UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 28, 2005
MB FINANCIAL, INC.
(Exact name of registrant as specified in its charter)
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Maryland |
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0-24566-01 |
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36-4460265 |
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(State or other jurisdiction |
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(Commission File No.) |
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(IRS Employer |
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801 West Madison Street, Chicago, Illinois 60607 |
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(Address of principal executive offices) (Zip Code) |
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Registrant’s telephone number, including area code: (312) 633-0333 |
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N/A |
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(Former name or former address, if changed since last report) |
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17CFR 240.13e-4(c))
Item 7.01. Regulation FD Disclosure
Forward-Looking Statements
When used in this presentation and in filings with the Securities and Exchange Commission, in other press releases or other public shareholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases “believe,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “plans,” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date made. These statements may relate to future financial performance, strategic plans or objectives, revenues or earnings projections, or other financial items. By their nature, these statements are subject to numerous uncertainties that could cause actual results to differ materially from those anticipated in the statements.
Important factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to, the following: (1) expected cost savings and synergies from our merger and acquisition activities might not be realized within the expected time frames, and costs or difficulties relating to integration matters might be greater than expected; (2) the credit risks of lending activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses; (3) competitive pressures among depository institutions; (4) interest rate movements and their impact on customer behavior and net interest margin; (5) the impact of repricing and competitors’ pricing initiatives on loan and deposit products; (6) the ability to adapt successfully to technological changes to meet customers’ needs and developments in the market place; (7) MB Financial’s ability to realize the residual values of its direct finance, leveraged, and operating leases; (8) the ability to access cost-effective funding; (9) changes in financial markets; (10) changes in economic conditions in general and in the Chicago metropolitan area in particular; (11) the costs, effects and outcomes of litigation; (12) new legislation or regulatory changes, including but not limited to changes in federal and/or state tax laws or interpretations thereof by taxing authorities; (13) changes in accounting principles, policies or guidelines; and (14) future acquisitions by MB Financial of other depository institutions or lines of business.
MB Financial does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date on which the forward-looking statement is made.
Set forth below are investor presentation materials.
2
Searchable text section of graphics shown above
[LOGO]
Investor Presentation
Mitchell Feiger, President and Chief Executive Officer
March 3, 2005
NASDAQ: MBFI
Forward Looking Statements
When used in this presentation and in filings with the Securities and Exchange Commission, in other press releases or other public shareholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases “believe,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “plans,” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date made. These statements may relate to future financial performance, strategic plans or objectives, revenues or earnings projections, or other financial items. By their nature, these statements are subject to numerous uncertainties that could cause actual results to differ materially from those anticipated in the statements.
Important factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to, the following: (1) expected cost savings and synergies from our merger and acquisition activities might not be realized within the expected time frames, and costs or difficulties relating to integration matters might be greater than expected; (2) the credit risks of lending activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses; (3) competitive pressures among depository institutions; (4) interest rate movements and their impact on customer behavior and net interest margin; (5) the impact of repricing and competitors’ pricing initiatives on loan and deposit products; (6) the ability to adapt successfully to technological changes to meet customers’ needs and developments in the market place; (7) MB Financial’s ability to realize the residual values of its direct finance, leveraged, and operating leases; (8) the ability to access cost-effective funding; (9) changes in financial markets; (10) changes in economic conditions in general and in the Chicago metropolitan area in particular; (11) the costs, effects and outcomes of litigation; (12) new legislation or regulatory changes, including but not limited to changes in federal and/or state tax laws or interpretations thereof by taxing authorities; (13) changes in accounting principles, policies or guidelines; and (14) future acquisitions by MB Financial of other depository institutions or lines of business.
MB Financial does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date on which the forward-looking statement is made.
[LOGO]
2
MB Financial Snapshot
(Dollars amounts in millions, except per share data)
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2003 |
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2004 |
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Change |
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Assets |
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$ |
4,355 |
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$ |
5,254 |
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+20.6 |
% |
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Loans |
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$ |
2,826 |
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$ |
3,346 |
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+18.4 |
% |
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Deposits |
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$ |
3,432 |
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$ |
3,962 |
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+15.4 |
% |
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Net income |
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$ |
53.4 |
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$ |
64.4 |
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+20.7 |
% |
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Fully diluted EPS |
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$ |
1.96 |
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$ |
2.25 |
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+14.8 |
% |
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Return on equity |
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14.82 |
% |
14.88 |
% |
+0.06 |
% |
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Cash return on tangible equity |
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18.79 |
% |
20.69 |
% |
+1.90 |
% |
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Net interest margin - FTE |
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3.80 |
% |
3.79 |
% |
-0.01 |
% |
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Efficiency ratio |
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55.70 |
% |
53.68 |
% |
-2.02 |
% |
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Non-performing loan ratio |
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0.75 |
% |
0.71 |
% |
-0.04 |
% |
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3
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2000 |
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2004 |
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Change |
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Assets |
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$ |
3,287 |
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$ |
5,254 |
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+59.8 |
% |
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Loans |
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$ |
2,019 |
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$ |
3,346 |
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+65.7 |
% |
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Deposits |
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$ |
2,639 |
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$ |
3,962 |
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+50.1 |
% |
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Net income |
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$ |
27.0 |
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$ |
64.4 |
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+138.6 |
% |
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Fully diluted EPS |
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$ |
1.02 |
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$ |
2.25 |
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+120.6 |
% |
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Return on equity |
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10.24 |
% |
14.88 |
% |
+4.64 |
% |
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Cash return on tangible equity |
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13.00 |
% |
20.69 |
% |
+7.69 |
% |
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Net interest margin - FTE |
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3.75 |
% |
3.79 |
% |
+0.04 |
% |
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Efficiency ratio |
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64.80 |
% |
53.68 |
% |
-11.12 |
% |
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Non-performing loan ratio |
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0.81 |
% |
0.71 |
% |
-0.10 |
% |
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4
Marketplace Dynamics
• Fragmented banking market
• Slowly consolidating
• Target market includes 8,000+ middle market companies
[GRAPHIC]
5
Bank Holding Companies
Cook County Deposit Market Share
As of June 30, 2004
Pending Ownership as of February 23, 2005
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Rank |
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Institution |
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Branch |
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Total |
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Market |
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1 |
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JPMorgan Chase & Co. (NY (Bank One) |
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171 |
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28,171,866 |
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18.9 |
% |
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2 |
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LaSalle Bank Corporation (IL) |
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91 |
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26,063,977 |
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17.5 |
% |
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3 |
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BMO Financial Group (Harris) |
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76 |
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14,937,173 |
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10.0 |
% |
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4 |
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Northern Trust Corp. (IL) |
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9 |
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6,369,328 |
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4.3 |
% |
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5 |
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Royal Bank of Scotland Group (Charter One) |
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82 |
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4,805,561 |
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3.2 |
% |
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6 |
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Citigroup Inc. (NY) |
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39 |
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4,421,363 |
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3.0 |
% |
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7 |
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Fifth Third Bancorp (OH) |
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40 |
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3,527,520 |
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2.4 |
% |
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8 |
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MAF Bancorp Inc. (IL) |
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33 |
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3,390,467 |
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2.3 |
% |
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9 |
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MB Financial Inc. (IL) |
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33 |
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3,174,321 |
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2.1 |
% |
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10 |
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Bank of America Corp. (NC) |
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10 |
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3,087,480 |
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2.1 |
% |
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11 |
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Corus Bankshares Inc. (IL) |
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14 |
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2,993,795 |
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2.0 |
% |
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12 |
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Wintrust Financial Corp. (IL) |
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20 |
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2,392,615 |
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1.6 |
% |
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13 |
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FBOP Corp. (IL) |
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21 |
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2,118,074 |
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1.4 |
% |
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14 |
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Taylor Capital Group Inc. (IL) |
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11 |
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2,109,047 |
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1.4 |
% |
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15 |
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Metropolitan Bank Group Inc. (IL) |
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58 |
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1,905,509 |
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1.3 |
% |
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16 |
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TCF Financial Corp. (MN) |
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112 |
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1,896,575 |
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1.3 |
% |
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17 |
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First Midwest Bancorp Inc. (IL) |
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17 |
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1,696,963 |
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1.1 |
% |
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18 |
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Parkway Bancorp Inc. (IL) |
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14 |
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1,331,845 |
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0.9 |
% |
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19 |
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Popular Inc. (PR) |
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17 |
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1,255,821 |
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0.8 |
% |
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20 |
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U.S. Bancorp (MN) |
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25 |
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1,205,083 |
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0.8 |
% |
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Source - SNL Datasource |
6
Key Strategies
Our EPS growth has been fueled by dual growth sources
• Core business lines are growing
• Commercial Banking
• Wealth Management
• Retail Banking
• Mergers and acquisitions supplement core business growth
[CHART]
* Includes $19.2 million after tax merger charge.
7
Commercial Banking
• Well developed business line
• Heavy investment in personnel over past 10 years
• Robust training program for recent graduates
• Focused on:
• Middle-market business financing
• Treasury management
• Capital market products
• Real estate investor, construction, developer financing
• Lease banking
[CHART]
8
Market Feedback
Based upon third party research, client satisfaction leads the market.
9 out of 10 customers with sales over $10 million in 2004 said MB Financial Bank was:
• “Excellent or Above Average” in overall satisfaction.
• “Above market standard” for prompt follow-up and closure on requests.
• “Excellent or Above Average” on top management support.
9
Commercial Banking - Loans Outstanding
• Target market is companies with revenues ranging from $5 to 100 million
• $2.4 billion of commercial lending relationships (92%) have a current outstanding balance less than $15 million
[CHART]
*Includes commercial loans collateralized by assignment of lease payments.
10
Commercial Banking Diversified Loan Portfolio
|
Loan Portfolio Composition |
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Commercial Loans by Industry Type |
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($3.3 billion) |
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($2.6 billion) |
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[CHART] |
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[CHART] |
11
Credit Quality
• Excellent, stable, predictable
• Better than peers with large C&I portfolios
• Loans are granular – typical size is $3 to $6 million
• Extensive due diligence prior to acquisitions
|
Net Charge-offs to Average Loans |
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|
|
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|
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[CHART] |
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|
|
|
|
2000 |
|
2001 |
|
2002 |
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2003 |
|
2004 |
|
|
Allowance to Total Loans |
|
1.33 |
% |
1.19 |
% |
1.35 |
% |
1.40 |
% |
1.32 |
% |
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NPL to Total Loans |
|
0.81 |
% |
0.78 |
% |
0.88 |
% |
0.75 |
% |
0.71 |
% |
12
Granularity of Non-Performing Loans
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Non-performing Loan Size |
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Number of |
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Outstanding |
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Percent of |
|
|
|
|
|
|
|
|
|
|
|
|
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Over $3.0 million |
|
1 |
|
$ |
4,180 |
|
17.6 |
% |
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$2.0 to $3.0 million |
|
2 |
|
5,309 |
|
22.4 |
% |
|
|
$1.0 to $2.0 million |
|
2 |
|
2,426 |
|
10.2 |
% |
|
|
Less $1.0 million |
|
150 |
|
11,769 |
|
49.8 |
% |
|
|
Total |
|
155 |
|
$ |
23,684 |
|
100.0 |
% |
13
Wealth Management
Expanding business and capabilities
• Private Banking
• Staff are deep generalists (loans, deposits, trust and asset management services, estate and financial planning)
• Trust/Asset Management
• Open architecture asset management format
• Objective advice
• Superior returns
• Vision Investment Services
• Provides brokerage services through MB and other banks
• Works closely with MB Retail Banking
14
Retail Banking
• Consumer and small business
• Deposit and credit services
• Working hard to reduce overall funding costs and expand net interest margin
• Focused on growing core transaction accounts
• Sales/service culture
• Upgrading branch locations to maximize growth and profitability
16
Deposits
• 15% annual growth over the past two years
• Deposit mix is improving
• Less price sensitive deposits (non-interest bearing, MMDA, NOW and savings) grew 19% over past two years
12/31/02
[CHART]
12/31/04
[CHART]
17
M & A Highlights
2001 to 2004
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|
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Assets |
|
|
|
|
|
|
|
|
|
1990 to 2000 (10 mergers and acquisitions) |
|
$ |
1.9 billion |
|
|
|
|
|
|
|
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Acquired FSL Holdings, Inc. |
|
$ |
222 million |
|
|
April 2001 |
|
|
|
|
|
|
|
|
|
|
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MidCity Financial and MB Financial merge |
|
MOE |
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November 2001 |
|
|
|
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Acquired Lincolnwood Financial Corp. |
|
$ |
228 million |
|
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April 2002 |
|
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Acquired LaSalle Systems Leasing |
|
$ |
92 million |
|
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August 2002 |
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Acquired South Holland Bancorp |
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$ |
560 million |
|
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February 2003 |
|
|
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|
|
|
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|
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Divested Abrams Centre Bancshares |
|
$ |
98 million |
|
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May 2003 |
|
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|
|
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Acquired First SecurityFed Financial |
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$ |
567 million |
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May 2004 |
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18
Recent Acquisition Pricing
|
Transaction |
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P/E |
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P/E |
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P/B |
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Prem/ |
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FSL |
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21.7 |
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9.7 |
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1.2 |
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4.3 |
% |
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Lincolnwood |
|
14.4 |
|
9.7 |
|
1.6 |
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6.9 |
% |
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LaSalle Leasing |
|
10.0 |
|
6.3 |
|
1.3 |
|
N/A |
|
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South Holland |
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18.1 |
|
10.3 |
|
1.2 |
|
4.4 |
% |
|
First SecurityFed |
|
16.8 |
|
9.8 |
|
1.7 |
|
18.8 |
% |
* P/E Adj is computed as (price - excess equity) / (pre-acquisition core earnings + after-tax cost savings in year one - after tax earnings on excess equity).
19
|
|
IRR |
|
1st Yr |
|
1st Yr |
|
|
|
FSL |
|
27 |
% |
+3.5 |
% |
42 |
% |
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Lincolnwood |
|
27 |
% |
+4.5 |
% |
50 |
% |
|
LaSalle Leasing |
|
22 |
% |
+3.4 |
% |
0 |
% |
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South Holland |
|
22 |
% |
+3.5 |
% |
21 |
% |
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First SecurityFed* |
|
21 |
% |
+3.5 |
% |
15 |
% |
* For First SecurityFed, second year EPS accretion is projected to be 3.8% and second year cost saves are estimated to be 32%.
20
MB Financial Performance
• Five years of strong results
• Robust core business growth
• Capitalized on M&A opportunities
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Dollars in millions, except per share amounts. |
|
4 Year |
|
|||||||||||||
|
|
|
2000 |
|
2001* |
|
2002 |
|
2003 |
|
2004 |
|
CAGR |
|
|||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Assets |
|
$ |
3,287 |
|
$ |
3,466 |
|
$ |
3,760 |
|
$ |
4,355 |
|
$ |
5,254 |
|
12 |
% |
|
Loans |
|
$ |
2,019 |
|
$ |
2,312 |
|
$ |
2,505 |
|
$ |
2,826 |
|
$ |
3,346 |
|
13 |
% |
|
Deposits |
|
$ |
2,639 |
|
$ |
2,822 |
|
$ |
3,020 |
|
$ |
3,432 |
|
$ |
3,962 |
|
11 |
% |
|
Net income |
|
$ |
27.0 |
|
$ |
12.4 |
|
$ |
46.4 |
|
$ |
53.4 |
|
$ |
64.4 |
|
24 |
% |
|
Diluted EPS |
|
$ |
1.02 |
|
$ |
0.46 |
|
$ |
1.75 |
|
$ |
1.96 |
|
$ |
2.25 |
|
22 |
% |
|
ROA |
|
0.85 |
% |
0.36 |
% |
1.27 |
% |
1.28 |
% |
1.34 |
% |
|
|
|||||
|
ROE |
|
10.24 |
% |
4.27 |
% |
14.60 |
% |
14.82 |
% |
14.88 |
% |
|
|
|||||
|
Cash ROTE |
|
13.00 |
% |
13.53 |
% |
17.09 |
% |
18.79 |
% |
20.69 |
% |
|
|
|||||
* Includes $19.2 million net merger expenses.
21
Net Interest Income
• NII consistently growing as we expand our business
• NIM has been stable through various interest rate environments
• Funding sources are stable
Net Interest Income
[CHART]
NIM vs. Fed Funds Rate
[CHART]
22
Interest Rate Risk
• Slightly asset sensitive
• Naturally hedged
NII Sensitivity (Ramped)
[CHART]
NII Sensitivity (Shocked)
[CHART]
Twist Scenario
[CHART]
23
Other Income
• Diversifying and growing revenue sources
• Wealth Management, Deposit Services and Lease Banking are strong contributors to growth
[CHART]
24
Efficiency Ratio
• We carefully manage expenses
• We are making investments in revenue producing personnel
• Extensive investing in infrastructure – electronic and physical
[CHART]
*Excludes $19.2 million after tax merger charge.
25
Key Investment Considerations
Strategy
• Build market share in key business lines (Commercial, Retail, Wealth Management)
• Diversify revenue streams
• Capitalize on key M&A opportunities
• Invest in people and process
Results
• Strong, consistent loan growth
• Stable credit quality
• Robust EPS growth
• High return on equity/tangible equity
• Increasing commercial market share
• Expanding stock multiples
27
[LOGO]
Investor Presentation
Mitchell Feiger, President and Chief Executive Officer
March 3, 2005
NASDAQ: MBFI
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, MB Financial, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 28th day of February, 2005.
|
MB FINANCIAL, INC. |
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|
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By: |
/s/ Jill E. York |
|
|
Jill E. York |
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Vice President and Chief Financial Officer |
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(Principal Financial and Principal Accounting Officer) |
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3