M&I Bank sells assets to private equity firm; Commercial real estate drags on Bank Mutual; Associated Bank CEO predicts return to profitability; ‘Stabilizing credit quality’ propels PNC Bank; U.S. Bancorp reports strong quarter; M&I lost $173.8 million in quarter
M&I Bank sells assets to private equity firm
SilverLeaf Financial, a Salt Lake City, Utah-based private equity firm, has acquired a $70 million pool of assets from Milwaukee-based Marshal & Ilsley Corp. SilverLeaf acquired 19 assets from 17 loan relationships, 25 loans and two properties in the deal.
"We are excited about this purchase,” said SilverLeaf chief executive officer Shane Baldwin. “We’ve purchased several loans from M&I in the past, and they have been a great seller for us. This 2nd quarter was a big quarter for a lot of sellers as it was for a lot of buyers. There was a lot of product on the market, and I think that’s why we saw such favorable pricing on the deals that we acquired."
The associated collateral from SilverLeaf’s M&I acquisition contains a mix of commercial and residential land, single-family residences, office buildings, industrial buildings, storage units, and multi-family units. The collateral is located primarily in Florida, Wisconsin, and Arizona, which are M&I’s primary markets.
"As long as we continue to see good product at nice discounts from banks, special servicers and the FDIC, we will be a very active buyer in this market," said Benjamin Smith, vice president of acquisitions for SilverLeaf Financial.
M&I has lost money for seven consecutive quarters. Over the past 12 months, the company has lost $882.4 million. M&I’s losses are largely related to the collapse of the housing markets in Florida and Arizona. For the past two years, M&I has written down large housing-related losses in both markets.
Commercial real estate drags on Bank Mutual
Milwaukee-based Bank Mutual Corp. reported second quarter net income of $731,000, 2 cents per share, down from $3.8 million, or 8 cents per share, in the same period a year ago.
Bank Mutual’s provision for loan losses was $6.2 million during the second quarter, up from $472,000 in the same quarter last year.
Michael Crowley Jr., chairman, president, and chief executive officer of Bank Mutual, said, "A low interest rate environment and a difficult market for commercial real estate continue to challenge our earnings performance. Also, a lack of convincing improvement in economic conditions continues to impact our customers’ ability and willingness to borrow, which restricts our ability to expand our lending franchise. Despite these headwinds, we are pleased that our operations continue to be profitable and we are confident our strong capital and liquidity positions will enable us to take advantage of opportunities that may present themselves as conditions improve."
Associated Bank CEO predicts return to profitability
Green Bay-based Associated Banc-Corp. reported a second quarter net loss to common shareholders of $10.2 million, or 6 cents per share, an improvement from a net loss of $24.7 million, or 19 cents per share, for the same period a year ago.
“We continued to make good progress in addressing the company’s credit quality issues during the quarter,” said Philip Flynn, president and chief executive officer of Associated Bank, which is Wisconsin’s second-largest bank. “The company’s capital and liquidity positions remain strong as we continue to aggressively work through our nonperforming assets and position the company for future profitability and growth.”
The company’s provision for loan losses was $98 million for the quarter, down 41 percent from $165 million for the first quarter of 2010 and down 37 percent from $155 million for the second quarter of 2009. The firm’s net charge offs for the quarter were $105 million, down 36 percent from $163 million for the first quarter and up 72 percent from $61 million for the second quarter of 2009.
Associated’s nonperforming loans declined to $1.02 billion, down 16 percent from $1.21 billion in the first quarter.
The bank’s potential problem loans continued to decline to $1.27 billion.
In a conference call with analysts this afternoon, Flynn said. “We’ve taken a lot of action to strengthen our balance sheet … We’ve had significant improvement in our credit quality and a reduction in loan loss and charge-offs.”
Because Associated still has several billion in problem loans and potential problem loans, the bank will likely still continue charge-offs and loan loss provisions at elevated levels for the foreseeable future. However, the bank still believes it will return to profitability in the third or fourth quarters of this year, Flynn said.
“We expect to see positive net earnings in the next two quarters,” he said.
Flynn acknowledged that Associated’s liquidity is “conservative” at the moment – the bank has about $2.5 billion in cash.
“We will redeploy that in the future to fund loan growth, but we believe that liquidity (level) is prudent,” he said.
The bank expects its recent commercial banking hires in Chicago will pay off in the coming months and years because it was able to hire lenders with significant experience and strong ties to the community.
“We hired well known, experienced commercial lenders,” Flynn said. “And we can back them with targeted print advertising and marketing events.”
In a recent BizTimes Milwaukee cover story, Flynn assessed the outlook for the company.
‘Stabilizing credit quality’ propels PNC Bank
The PNC Financial Services Group Inc., reported second quarter net income of $803 million, or $1.47 per common share, up from $207 million, or 14 cents per share, in the same period a year ago.
The Pittsburgh-based company operates the PNC Bank branches in southeastern Wisconsin.
“PNC reported strong second quarter financial results reflecting revenue growth, well-managed expenses and stabilizing credit quality,” said James Rohr, chairman and chief executive officer of PNC Financial. “We successfully completed the National City conversion encompassing 6 million customers and 1,300 branches in nine states, providing further growth opportunities throughout our expanded footprint. The quality of our balance sheet has served us well and our robust earnings added to equity. As we look to the future, PNC’s vision, values and execution capabilities position us to successfully compete despite the regulatory changes and economic challenges facing the industry.”
U.S. Bancorp reports strong quarter
U.S. Bancorp has reported second quarter net income of $766 million, or 45 cents per share, up from $471 million, or12 cents per share, in the same period a year ago.
The Minneapolis-based company, which operates U.S. Bank branches in Wisconsin, reported quarterly total net revenue of $4.5 billion, the result of strong year-over-year growth in both net interest income and fee revenue.
U.S. Bancorp chairman, president and chief executive officer Richard Davis said, "Our earnings were driven by record total net revenue and lower credit costs. On-going investments and business line growth initiatives, as well as recent acquisitions, contributed to the increase in net revenue. Growth in earning assets and deposits, coupled with an expanded net interest margin, led to a 14.5 percent increase in net interest income year-over-year, while strong results from our payments businesses and corporate banking group benefited total noninterest income.”
Davis said the company’s credit quality showed “marked improvement” in the second quarter, as net charge-offs and nonperforming assets declined from the levels recorded in the first quarter of 2010.
“Additionally, although the company recorded $25 million of provision in excess of net charge-offs in the second quarter, it was significantly lower than the $175 million and $466 million of excess provision recorded in the first quarter of 2010 and second quarter of 2009, respectively. With these positive changes in our credit metrics, as well as other indications of ongoing improvement in the portfolio, we believe the Company has reached the inflection point in credit quality and we expect net charge-offs and nonperforming assets to be lower in the third quarter than the current quarter. The company’s capital position remains strong,” Davis said.
M&I lost $173.8 million in quarter
Marshall & Ilsley Corp. has posted a second quarter net loss of $173.8 million, or 33 cents per share, which was an improvement over a net loss of $234.0 million, or 83 cents per share, in the same period a year ago.
The quarterly loss per share was deeper than the 26 cents estimated by a consensus of Wall Street analysts surveyed by Thomson Reuters.
The Milwaukee-based parent company of M&I Bank has lost money for seven consecutive quarters. Over the past 12 months, Marshall & Ilsley has lost $882.4 million.
The company said its early stage delinquencies fell 14 percent from the first quarter, the fifth consecutive quarterly decline and the lowest level since 2007.
The company’s non-performing loans decreased 8 percent from first quarter 2010 – the fourth consecutive quarterly decline and down 25 percent from second quarter 2009 high.
"Our second quarter results were in line with the prior quarter after adjusting for last quarter’s gain on the sale of our merchant processing business," said Mark Furlong, president and chief executive officer of Marshall & Ilsley. "Loan loss provision and net charge-offs were consistent with the first quarter and substantially better than last year. This continues the progress we have made in addressing asset quality challenges through our early identification of problem credits. We will remain diligent in continuing to improve our credit profile, but our attention will increasingly shift toward a return to profitability and growth opportunities."
Given the reductions in new loan delinquencies, M&I believes that it is near the end of large losses related to residential real estate.
“The third quarter, given the delinquencies and inflows we are seeing is when we think we’ll see some more downward pressure in our reserves,” said Mark Hogan, senior vice president and chief credit officer. “When you look at our reserve now – they were 50-50 a year ago, with commercial and residential. Today, they’re 60-40, commercial and residential. And we expect, with the reductions in delinquency trends, some reductions in loss rates on the commercial side … We believe we’re at that point where the third quarter will be a very pivotal quarter. We think we’re very close to getting to the end of the credit issues.”
