industrial $14 $ - $17,841 $1,922,240 $1,940,095 53% $41,857
Commercial
real
estate
secured:
Commercial
non-owner
occupied:
Retail
strip
centers
or malls - - 13,398 81,973 95,371 2% 2,469
Office/
mixed use
property - - 302 146,520 146,822 4% 2,473
Commercial
properties - - 389 123,407 123,796 3% 3,100
Specialized
- other - - 4,528 97,486 102,014 3% 1,502
Other
commercial
properties - - - 18,639 18,639 1% 273
Farmland - - - 2,227 2,227 - % 33
--- --- --- ----- ----- --- --- ---
Subtotal
commercial
non-
owner
occupied - - 18,617 470,252 488,869 13% 9,850
Commercial
owner-
occupied 1,049 - 7,805 482,559 491,413 13% 8,380
Multi-
family
properties - - 167 128,593 128,760 4% 2,109
--- --- --- ------- ------- --- -----
Total
commercial
real 1,049 - 26,589 1,081,404 1,109,042 30% 20,339
estate
secured
Residential
construction
and land:
Residential
construction - - - 30,026 30,026 1% 2,884
Land - - - 15,391 15,391 - % 1,548
--- --- --- ------ ------ --- --- -----
Total
residential - - - 45,417 45,417 1% 4,432
construction
and land
Commercial
construction
and land - - 22,550 110,179 132,729 4% 8,261
Lease
receivables,
net of
unearned
discount 2,319 - - 126,865 129,184 4% 775
----- --- --- ------- ------- --- ---
Total
commercial
loans 3,382 - 66,980 3,286,105 3,356,467 92% 75,664
Consumer
loans 4,653 - 5,956 283,937 294,546 8% 7,227
----- --- ----- ------- --- -----
Total
loans $8,035 $ - $72,936 $3,570,042 $3,651,013 100% $82,891
====== === === ======= ======== ======== === =======
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
--------------------------
March 31, 2014 December 31, 2013 March 31, 2013
-------------- ----------------- --------------
Average Percent Average Percent Average Percent
Balance of Balance of Balance of
Deposits Deposits Deposits
-------- -------- -------- -------- -------- --------
Noninterest-
bearing
deposits $1,011,485 26.4% $1,081,148 28.0% $1,333,958 35.5%
Interest-bearing
deposits:
Commercial
interest
checking 377,103 9.8 360,476 9.3 - -
NOW
accounts 555,784 14.5 597,373 15.4 717,410 19.1
Savings
deposits 40,600 1.1 40,355 1.0 40,255 1.1
Money
market
accounts 694,531 18.1 728,419 18.8 746,542 19.9
Brokered
money
market
deposits 9,085 0.2 37,874 1.0 11,942 0.3
Certificates
of
deposit 476,370 12.4 493,291 12.8 550,430 14.6
Brokered
certificates
of
deposit 290,749 7.6 268,982 7.0 181,740 4.8
CDARS time
deposits 334,262 8.7 205,088 5.3 162,662 4.3
Public
time
deposits 47,921 1.2 54,430 1.4 13,791 0.4
------ --- ------ --- ------ ---
Total
interest-
bearing
deposits 2,826,405 73.6 2,786,288 72.0 2,424,772 64.5
--------- ---- --------- ---- --------- ----
Total
deposits $3,837,890 100.0% $3,867,436 100.0% $3,758,730 100.0%
======== ===== ======== ===== ======== =====
The following
table sets forth
the period-end
balances of total
deposits as of
each of the dates
indicated below.
March 31, December March 31,
2014 31, 2013
2013
----
Noninterest-
bearing
deposits $1,068,207 $1,048,946 $1,326,483
Interest-
bearing
deposits:
Commercial
interest
checking 373,467 377,631 -
NOW
accounts 572,259 566,269 819,101
Savings
accounts 41,229 40,357 40,646
Money
market
accounts 684,358 698,302 741,818
Brokered
money
market
deposits 6,081 51,124 -
Certificates
of
deposit 507,239 472,222 548,767
Brokered
certificates
of
deposit 428,502 203,715 171,320
CDARS time
deposits 214,479 142,835 135,630
Public
time
deposits 57,564 49,582 10,629
------ ------ ------
Total
interest-
bearing
deposits 2,885,178 2,602,037 2,467,911
--------- --------- ---------
Total
deposits $3,953,385 $3,650,983 $3,794,394
======== ======== ========
SUMMARY OF QUARTERLY SEGMENT FINANCIAL DATA (unaudited)
(dollars in thousands)
For the Three Months Ended
--------------------------
Mar. 31, Dec. 31, Sept. 30, Jun. 30, Mar. 31,
2014 2013 2013 2013 2013
--------- --------- ---------- --------- ---------
BANKING:
--------
Net
interest
income $40,528 $40,975 $40,780 $37,175 $36,181
Provision
for loan
losses 2,603 1,210 233 946 292
Total
noninterest
income 6,001 12,428 7,284 7,528 7,647
Total
noninterest
expense 25,947 28,363 23,473 25,770 25,468
------ ------ ------ ------
Income
before
income
taxes 17,979 23,830 24,358 17,987 18,068
Income tax
expense 7,102 9,413 9,621 7,105 7,136
----- ----- ----- -----
Net income $10,877 $14,417 $14,737 $10,882 $10,932
======= ======= ======= ======= =======
For the Three Months Ended
--------------------------
Mar. 31, Dec. 31, Sept. 30, Jun. 30, Mar. 31,
2014 2013 2013 2013 2013
--------- --------- ---------- --------- ---------
MORTGAGE
BANKING:
---------
Net
interest
income $4,735 $5,517 $6,499 $5,742 $6,414
Provision
for loan
losses (3) (110) 67 (246) 8
Noninterest
income:
Loan
origination
income 11,292 13,943 17,249 29,355 26,430
Net
servicing
income 11,763 13,226 7,896 9,176 5,600
------ ------ ----- ----- -----
Total
noninterest
income 23,055 27,169 25,145 38,531 32,030
Total
noninterest
expense 27,943 29,222 29,063 29,086 26,287
------ ------ ------ ------
Income
(loss)
before
income
taxes (150) 3,574 2,514 15,433 12,149
Income tax
expense
(benefit) (278) 1,033 (19) 4,928 3,375
----- --- ----- -----
Net income $128 $2,541 $2,533 $10,505 $8,774
==== ====== ====== ======= ======
Origination
Volume $1,052,106 $1,169,098 $1,596,431 $1,874,248 $1,907,642
Refinance % 41% 40% 37% 62% 77%
Purchase % 59% 60% 63% 38% 23%
Period-End Balances
-------------------
Mar. 31, Dec. 31, Sept. 30, Jun. 30, Mar. 31,
2014 2013 2013 2013 2013
--------- --------- ---------- --------- ---------
Mortgage
servicing
book $20,136,044 $18,496,230 $16,431,269 $12,740,176 $10,506,034
Mortgage
servicing
rights 227,695 216,111 184,237 145,729 106,576
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 third party 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 subordinated debt expense, certain parent company activities, expenses related to the pending merger with MB Financial, and residual income tax expense or benefit.
RECONCILIATION OF U.S. GAAP FINANCIAL
MEASURES (unaudited)
(dollars in thousands)
The following reconciles the income
before income taxes to pre-tax,
pre-provision operating earnings
for the periods indicated.
For the Three Months Ended
--------------------------
Mar. Dec. Sept. Jun. Mar.
31, 31, 30, 30, 31,
2014 2013 2013 2013 2013
----- ----- ------ ----- -----
Income before
income taxes $15,789 $21,665 $23,657 $26,212 $28,347
Add back
(subtract):
Credit costs:
Provision for
loan losses 2,600 1,100 300 700 300
Nonperforming
asset expense 166 2,246 (836) (1,198) 559
----- ---- ------ ---
Credit costs
subtotal 2,766 3,346 (536) (498) 859
Other:
Gain on sales
of investment
securities (35) (5,891) (61) (6) (1)
Early
extinguishment
of debt - - - 5,380 -
--- --- ----- ---
Other subtotal (35) (5,891) (61) 5,374 (1)
--- ------ --- ----- ---
Pre-tax, pre-
provision
operating
earnings $18,520 $19,120 $23,060 $31,088 $29,205
===== ===== ===== ===== =====
The following details the
components of revenue
for the periods
indicated.
For the Three Months Ended
--------------------------
Mar. Dec. Sept. Jun. Mar.
31, 31, 30, 30, 31,
2014 2013 2013 2013 2013
----- ----- ------ ----- -----
Net
interest
income $43,854 $45,204 $46,027 $41,082 $40,683
Noninterest
income 29,098 39,640 32,472 46,101 39,719
Add back
(subtract):
Gain on
sales
of
investment
securities (35) (5,891) (61) (6) (1)
--- ------ --- --- ---
Revenue $72,917 $78,953 $78,438 $87,177 $80,401
===== ===== ===== ===== =====
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.
