Add
MBHI to Portfolio
Set Alert
Email to a
Friend
| |||
|
|
Quotes & Info
|
| MBHI > SEC Filings for MBHI > Form 10-Q on 11-May-2009 | All Recent SEC Filings |
11-May-2009
Quarterly Report
On October 3, 2008 the Troubled Asset Relief Program, TARP, became
effective. The TARP gave the U.S. Treasury authority to deploy up to
$700 billion into the financial system with an objective of improving liquidity
in capital markets. On October 14, 2008, the U.S. Treasury announced plans to
direct $250 billion of this authority into preferred stock investments in
financial institutions. The general terms of this preferred stock program are as
follows for a participant: pay 5% dividends on the U.S. Treasury's preferred
stock for the first five years and 9% dividends thereafter; cannot increase
common stock dividends for three years while Treasury is an investor without
their permission; the U.S. Treasury receives warrants entitling it to buy a
participant's common stock equal to 15% of the U.S. Treasury's total initial
investment in the participant; and the participating company's executives must
agree to certain compensation restrictions, and restrictions on the amount of
executive compensation which is tax deductible and other detailed terms and
conditions. The terms of this preferred stock program could reduce investment
returns to participating companies' stockholders by restricting dividends to
common stockholders, diluting existing stockholders' interests, and restricting
capital management practices. The TARP capital purchase program, CPP, is a
voluntary program designed to help healthy institutions build capital to support
the U.S. economy by increasing the flow of financing to U.S. businesses and
consumers.
Although the Company exceeds all applicable regulatory capital
requirements, it submitted an application for participation in the CPP and, on
December 5, 2008, it sold 84,784 shares of Series T preferred stock to the U.S.
Treasury for an aggregate purchase price of $84.784 million and issued a warrant
to the U.S. Treasury which will allow it to acquire 4,282,020 shares of its
common stock for $2.97 per share. The Series T preferred stock qualifies as Tier
1 capital and will pay cumulative dividends at a rate of 5% per annum for the
first five years, and 9% per annum thereafter. The Series T preferred stock may
be redeemed by the Company after three years. Prior to the end of three years,
the Series T preferred stock may be redeemed by the Company only with proceeds
from the sale of qualifying equity securities. The senior preferred stock is
non-voting, other than class voting rights on certain matters that could amend
the rights of or adversely affect the stock.
If the Company completes one or more qualified equity offerings on or prior
to December 31, 2009 that result in its receipt of aggregate gross proceeds of
not less than $84.784 million, which is equal to 100% of the aggregate
liquidation preference of the Series T preferred stock, the number of shares of
common stock underlying the warrant then held by the selling securityholders
will be reduced by 50% to 2,141,010 shares. The number of shares for which the
warrant may be exercised and the exercise price applicable to the warrant will
be proportionately adjusted in the event the Company pays stock dividends or
makes distributions of its common stock, subdivide, combine or reclassify
outstanding shares of its common stock.
The EESA included a provision for an increase in the amount of deposits
insured by the FDIC to $250,000 until December 2009. On October 14, 2008, the
FDIC announced a new program, the Temporary Liquidity Guarantee Program, that
provides unlimited deposit insurance on funds in noninterest-bearing transaction
deposit accounts not otherwise covered by the existing deposit insurance limit
of $250,000. The Company has elected to participate in the Temporary Liquidity
Guarantee Program and incur a 10 basis point surcharge as a cost of
participation. The behavior of depositors in regard to the level of FDIC
insurance could cause the Company's existing customers to reduce the amount of
deposits held at the Company, or could cause new customers to open deposit
accounts. The level and composition of the Company's deposit portfolio directly
impacts its funding cost and net interest margin.
The EESA followed, and has been followed by, numerous actions by the
Federal Reserve, the U.S. Congress, U.S. Treasury, the FDIC, the SEC and others
to address the current liquidity and credit crisis that has followed the
sub-prime meltdown that commenced in 2007. These measures include homeowner
relief that encourage loan restructuring and modification; the establishment of
significant liquidity and credit facilities for financial institutions and
investment banks; the lowering of the federal funds rate; emergency action
against short selling practices; a temporary guaranty program for money market
funds; the establishment of a commercial paper funding facility to provide
back-stop liquidity to commercial paper
issuers; and coordinated international efforts to address illiquidity and other
weaknesses in the banking sector.
On February 17, 2009, President Barack Obama signed the American Recovery
and Reinvestment Act of 2009, ARRA, more commonly known as the economic stimulus
or economic recovery package. ARRA includes a wide variety of programs intended
to stimulate the economy and provide for extensive infrastructure, energy,
health and education needs. In addition, ARRA imposes new executive compensation
and corporate governance limits on current and future participants in TARP,
including the Company, which are in addition to those previously announced by
U.S. Treasury. The new limits remain in place until the participant has redeemed
the preferred stock sold to U.S. Treasury, which is now permitted under ARRA
without penalty and without the need to raise new capital, subject to U.S.
Treasury's consultation with the recipient's appropriate federal regulator.
Among the provisions in the ARRA are restrictions affecting financial
institutions that are participating in the CPP. These provisions are set forth
in the form of amendments to the EESA. The amendments provide that during the
period in which any TARP obligation is outstanding (other than those relating to
warrants), TARP recipients are subject to standards for executive compensation
and corporate governance to be set forth in regulations to be issued by the U.S.
Treasury. Among these provisions included in ARRA are the following:
• a limitation on incentive compensation paid or accrued to the top five
executive officers based on the amount of TARP funds that the Company
received. Under the provision, incentive compensation paid to such
individuals may not exceed one-third of the individual's annual
compensation. It must be paid in restricted stock that does not fully vest
during the period in which any obligation arising from financial assistance
provided under TARP remains outstanding;
• an expansion of the prohibitions on certain golden parachute payments to cover any severance payment for a departure for any reason (subject to certain limited exceptions) made to the senior executives named in the 2009 proxy statement and the next five highest paid employees;
• a requirement that the chief executive officer and chief financial officer provide a written certification of compliance with certain executive compensation and corporate governance provisions in annual securities filings;
• a requirement that companies adopt a company-wide policy regarding excessive or luxury expenditures as they relate to entertainment, renovations to offices or facilities, and aviation and other transportation services; and
• a requirement that companies permit a separate non-binding shareholder vote to approve the compensation of senior executive officers.
The U.S. Treasury has not adopted rules to implement these provisions.
Congress has held other hearings and proposed additional legislation relating to
TARP. Many of the proposals relate to executive compensation as well as
additional regulatory reporting requirements. It is possible that the enactment
of additional legislation related to TARP could restrict or require changes to
lending, corporate governance or executive compensation.
On February 27, 2009, the FDIC board agreed to impose an emergency special
assessment of 20 basis points on all banks to restore the Deposit Insurance Fund
to an acceptable level. The assessment, which would be payable on September 30,
2009, is in addition to a planned increase in premiums and a change in the way
regular premiums are assessed, which the board also approved on that date. This
emergency special assessment for the Company, if assessed in accordance with the
February 27, 2009 directive, is projected to be $5.0 million based on March 31,
2009 data.
Selected Consolidated Financial Data
The following table sets forth certain selected consolidated financial
data.
At or For the Three Months Ended
March 31, December 31,
2009 2008 2008
(Dollars in thousands, except per share data)
Statement of Income Data:
Total interest income $ 42,266 $ 50,795 $ 43,734
Total interest expense 21,164 28,579 23,902
Net interest income 21,102 22,216 19,832
Provision for loan losses 13,000 5,400 20,000
Noninterest income 3,343 1,790 3,732
Noninterest expenses 21,761 28,609 25,678
(Loss) income before income taxes (10,316 ) (10,003 ) (22,114 )
Provision for income taxes (4,996 ) (4,587 ) (26,543 )
Net (loss) income $ (5,320 ) $ (5,416 ) $ 4,429
Preferred stock dividends 2,123 835 1,222
Net (loss) income available to common stockholders $ (7,443 ) $ (6,251 ) $ 3,207
Per Share Data:
(Loss) earnings per share (basic) (10) $ (0.27 ) $ (0.22 ) $ 0.11
(Loss) earnings per share (diluted) (10) (0.27 ) (0.22 ) 0.11
Cash dividends declared on common stock - 0.13 -
Book value 6.38 12.14 6.56
Tangible book value (non-GAAP measure) (9) 3.05 5.79 3.21
Selected Financial Ratios:
Return on average assets (1) (0.59 )% (0.59 )% 0.49 %
Return on average equity (2) (7.12 ) (5.69 ) 7.17
Dividend payout ratio - N/M -
Average equity to average assets 8.30 10.38 6.85
Tier 1 risk-based capital 7.39 9.33 8.30
Total risk-based capital 9.16 10.61 10.07
Net interest margin (tax equivalent) (3)(4) 2.63 2.82 2.51
Loan to deposit ratio 101.85 102.62 104.02
Net overhead expense to average assets (5) 2.05 1.01 2.43
Efficiency ratio (6) 84.04 65.88 104.58
Loan Quality Ratios:
Allowance for loan losses to total loans 2.05 0.82 1.77
Provision for loan losses to total loans 2.03 0.88 3.17
Net loans charged off to average total loans 0.70 1.93 2.39
Nonaccrual loans to total loans (7) 3.10 1.90 2.43
Nonperforming assets to total assets (8) 2.96 1.33 2.36
Allowance for loan losses to nonaccrual loans 0.66x 0.43x 0.73x
Balance Sheet Data:
Total assets $ 3,713,064 $ 3,730,446 $ 3,570,212
Total earning assets 3,339,448 3,298,143 3,195,408
Average assets 3,648,873 3,686,269 3,590,313
Loans 2,591,048 2,467,701 2,509,759
Allowance for loan losses 53,011 20,344 44,432
Deposits 2,544,005 2,404,712 2,412,791
Borrowings 832,057 906,505 817,041
Stockholders' equity 301,070 381,156 305,834
Tangible stockholders' equity (non-GAAP measure) (9) 208,098 204,295 212,289
|
(1) Net income divided by average assets.
(2) Net income divided by average equity.
(3) Net interest income, on a fully tax-equivalent basis, divided by average earning assets.
(4) The following table reconciles reported net interest income on a fully tax-equivalent basis for the periods presented (in thousands):
Three Months Ended
March 31, December 31,
2009 2008 2008
Net interest income $ 21,102 $ 22,216 $ 19,832
Tax-equivalent adjustment to net interest income 357 892 363
Net interest income, fully tax-equivalent basis $ 21,459 $ 23,108 $ 20,195
|
(5) Noninterest expense less noninterest income, excluding security gains or losses, divided by average assets.
(6) Noninterest expense excluding amortization and foreclosed properties expense divided by noninterest income, excluding security gains or losses, plus net interest income on a fully tax-equivalent basis.
(7) Includes total nonaccrual loans.
(8) Includes total nonaccrual and foreclosed properties.
(9) Stockholders' equity less goodwill, core deposit and other intangible assets. Management believes that tangible stockholders' equity (non-GAAP measure) is a more useful measure since it excludes the balances of intangible assets. The following table reconciles reported stockholders' equity to tangible stockholders' equity for the periods presented (in thousands):
At March 31, At December 31,
2009 2008 2008
Stockholders' equity $ 301,070 $ 381,156 $ 305,834
Core deposit intangible and other intangibles, net (14,110 ) (16,454 ) (14,683 )
Goodwill (78,862 ) (160,407 ) (78,862 )
Tangible stockholders' equity $ 208,098 $ 204,295 $ 212,289
|
(10) Prior periods with earnings were re-stated per FSP EITF 03-6-1.
Results of Operations - Three Months Ended
March 31, 2009 and 2008
Set forth below are some highlights of first quarter 2009 results compared
to the first quarter of 2008.
• Basic and diluted loss per share for the three months ended March 31, 2009
and 2008 was $0.27 and $0.22 per share, respectively.
• Net loss for the first quarter of 2009 was $5.3 million compared to $5.4 million for the first quarter of 2008. The first quarter of 2009 included a $13.0 million provision for loan losses. The first quarter of 2008 reflected a $17.6 million impairment charge on securities, a $7.1 million loss on the early extinguishment of debt and a $15.2 million gain on the sale of a branch property.
• Net interest income decreased 5.0% to $21.1 million in the first quarter of 2009 compared to $22.2 million in the first quarter of 2008, primarily as a result of the decline in interest income on loans caused by decreases in the prime interest rate in 2008.
• The net interest margin continues to be under pressure at 2.63% for the three months ended March 31, 2009 compared to 2.82% for the similar period of 2008, largely due to lower yields on earning assets caused by reductions in prime rate.
• The annualized return on average assets was was (0.59)% for the three months ended March 31, 2009 and 2008.
• The annualized return on average equity for the three months ended March 31, 2009 was (7.12)% compared to (5.69)% for the similar period in 2008.
• The provision for loan losses increased by $7.6 million, to $13.0 million, in the first quarter of 2009 compared to $5.4 million for the comparable period in 2008, reflecting management's current updated assessments of impaired loans and concerns about the continued deterioration of economic conditions.
• Noninterest income was $3.3 million for the three months ended March 31, 2009 compared to $1.8 million over the comparable period in 2008. Excluding the impairment charge on securities and the gain on the sale of real estate, noninterest income was $4.2 million for the first quarter of 2008.
• Noninterest expenses were $21.8 million during the first quarter of 2009 compared to $28.6 million for the similar period in 2008. Excluding the loss on the early extinguishment of debt and merger related charges, noninterest expense increased by $273,000 compared to the first quarter of 2008.
Set forth below are some highlights of first quarter 2009 results compared
to the fourth quarter of 2008.
• Basic and diluted loss per share for the three months ended March 31, 2009
were $0.27 compared to earnings per share of $0.11 for three months ended
December 31, 2008.
• Net loss for the first quarter of 2009 was $5.3 million compared to net income of $4.4 million for the fourth quarter of 2008. Income tax benefits of $16.6 million related to securities losses recognized in the third quarter of 2008 were recorded in the fourth quarter of 2008 due to subsequent tax law changes. Without this adjustment, a net loss of $12.2 million would have resulted for the fourth quarter of 2008.
• Net interest income increased by $1.3 million to $21.1 million in the first quarter of 2009 compared to $19.8 million in the fourth quarter of 2008, primarily as a result of lower cost of funds.
• The net interest margin increased to 2.63% for the three months ended March 31, 2009 compared to 2.51% for the fourth quarter of 2008, mainly due to average rates paid on interest-bearing liabilities falling more than the yields on earning assets.
• The annualized return on average assets for the three months ended March 31, 2009 was (0.59)% compared to 0.49% for the fourth quarter of 2008. Excluding the income tax benefit of $16.6 million, the annualized return on average assets would have been (1.35)% for the fourth quarter of 2008.
• The annualized return on average equity for the three months ended March 31, 2009 was (7.12)% compared to 7.17% for the fourth quarter of 2008. Excluding the income tax benefit of $16.6 million, the annualized return on average equity would have been (19.72)% for the fourth quarter of 2008.
• The provision for loan losses was $13.0 million in the first quarter of 2009 compared to $20.0 million for the fourth quarter of 2008, reflecting management's current updated assessments of impaired loans and concerns about the continued deterioration of economic conditions.
• Noninterest income was $3.3 million for the three months ended March 31, 2009 and $3.7 million in the fourth quarter of 2008.
• Noninterest expenses were $21.8 million during the first quarter of 2009 compared to $25.7 million in the fourth quarter of 2008.
Net Interest Income
The following table sets forth the average balances, net interest income on
a tax equivalent basis and expense and average yields and rates for the
Company's interest-earning assets and interest-bearing liabilities for the
indicated periods.
For the Three Months Ended
March 31, 2009 March 31, 2008 December 31, 2008
Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
(Dollars in thousands)
Interest-Earning Assets:
Federal funds sold and
interest-bearing deposits due
from banks $ 4,787 $ 37 3.09 % $ 21,939 $ 148 2.70 % $ 18,748 $ 54 1.15 %
Securities:
Taxable(1) 629,783 6,940 4.41 704,119 9,566 5.43 610,160 7,381 4.84
Exempt from federal income
taxes(1) 58,551 846 5.78 61,847 920 5.95 58,670 848 5.78
Total securities 688,334 7,786 4.52 765,966 10,486 5.48 668,830 8,229 4.92
FRB and FHLB stock 31,698 190 2.40 29,230 183 2.50 31,698 190 2.40
Loans (collateral-based
classification):
Commercial loans(1)(3)(4) 530,467 6,588 4.97 499,461 8,777 7.03 522,576 7,193 5.51
. . .
|
|
|