Morningstar® Document Research℠
FORM 425
FIFTH THIRD BANCORP - MBFI
Filed: January 22, 2019 (period: )
Filing of certain prospectuses and communications in connection with business combination transactions
The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Filed by Fifth Third Bancorp
pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
under the Securities Exchange Act of 1934
Subject Company: MB Financial, Inc.
SEC File No.: 001-36599
Filer's SEC File No.: 001-33653
Date: January 22, 2019
Fifth Third Announces Fourth Quarter 2018 Results
Diluted earnings per share of $0.64, including a negative $0.05 impact from certain items on page 2
Key Financial Data
Key Highlights(a)
$ millions for all balance sheet and income statement items
4Q18
3Q18
4Q17
Income Statement Data(a) |
$432
Strong financial performance and momentum
Net income available to common shareholders Net interest income (U.S. GAAP)
$421 $504
● NIM(b) up 19 bps compared to adjusted 4Q17
1,081
1,043 956
Net interest income (FTE)(b) Noninterest income Noninterest expense
1,085
1,047 963
● Expenses flat compared to 4Q17
575
563 577
977
970 975
● Adjusted PPNR(b) up 14% compared to 4Q17
Per Share Data(a)
$0.65 0.64 23.07 19.17
● Average loans up 3% compared to 4Q17
Earnings per share, basic Earnings per share, diluted Book value per share
$0.62 $0.71
0.61 0.70
● Average core deposits up 4% compared to 4Q17
21.70 21.43
Remain on-track to achieve NorthStar targets(b)
Tangible book value per share(b)
17.94 17.86
Balance Sheet & Credit Quality |
$92,250 102,790 0.33 % 0.53
● ROTCE - 14.3% (adjusted 15.4%)
Average portfolio loans and leases Average deposits
$94,757 107,495
Net charge-off ratio(c) Nonperforming asset ratio(d)
0.35 % 0.41
$93,192 104,666 0.30 % 0.48
● ROA - 1.25% (adjusted 1.34%)
● Efficiency ratio - 58.8% (adjusted 56.8%)
Record 4Q18 business and credit results
Financial Ratios(a) |
1.22 %
Return on average assets
1.25 %
1.48 %
● Record corporate banking revenue
Return on average common equity
11.8
11.4 13.3
Return on average tangible common equity(b) CET1 capital(e)(f)(g)
14.3
13.8 16.0
● Record middle market & corporate loan originations
10.24
10.67 10.61
● ~20 year low commercial criticized ratio (3.34%)
Net interest margin(b)
3.29
3.23 3.02
Efficiency(b)
58.8
60.2 63.3
● ~20 year low NPA ratio (0.41%)
Other than the Quarterly Financial Review tables beginning on page 14, commentary is on a fully taxable-equivalent (FTE) basis unless otherwise noted. Consistent with SEC guidance in Industry Guide 3 that contemplates the calculation of tax-exempt income on a taxable-equivalent basis, net interest income, net interest margin, net interest rate spread, total revenue and the efficiency ratio are provided on an FTE basis. Effective in the fourth quarter of 2018, Fifth Third retrospectively applied a change in its accounting policy for investments in affordable housing projects that qualify for low-income housing tax credits (LIHTC) to all prior period amounts presented. As a result, prior period financial results may differ compared to previous disclosures. A summary reconciliation of the change is provided on page 30.
CEO Commentary
"Our fourth quarter and full year results were very strong. In 2018, we produced record results, generated profitable relationship growth, benefited from our improved balance sheet resiliency, and diligently managed our expenses while continuing to invest for future growth. We returned $2 billion to our shareholders through repurchases and dividends, including a nearly 40% increase in the dividend by the end of the year, while maintaining very strong capital ratios."
"We recently received the regulatory non-objection related to our re-submitted capital plan, including the pro forma impact of MB Financial. We remain confident in our ability to achieve the expected financial synergies from the pending acquisition, and we continue to expect the transaction to close in the first quarter of 2019."
"With the conclusion of Project NorthStar at the end of 2019, the ongoing MB Financial integration efforts, and a clearly-defined set of strategic priorities for the future, we remain very confident in our ability to achieve our long-term financial targets and outperform through the cycle."
-Greg D. Carmichael, Chairman, President and CEO
Investor contact: Chris Doll (513) 534-2345 | Media contact: Larry Magnesen (513) 534-8055
January 22, 2019
Effective in the fourth quarter of 2018, Fifth Third retrospectively applied a change in its accounting policy for investments in affordable housing projects that qualify for low-income housing tax credits (LIHTC) to all prior period amounts presented. As a result, prior period financial results may differ compared to previous disclosures. A summary reconciliation of the change is provided on page 30.
Income Statement Highlights
($ in millions, except per share data)
For the Three Months Ended
% ChangeDecember 2018
September 2018
December 2017
SeqYr/Yr
Condensed Statements of Income(a) Net interest income (NII)(b)
$1,085
$1,047
$963
4%
13%
Provision for loan and lease losses Noninterest income
95
86
6710%42%
575
563
Noninterest expense
Income before income taxes(b)
$588
977
970
$554
577 975$498
2% 1%6%
- -18%
Taxable equivalent adjustment Applicable income tax expense (benefit) Net income
4
4
7
-(43%)
129
114
(36)
13%
NM
Less: Net income attributable to noncontrolling interests Net income attributable to Bancorp
$455-
$436-
$527-
4%(14%)
NM
NM
$455
$436
$527
4%(14%)
Dividends on preferred stock
23
15
23
53%
-
Net income available to common shareholders Earnings per share, diluted
$0.64
$432
$0.61
$421
$0.70
$504
3%(14%)
5%
(9%)
Fifth Third Bancorp (Nasdaq: FITB) today reported fourth quarter 2018 net income of $455 million compared to net income of $527 million in the year-ago quarter. Net income available to common shareholders was $432 million, or $0.64 per diluted share, compared to $504 million, or $0.70 per diluted share in the year-ago quarter. Prior quarter net income was $436 million and net income available to common shareholders was $421 million, or $0.61 per diluted share.
Reported full year 2018 net income was $2.2 billion, compared to full year 2017 net income of $2.2 billion. Full year 2018 net income available to common shareholders was $2.1 billion, or $3.06 per diluted share, compared to full year 2017 net income available to common shareholders of $2.1 billion, or $2.81 per diluted share.
Diluted earnings per share impact of certain items | |
($ in millions, except per share data) | |
Merger-related expenses, after-tax(h) | $21 |
GreenSky equity securities losses, after-tax(h) $17 | |
Valuation of Visa total return swap, after-tax(h) | ($6) |
After-tax impact(h) $32 | |
Average diluted common shares outstanding (thousands) 662,966 | |
Diluted earnings per share impact $0.05 | |
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Net Interest Income (FTE; $ in millions)(b)
For the Three Months Ended
% ChangeInterest Income Interest income Interest expense
Net interest income (NII)
December | September | December | ||
2018 | 2018 | 2017 | Seq | Yr/Yr |
$1,397 | $1,319 | $1,151 | 6% | 21% |
66% | ||||
13% |
312$1,085
272$1,047
18815%
$963
4%Average Yield/Rate Analysis Yield on interest-earning assetsbps Change
Rate paid on interest-bearing liabilities
4.23% 1.33%
4.07% 1.20%
3.61% 0.88%
16 62 1345
Ratios
Net interest rate spread Net interest margin
2.90%3.29%
2.87%3.23%
2.73%3.02%
3176 27
Compared to the year-ago quarter, NII increased $122 million, or 13 percent, which was impacted by a $27 million remeasurement related to the tax treatment of leveraged leases in the year-ago quarter. Excluding the remeasurement, NII increased $95 million, or 10 percent, reflecting higher short-term market rates and growth in interest-earning assets, partially offset by an increase in funding costs. NIM increased 27 bps, which included an 8 bps impact from the remeasurement in the year-ago quarter. Excluding the remeasurement, NIM increased 19 bps, reflecting higher short-term market rates and growth in interest-earning assets.
Compared to the prior quarter, NII increased $38 million, or 4 percent, reflecting growth in commercial and industrial (C&I) loans, securities portfolio balance growth, and higher short-term market rates. NIM increased 6 bps, primarily driven by higher short-term market rates and growth in C&I loans.
Noninterest Income
Noninterest Income |
Corporate banking revenue 130 100 77 | 30% | 69% |
Wealth and asset management revenue 109 114 106 | (4%) | 3% |
Other noninterest income 93 86 123 | 8% | (24%) |
Securities gains (losses), net - non-qualifying hedges on mortgage servicing rights 2 (1) (2) | NM | NM |
Reported noninterest income was flat from the year-ago quarter, and increased $12 million, or 2 percent, from the prior quarter. The comparisons reflect the impact of certain significant items in the table on page 4.
($ in millions) | |||||
December | September | December | |||
2018 | 2018 | 2017 | Seq | Yr/Yr | |
Service charges on deposits | $135 | $139 | $138 | (3%) | (2%) |
Mortgage banking net revenue | 54 | 49 | 54 | 10% | - |
Card and processing revenue | 84 | 82 | 80 | 2% | 5% |
Securities (losses) gains, net | (32) | (6) | 1 | 433% | NM |
Total noninterest income | $575 | $563 | $577 | 2% | - |
3 |
For the Three Months Ended
% Change
Compared to the year-ago quarter, service charges on deposits decreased $3 million, or 2 percent. Corporate banking revenue increased $53 million, or 69 percent, which was impacted by a $25 million lease remarketing impairment in the year-ago quarter. Excluding this impact, corporate banking revenue increased $28 million, or 27 percent, primarily driven by strong capital markets revenue led by record M&A advisory fees as well as increased syndication revenues. Mortgage banking net revenue was flat primarily driven by lower negative net valuation adjustments and higher gross mortgage servicing fees, partially offset by lower origination fees and gains on loan sales. Mortgage originations of $1.6 billion decreased 18 percent. Wealth and asset management revenue increased $3 million, or 3 percent, primarily driven by higher personal asset management revenue reflecting positive net inflows. Card and processing revenue increased $4 million, or 5 percent, reflecting increases in credit card spend and debit transaction volumes, partially offset by higher rewards.
Compared to the prior quarter, service charges on deposits decreased $4 million, or 3 percent. Corporate banking revenue increased $30 million, or 30 percent, primarily driven by increases in M&A advisory and syndication revenues. Mortgage banking net revenue increased $5 million, or 10 percent, primarily driven by lower negative net valuation adjustments partially offset by lower origination fees and gains on loan sales. Mortgage originations decreased 16 percent. Wealth and asset management revenue decreased $5 million, or 4 percent, primarily driven by lower institutional trust and brokerage fees. Card and processing revenue increased $2 million, or 2 percent, reflecting increases in credit card spend volumes, partially offset by higher rewards.
Noninterest Income excluding certain items
($ in millions)
For the Three Months Ended
% ChangeDecember 2018
September 2018
December 2017
SeqYr/Yr
Noninterest Income excluding certain items |
Noninterest income (U.S. GAAP)
$575
$563
$577
Valuation of Visa total return swap (7) 17 11 |
21
GreenSky equity securities losses
8
-
Securities losses / (gains), net (excluding GreenSky) 11 (2) (1) |
Noninterest income excluding certain items(b)
$600
$586
$587
2%
2%
Compared to the year-ago quarter, noninterest income excluding the items in the table above increased $13 million, or 2 percent. Compared to the prior quarter, noninterest income excluding these items increased $14 million, or 2 percent.
Other noninterest income on a reported basis in the current and previous quarters was impacted by the Visa total return swap valuation adjustments. Excluding this item, other noninterest income of $86 million decreased $48 million, or 36 percent compared to the year-ago quarter, primarily driven by a decrease in the revenue recognized from Worldpay related to the tax receivable agreement and a decline in equity method earnings from the ownership interest in Worldpay. Compared to the prior quarter, other noninterest income excluding the Visa total return swap valuation adjustments decreased $17 million, or 17 percent, primarily driven by lower private equity investment income, partially offset by the revenue recognized from Worldpay related to the tax receivable agreement.
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Fifth Third Bancorp published this content on 22 January 2019 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 22 January 2019 21:13:08 UTC