By Becky Yerak | MB
Financial Inc., which last Friday bought its fifth and sixth failed
banks since 2009, said Monday that it has the wherewithal to pick up
more collapsed banks even as it digests newly acquired Broadway Bank and
New Century Bank.
The Chicago-based bank said traditional mergers and acquisitions
involving sounder banks are probably unlikely for the foreseeable
future. It’s safer to stick with deals in which the Federal Deposit
Insurance Corp. shares losses on the collapsed lenders, MB’s chief
executive said Monday.
“It’s so hard to value a loan portfolio,” MB Chief Executive Mitch Feiger said in a conference call Monday. “There’s some evidence that the economy is improving, but I think it has a long way to go.” Specifically, MB expects the commercial real estate market to remain stressed for a while.
He also said that FDIC deals offer the ability to change interest rates on CDs, cancel contracts and take a pass on unwanted facilities. “Those are things that make them more profitable than unassisted (mergers and acquisitions) transactions,” he said.
Last Friday MB, with FDIC assistance, bought Chicago-based New Century Bank and Chicago-based Broadway Bank, the family business of U.S. Senate candidate Alexi Giannoulias.
Broadway had about $1.1 billion in total deposits, but MB is assuming only $281 million of those. About three-fours of Broadway’s deposits were brokered deposits. In contrast, New Century had $492 million in total deposits and MB assumed $471 million of those.
“We expect to retain $400 million of low-cost deposits” over the long run, MB said in a conference call.
MB didn’t pay a premium on either bank’s deposits.
Assets were purchased at a discount of 19.6 percent for Broadway assets and 9.1 percent for New Century, and are subject to loss-sharing agreements with the FDIC. MB will share in 20 percent of the losses on about $1.3 billion in of the assets acquired — $874 million from Broadway and $431 million from New Century — and the FDIC will shoulder 80 percent of the losses on the loans for both banks.
MB said New Century has three good offices, including its high-profile headquarters at Ontario Street and the Kennedy Expressway.
MB said many of Broadway’s loans are outside the Chicago market. It said it’s getting to know Broadway’s staff and trying to decide whether to handle the loans, use existing Broadway bankers or outsource management of them. MB said the loan-workout process at the banks should be “relatively easy.”
He said both banks’ offices are complementary but that MB is evaluating its new footprint.
Separately, MB was asked whether it plans to repay money from the U.S. Treasury’s Troubled Asset Relief Program, but Feiger said there are still no immediate plans to do so until the economy stabilizes.
“Then we’ll repay TARP if they’ll allow us,” Feiger said. “TARP is a little pain in the neck, but we’re happy to have the capital, and I think we’ve used it well.”
Feiger reiterated that he continues to see bank failures throughout 2010 and into 2011.
He also said he wasn’t surprised the FDIC seized so many banks on one day in the same market. He said the FDIC has telegraphed that it was trying to cluster banks in the same market and might continue to do so. He said that plays to the advantages of mid-size banks such as MB over smaller banks that want to acquire but “don’t have the operating bandwith.”