MB FINANCIAL INC /MD - FORM 8-K - EX-99 - EXHIBIT 99

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8-K - 8-K - MB FINANCIAL INC /MD	form8-kearningsrelease2q15.htm

EXHIBIT 99




				MB Financial, Inc.
				800 West Madison Street
				Chicago, Illinois 60607
				(888) 422-6562
				NASDAQ: MBFI

PRESS RELEASE

For Information at MB Financial, Inc. contact:

Berry Allen - Investor Relations

E-Mail: beallen@mbfinancial.com

FOR IMMEDIATE RELEASE

MB FINANCIAL, INC. REPORTS RECORD EARNINGS FOR THE SECOND QUARTER 2015, COMBINED WITH SOLID LOAN GROWTH

CHICAGO, July 16, 2015 – MB Financial, Inc. (NASDAQ: MBFI), the holding company for MB Financial Bank, N.A., today announced 2015 second quarter net income available to common stockholders of $39.0 million, or $0.52 per diluted common share, compared to $32.1 million, or $0.43 per diluted common share, last quarter and $23.1 million, or $0.42 per diluted common share, in the second quarter a year ago.

Highlights Include:

Operating Earnings Up from Prior Quarter and One Year Ago


•	Operating earnings, which we define as earnings excluding non-core items, were $41.8 million for the second quarter of 2015 compared to $39.3 million last quarter (+6.2%) and $23.5 million in the second quarter a year ago (+77.4%) . A table reconciling net income, as reported, to operating earnings is set forth below and in the “Non-GAAP Financial Information” section.


•	Annualized operating return on average assets increased to 1.14% for the second quarter of 2015 compared to 1.11% last quarter and 0.99% for the second quarter a year ago.


•	Our net interest margin on a fully tax equivalent basis, excluding the accretion on loans acquired in the Taylor Capital merger ("the Merger") declined five basis points from the prior quarter and was up four basis points from the second quarter of 2014.


•	Our core non-interest income grew from $81.4 million in the prior quarter to $83.0 million (+7.9% annualized) primarily as a result of higher mortgage banking revenue driven by an increase in servicing income. The increase in mortgage banking revenue was partially offset by lower leasing revenue as leasing revenue in the first quarter was exceptionally strong.


•	Our core non-interest expense was well-controlled compared to the prior quarter, remaining at $131.5 million despite an extra day and annual salary increases effective in the second quarter of 2015.


•	Merger related expenses incurred in the second quarter of 2015 of $1.2 million were primarily related to branch exit charges on facilities we closed in connection with the Merger as well as legal fees.

The following table presents the calculation of operating earnings and operating earnings available to common stockholders:



										Six Months Ended
										June 30,
	2Q15			1Q15			2Q14			2015			2014
(Dollars in thousands, except per share data)
Net income, as reported	$	40,952		$	34,111		$	23,106		$	75,063		$	43,075
Less non-core items:
Net (loss) gain on investment securities	(84		)	(460		)	(87		)	(544		)	230
Net (loss) gain on sale of other assets	(7		)	4			(24		)	(3		)	(17		)
Merger related expenses	(1,234		)	(8,069		)	(488		)	(9,303		)	(1,168		)
Prepayment fees on interest bearing liabilities	—			(85		)	—			(85		)	—
Loss on low to moderate income real estate investment	—			—			(96		)	—			(2,124		)
Total non-core items	(1,325		)	(8,610		)	(695		)	(9,935		)	(3,079		)
Income tax expense on non-core items	(526		)	(3,417		)	(266		)	(3,943		)	(1,121		)
Non-core items, net of tax	(799		)	(5,193		)	(429		)	(5,992		)	(1,958		)
Operating earnings	41,751			39,304			23,535			81,055			45,033
Dividends on preferred shares	2,000			2,000			—			4,000			—
Operating earnings available to common stockholders	$	39,751		$	37,304		$	23,535		$	77,055		$	45,033
Diluted operating earnings per common share	$	0.53		$	0.50		$	0.43		$	1.02		$	0.82
Weighted average common shares outstanding for diluted earnings per common share	75,296,029			75,164,716			55,200,054			75,230,455			55,232,703
Annualized operating return on average assets	1.14		%	1.11		%	0.99		%	1.13		%	0.96		%

Loan Growth During the Quarter


•	Loan balances, excluding purchased credit-impaired loans, increased $235.4 million (+2.7%, or +10.9% annualized) during the second quarter of 2015 primarily due to increases in commercial related loans across several business lines.



	Change from 3/31/2015 to 6/30/2015
	Amount			Percent
Commercial related credits:
Commercial loans	$	96,237		3.0	%
Commercial loans collateralized by assignment of lease payments (lease loans)	62,835			3.9
Commercial real estate	14,351			0.6
Construction real estate	5,494			3.0
Total commercial related credits	178,917			2.4
Other loans:
Residential real estate	27,560			5.5
Indirect vehicle	30,672			11.2
Home equity	(10,600		)	(4.4	)
Consumer loans	8,818			11.4
Total other loans	56,450			5.1
Total loans, excluding purchased credit-impaired	235,367			2.7
Purchased credit-impaired	(62,739		)	(27.6	)
Total loans	$	172,628		1.9	%

Deposit Balance Changes


•	Non-interest bearing deposits increased $87.5 million (+2.0%, or +8.2% annualized) during the second quarter of 2015 and comprised 40% of total deposits at quarter-end.


•	Low cost deposits decreased $71.7 million (-0.8%, or -3.1% annualized) in the second quarter of 2015 but continued to represent 84% of total deposits at quarter-end.

Credit Quality


•	Provision for credit losses on legacy loans (which excludes loans acquired through the Merger) was negative $600 thousand in the second quarter of 2015 compared to a negative provision of $550 thousand in the first quarter of 2015.

•

Taylor Capital related provision for credit losses was $4.9 million in the second quarter of 2015 compared to $5.5 million in the first quarter of 2015. These credit costs are a result of Taylor Capital loan renewals and needed reserves on Taylor Capital acquired loans in excess of the purchase loan discount. As expected, these credit costs largely offset the accretion on Taylor Capital non-purchased credit-impaired loans of $8.0 million in the second quarter of 2015 and $8.6 million in the first quarter of 2015.


•	We had net loan recoveries during the second quarter of 2015 of $2.6 million compared to net loan charge-offs of $1.8 million in the first quarter of 2015.


•	Non-performing loans increased by $14.8 million and potential problem loans increased by $8.7 million from March 31, 2015. These increases were more than offset by a $62.7 million decline in purchased credit-impaired loans.

Capital Actions


•	We increased the dividend on our common stock from $0.14 to $0.17 in the second quarter of 2015.


•	We also announced in the second quarter of 2015 that our Board of Directors has authorized the repurchase of up to $50 million of our common stock. We repurchased $3.1 million, or approximately 93,700 shares, of our common stock in the second quarter of 2015.

Mortgage Servicing Rights Sale


•	In July 2015, we sold approximately $106 million of mortgage servicing rights at a price (net of transaction costs) that approximated fair value.

RESULTS OF OPERATIONS

Second Quarter Results

Net Interest Income



							Change from 1Q15 to 2Q15					Change from 2Q14 to 2Q15		Six Months Ended						Change from 2014 to 2015
														June 30,
	2Q15			1Q15					2Q14					2015			2014
(Dollars in thousands)
Net interest income - fully tax equivalent	$	121,149		$	119,473		+1.4	%	$	73,749		+64.3	%	$	240,622		$	146,658		+64.1	%
Net interest margin - fully tax equivalent	3.84		%	3.93		%	-0.09	%	3.53		%	+0.31		3.89		%	3.59		%	+0.30	%
Net interest margin - fully tax equivalent, excluding acquisition accounting discount accretion on Taylor Capital loans	3.57		%	3.62		%	-0.05	%	3.53		%	+0.04		3.59		%	3.59		%	—	%
Acquisition accounting discount accretion on Taylor Capital loans	$	7,952		$	8,576		-7.3	%	$	—		NA		$	16,528		$	—		NA

Reconciliations of net interest income - fully tax equivalent to net interest income, as reported, net interest margin - fully tax equivalent to net interest margin and net interest margin - fully tax equivalent, excluding acquisition accounting discount accretion on Taylor Capital loans to net interest margin are set forth in the tables in the "Net Interest Margin" section.

Net interest income on a fully tax equivalent basis increased in the second quarter of 2015 compared to the prior quarter primarily due to an increase in interest earning assets (loans and investment securities) partly offset by lower loan yields.

While interest earning assets increased during the second quarter of 2015, our net interest margin on a fully tax equivalent basis, excluding accretion of the acquisition accounting discount recorded on loans acquired in the Merger, decreased five basis points to 3.57% for the second quarter of 2015 compared to 3.62% for the prior quarter. This decrease was primarily due to the decrease in average yields earned on loans.

See the supplemental net interest margin tables for further detail.

Non-interest Income (in thousands):



															Six Months Ended
															June 30,
	2Q15			1Q15			4Q14		3Q14			2Q14			2015			2014
Core non-interest income:
Key fee initiatives:
Lease financing, net	$	15,564		$	25,080		$	18,542	$	17,719		$	14,853		$	40,644		$	28,049
Mortgage banking revenue	35,648			24,544			29,080		16,823			187			60,192			246
Commercial deposit and treasury management fees	11,062			11,038			10,720		9,345			7,106			22,100			14,250
Trust and asset management fees	5,752			5,714			5,515		5,712			5,405			11,466			10,612
Card fees	4,409			3,927			3,900		3,836			3,304			8,336			6,005
Capital markets and international banking service fees	1,508			1,928			1,648		1,472			1,360			3,436			2,338
Total key fee initiatives	73,943			72,231			69,405		54,907			32,215			146,174			61,500
Consumer and other deposit service fees	3,260			3,083			3,335		3,362			3,156			6,343			6,091
Brokerage fees	1,543			1,678			1,350		1,145			1,356			3,221			2,681
Loan service fees	1,353			1,485			1,864		1,069			916			2,838			1,881
Increase in cash surrender value of life insurance	836			839			865		855			834			1,675			1,661
Other operating income	2,098			2,102			2,577		1,145			1,162			4,200			1,961
Total core non-interest income	83,033			81,418			79,396		62,483			39,639			164,451			75,775
Non-core non-interest income:
Net (loss) gain on investment securities	(84		)	(460		)	491		(3,246		)	(87		)	(544		)	230
Net (loss) gain on sale of other assets	(7		)	4			3,476		(7		)	(24		)	(3		)	(17		)
Gain on extinguishment of debt	—			—			—		1,895			—			—			—
Increase (decrease) in market value of assets held in trust for deferred compensation ⁽¹⁾	7			306			315		(38		)	400			313			552
Total non-core non-interest income	(84		)	(150		)	4,282		(1,396		)	289			(234		)	765
Total non-interest income	$	82,949		$	81,268		$	83,678	$	61,087		$	39,928		$	164,217		$	76,540


⁽¹⁾	Resides in other operating income in the consolidated statements of operations.

Core non-interest income for the second quarter of 2015 increased by $1.6 million, or 2.0%, to $83.0 million from the first quarter of 2015.


•	Mortgage banking revenue increased due to higher servicing income as a result of an increase in the fair value of the mortgage servicing asset, net of related hedges, primarily due to higher interest rates during the second quarter of 2015.


•	Card fees increased due to higher debit card fees.


•	Leasing revenues decreased due to lower fees and promotional revenue from the sale of third-party equipment maintenance contracts. Leasing revenue in the first quarter of 2015 was exceptionally strong.


•	Capital markets and international banking services fees decreased due to lower swap, commercial real estate advisory and syndication fees.

Core non-interest income for the six months ended June 30, 2015 increased by $88.7 million, or 117.0%, to $164.5 million from the six months ended June 30, 2014.


•	Mortgage banking revenue increased due to the mortgage operations acquired through the Merger.


•	Leasing revenues increased due to higher fees and promotional revenue from the sale of third-party equipment maintenance contracts and higher lease residual realization.


•	Commercial deposit and treasury management fees increased due to new customer activity as well as the increased customer base as a result of the Merger.


•	Other operating income increased due to higher earnings from investments in Small Business Investment Companies.


•	Card fees increased due to a new payroll prepaid card program that started in the second quarter of 2014 as well as higher debit and credit card fees.


•	Capital markets and international banking services fees increased due to higher swap and commercial real estate advisory fees partly offset by a decrease in M&A advisory fees.


•	Trust and asset management fees increased due to the addition of new customers and the impact of higher equity values.

Non-interest Expense (in thousands):



																Six Months Ended
																June 30,
	2Q15			1Q15			4Q14			3Q14			2Q14			2015			2014
Core non-interest expense:⁽¹⁾
Salaries and employee benefits	$	86,138		$	84,447		$	83,242		$	65,271		$	46,222		$	170,585		$	90,343
Occupancy and equipment expense	12,081			12,763			13,757			11,314			9,504			24,844			19,096
Computer services and telecommunication expense	8,407			8,634			8,612			6,194			4,909			17,041			9,980
Advertising and marketing expense	2,497			2,446			2,233			1,973			2,113			4,943			4,104
Professional and legal expense	1,902			2,480			2,184			2,501			1,488			4,382			2,857
Other intangible amortization expense	1,509			1,518			1,617			1,470			1,174			3,027			2,414
Net loss (gain) recognized on other real estate owned (A)	662			888			(120		)	1,348			204			1,550			326
Net (gain) loss recognized on other real estate owned related to FDIC transactions (A)	(88		)	(273		)	(27		)	421			(13		)	(361		)	52
Other real estate expense, net (A)	150			281			433			409			337			431			733
Other operating expenses	18,238			18,276			18,514			13,577			11,108			36,514			20,328
Total core non-interest expense	131,496			131,460			130,445			104,478			77,046			262,956			150,233
Non-core non-interest expense: ⁽¹⁾
Merger related expenses (B)	1,234			8,069			6,494			27,161			488			9,303			1,168
Prepayment fees on interest bearing liabilities	—			85			—			—			—			85			—
Loss on low to moderate income real estate investment (C)	—			—			—			—			96			—			2,124
Contingent consideration - Celtic acquisition (C)	—			—			—			10,600			—			—			—
Contribution to MB Financial Charitable Foundation (C)	—			—			3,250			—			—			—			—
Increase (decrease) in market value of assets held in trust for deferred compensation (D)	7			306			315			(38		)	400			313			552
Total non-core non-interest expense	1,241			8,460			10,059			37,723			984			9,701			3,844
Total non-interest expense	$	132,737		$	139,920		$	140,504		$	142,201		$	78,030		$	272,657		$	154,077


⁽¹⁾	Letters denote the corresponding line items where these non-core non-interest expense items reside in the consolidated statements of operations as follows: A – Net loss (gain) recognized on other real estate owned and other expense, B – See merger related expenses table below, C – Other operating expenses, D – Salaries and employee benefits.

Core non-interest expense increased by $36 thousand from the first quarter of 2015 to $131.5 million for the second quarter of 2015.


•	Salaries and employee benefits increased primarily due to higher incentive expense as well as the extra day and annual salary increases effective in the second quarter of 2015.


•	Occupancy and equipment expense decreased due to lower repair and maintenance expense as well as lower rent expense as a result of exiting certain facilities in the first quarter of 2015.


•	Professional and legal expense decreased due to lower legal fees.

Core non-interest expense increased by $112.7 million, or 75.0%, from the six months ended June 30, 2014 to $263.0 million for the six months ended June 30, 2015 primarily due to the Merger. Other explanations for changes are as follows:


•	Other operating expense increased as a result of an increase in filing and other loan expense and higher FDIC assessments due to our larger balance sheet.


•	Computer services and telecommunication expenses increased due to an increase in spending on IT security and our data warehouse.


•	Professional and legal expense increased due to higher consulting expense.

Non-core non-interest expense in the first six months of 2015 was impacted by merger related expense primarily due to branch exit and facilities impairment charges resulting from closing nine banking centers and exiting other office facilities.

The following table presents the detail of the merger related expenses (dollars in thousands):



											Six Months Ended
											June 30,
	2Q15		1Q15		4Q14		3Q14		2Q14		2015		2014
Merger related expenses:
Salaries and employee benefits	$	—	$	33	$	1,926	$	14,259	$	—	$	33	$	104
Occupancy and equipment expense	96		177		301		428		14		273		14
Computer services and telecommunication expense	130		270		1,397		5,312		170		400		183
Advertising and marketing expense	—		—		84		262		108		—		198
Professional and legal expense	511		190		258		6,363		79		701		489
Branch exit and facilities impairment charges	438		7,391		2,270		—		—		7,829		—
Other operating expenses	59		8		258		537		117		67		180
Total merger related expenses	$	1,234	$	8,069	$	6,494	$	27,161	$	488	$	9,303	$	1,168

Income Tax Expense

Income tax expense was $19.4 million for the second quarter of 2015 compared to $15.7 million for the first quarter of 2015. The increase in income tax expense was primarily due to the $10.6 million increase in income before taxes from $49.8 million in the first quarter of 2015 to $60.4 million in the second quarter of 2015.

Operating Segments

The Company's operations consist of three reportable operating segments: banking, leasing and mortgage banking. Our banking segment generates its revenues primarily from its lending and deposit gathering activities. Our leasing segment generates its revenues through lease originations and related services offered through the Company's leasing subsidiaries: LaSalle Systems Leasing, Inc., Celtic Leasing Corp. and MB Equipment Finance (formerly known as Cole Taylor Equipment Finance). Our mortgage banking segment originates residential mortgage loans for sale to investors through its retail and third party origination channels as well as residential mortgage loans held in our loan portfolio. The mortgage banking segment also services residential mortgage loans owned by investors and the Company.

The following table presents summary financial information, adjusted for funds transfer pricing and internal allocations of certain expenses, for the reportable segments (in thousands):



	Banking		Leasing		Mortgage Banking			Non-core Items			Consolidated
Three months ended June 30, 2015
Net interest income	$	104,352	$	2,915	$	7,206		$	—		$	114,473
Provision for credit losses	2,844		1,356		96			—			4,296
Net interest income after provision for credit losses	101,508		1,559		7,110			—			110,177
Non-interest income:
Lease financing, net	408		15,156		—			—			15,564
Mortgage origination fees	—		—		26,863			—			26,863
Mortgage servicing fees	—		—		8,785			—			8,785
Other non-interest income	30,791		1,037		—			(91		)	31,737
Total non-interest income	31,199		16,193		35,648			(91		)	82,949
Non-interest expense:
Salaries and employee benefits	54,168		6,986		24,991			—			86,145
Occupancy and equipment expense	9,733		823		1,525			96			12,177
Computer services and telecommunication expense	6,194		274		1,939			130			8,537
Professional and legal expense	1,655		247		—			511			2,413
Other operating expenses	14,654		1,498		6,816			497			23,465
Total non-interest expense	86,404		9,828		35,271			1,234			132,737
Income before income taxes	46,303		7,924		7,487			(1,325		)	60,389
Income tax expense	13,895		3,073		2,995			(526		)	19,437
Net income	$	32,408	$	4,851	$	4,492		$	(799	)	$	40,952
Three months ended March 31, 2015
Net interest income	$	104,126	$	3,015	$	6,254		$	—		$	113,395
Provision for credit losses	4,974		—		—			—			4,974
Net interest income after provision for credit losses	99,152		3,015		6,254			—			108,421
Non-interest income:
Lease financing, net	525		24,555		—			—			25,080
Mortgage origination fees	—		—		26,895			—			26,895
Mortgage servicing fees	—		—		(2,351		)	—			(2,351		)
Other non-interest income	31,448		648		4			(456		)	31,644
Total non-interest income	31,973		25,203		24,548			(456		)	81,268
Non-interest expense:
Salaries and employee benefits	52,682		10,789		21,282			33			84,786
Occupancy and equipment expense	10,454		833		1,476			177			12,940
Computer services and telecommunication expense	6,410		295		1,929			270			8,904
Professional and legal expense	1,568		307		605			190			2,670
Other operating expenses	16,066		1,432		5,638			7,484			30,620
Total non-interest expense	87,180		13,656		30,930			8,154			139,920
Income before income taxes	43,945		14,562		(128		)	(8,610		)	49,769
Income tax expense	13,379		5,747		(51		)	(3,417		)	15,658
Net income	$	30,566	$	8,815	$	(77	)	$	(5,193	)	$	34,111

Net income from our banking segment for the second quarter of 2015 increased compared to the prior quarter. This increase in net income was primarily due to a decrease in provision for credit losses.

Net income from our leasing segment for the second quarter of 2015 decreased compared to the prior quarter. Lease financing revenues decreased due to a decrease in fees and promotional revenue from the sale of third-party equipment maintenance contracts. This decrease in revenues was partially offset by a decrease in expense, primarily salaries and employee benefits, due to lower commissions on lower leasing revenue. Leasing revenue in the first quarter of 2015 was exceptionally strong.

Net income from our mortgage segment for the second quarter of 2015 increased compared to the prior quarter as a result of higher servicing income. This increase in revenues was partially offset by an increase in expense, primarily salaries and employee benefits due to higher incentive compensation.

The following table presents additional information regarding the mortgage banking segment (dollars in thousands):



	2Q15			1Q15			4Q14			3Q14 ⁽¹⁾
Origination volume	$	2,010,175		$	1,688,541		$	1,511,909		$	724,713
Refinance	43		%	61		%	44		%	35		%
Purchase	57			39			56			65

Origination volume by channel:
Retail	18		%	18		%	19		%	18		%
Third party	82			82			81			82

Mortgage servicing book (unpaid principal balance of loans serviced for others) at period end	$	23,539,865		$	22,927,263		$	22,479,008		$	21,989,278
Mortgage servicing rights, recorded at fair value, at period end	261,034			219,254			235,402			241,391
Notional value of rate lock commitments, at period end	992,025			1,069,145			645,287			610,818

⁽¹⁾ For the 44 day period subsequent to the Merger.

LOAN PORTFOLIO

The following table sets forth the composition of the loan portfolio (excluding loans held for sale) based on period end balances as of the dates indicated (dollars in thousands):



	6/30/2015				3/31/2015				12/31/2014				9/30/2014				6/30/2014
	Amount		% of Total		Amount		% of Total		Amount		% of Total		Amount		% of Total		Amount		% of Total
Commercial related credits:
Commercial loans	$	3,354,889	37	%	$	3,258,652	37	%	$	3,245,206	36	%	$	3,064,669	34	%	$	1,272,200	23	%
Commercial loans collateralized by assignment of lease payments (lease loans)	1,690,866		18		1,628,031		18		1,692,258		18		1,631,660		18		1,515,446		27
Commercial real estate	2,539,991		28		2,525,640		28		2,544,867		28		2,647,412		29		1,619,322		29
Construction real estate	189,599		2		184,105		2		247,068		3		222,120		3		116,996		2
Total commercial related credits	7,775,345		85		7,596,428		85		7,729,399		85		7,565,861		84		4,523,964		81
Other loans:
Residential real estate	533,118		6		505,558		5		503,287		5		516,834		6		309,234		6
Indirect vehicle	303,777		3		273,105		3		268,840		3		273,038		3		272,841		5
Home equity	230,478		3		241,078		3		251,909		3		262,977		3		245,135		4
Consumer loans	86,463		1		77,645		1		78,137		1		69,028		1		70,584		1
Total other loans	1,153,836		13		1,097,386		12		1,102,173		12		1,121,877		13		897,794		16
Total loans, excluding purchased credit-impaired loans	8,929,181		98		8,693,814		97		8,831,572		97		8,687,738		97		5,421,758		97
Purchased credit-impaired loans	164,775		2		227,514		3		251,645		3		288,186		3		134,966		3
Total loans	$	9,093,956	100	%	$	8,921,328	100	%	$	9,083,217	100	%	$	8,975,924	100	%	$	5,556,724	100	%

Our loan balances, excluding purchased credit-impaired loans, increased $235.4 million (+2.7%, or +10.9% annualized) during the second quarter of 2015 primarily due to increases in commercial related loans.

The following table sets forth the composition of the loan portfolio (excluding loans held for sale) based on quarterly average balances for the periods indicated (dollars in thousands):



	2Q15				1Q15				4Q14				3Q14				2Q14
	Amount		% of Total		Amount		% of Total		Amount		% of Total		Amount		% of Total		Amount		% of Total
Commercial related credits:
Commercial loans	$	3,309,519	37	%	$	3,190,755	36	%	$	3,110,016	35	%	$	2,118,864	30	%	$	1,229,799	22	%
Commercial loans collateralized by assignment of lease payments (lease loans)	1,634,583		18		1,647,761		18		1,642,427		18		1,561,484		22		1,476,618		27
Commercial real estate	2,522,473		28		2,538,995		29		2,611,410		29		2,108,492		29		1,620,658		29
Construction real estate	191,935		2		191,257		2		232,679		3		170,017		2		133,557		2
Total commercial related credits	7,658,510		85		7,568,768		85		7,596,532		85		5,958,857		83		4,460,632		80
Other loans:
Residential real estate	512,766		6		493,366		5		503,211		5		405,589		6		309,848		6
Indirect vehicle	286,107		3		267,265		3		273,063		3		251,969		3		269,556		5
Home equity	233,867		3		246,537		3		256,933		3		274,841		4		252,891		5
Consumer loans	76,189		1		72,374		1		75,264		1		69,699		1		65,437		1
Total other loans	1,108,929		13		1,079,542		12		1,108,471		12		1,002,098		14		897,732		17
Total loans, excluding purchased credit-impaired loans	8,767,439		98		8,648,310		97		8,705,003		97		6,960,955		97		5,358,364		97
Purchased credit-impaired loans	202,374		2		240,376		3		273,136		3		221,129		3		158,371		3
Total loans	$	8,969,813	100	%	$	8,888,686	100	%	$	8,978,139	100	%	$	7,182,084	100	%	$	5,516,735	100	%

ASSET QUALITY

The following table presents a summary of criticized assets (excluding loans held for sale, purchased credit-impaired loans that were acquired as part of our FDIC-assisted transactions and the Merger and other real estate owned acquired as part of our FDIC-assisted transactions) as of the dates indicated (dollars in thousands):



	6/30/2015			3/31/2015			12/31/2014			9/30/2014			6/30/2014
Non-performing loans:
Non-accrual loans ⁽¹⁾	$	91,943		$	81,571		$	82,733		$	97,580		$	108,414
Loans 90 days or more past due, still accruing interest	6,112			1,707			4,354			2,681			2,363
Total non-performing loans	98,055			83,278			87,087			100,261			110,777
Other real estate owned	28,517			21,839			19,198			18,817			20,306
Repossessed assets	78			160			93			126			73
Total non-performing assets	$	126,650		$	105,277		$	106,378		$	119,204		$	131,156
Potential problem loans ⁽²⁾	$	116,443		$	107,703		$	55,651		$	51,690		$	63,477
Purchased credit-impaired loans	$	164,775		$	227,514		$	251,645		$	288,186		$	134,966

Total allowance for loan and lease losses	$	120,070		$	113,412		$	110,026		$	102,810		$	100,910
Accruing restructured loans ⁽³⁾	17,604			16,874			15,603			16,877			26,793
Total non-performing loans to total loans	1.08		%	0.93		%	0.96		%	1.12		%	1.99		%
Total non-performing assets to total assets	0.84			0.73			0.73			0.82			1.34
Allowance for loan and lease losses to non-performing loans	122.45			136.18			126.34			102.54			91.09


⁽¹⁾	Includes $24.5 million, $25.5 million, $25.8 million, $22.4 million and $14.5 million of restructured loans on non-accrual status at June 30, 2015, March 31, 2015, December 31, 2014, September 30, 2014 and June 30, 2014, respectively.


⁽²⁾	We define potential problem loans as loans rated substandard that do not meet the definition of a non-performing loan. Potential problem loans carry a higher probability of default and require additional attention by management.


⁽³⁾	Accruing restructured loans consist primarily of residential real estate and home equity loans that have been modified and are performing in accordance with those modified terms as of the dates indicated.

Potential problem loans increased in the first quarter of 2015 primarily due to normal rotation in the portfolio.

The following table presents data related to non-performing loans by category (excluding loans held for sale and purchased credit-impaired loans that were acquired as part of our FDIC-assisted transactions and the Merger) as of the dates indicated (in thousands):



	6/30/2015		3/31/2015		12/31/2014		9/30/2014		6/30/2014
Commercial and lease	$	31,053	$	18,315	$	20,058	$	22,985	$	36,807
Commercial real estate	32,358		29,645		32,663		42,832		48,751
Construction real estate	337		337		337		337		337
Consumer related	34,307		34,981		34,029		34,107		24,882
Total non-performing loans	$	98,055	$	83,278	$	87,087	$	100,261	$	110,777

The following table represents a summary of other real estate owned (excluding other real estate owned acquired as part of our FDIC-assisted transactions) as of the dates indicated (in thousands):



	6/30/2015			3/31/2015			12/31/2014			9/30/2014			6/30/2014
Balance at the beginning of quarter	$	21,839		$	19,198		$	18,817		$	20,306		$	20,928
Transfers in at fair value less estimated costs to sell	8,595			4,615			1,261			221			112
Acquired from business combination	—			—			—			4,720			—
Fair value adjustments	(920		)	(922		)	(34		)	(2,083		)	(286		)
Net gains on sales of other real estate owned	258			34			154			735			82
Cash received upon disposition	(1,255		)	(1,086		)	(1,000		)	(5,082		)	(530		)
Balance at the end of quarter	$	28,517		$	21,839		$	19,198		$	18,817		$	20,306

The increase in other real estate owned in the second quarter of 2015 was primarily due to a $7.0 million purchased credit-impaired loan that migrated to other real estate owned.

Below is a reconciliation of the activity in our allowance for credit and loan losses for the periods indicated (dollars in thousands):



																Six Months Ended
																June 30,
	2Q15			1Q15			4Q14			3Q14			2Q14			2015			2014
Allowance for credit losses, balance at the beginning of period	$	117,189		$	114,057		$	106,912		$	103,905		$	108,395		$	114,057		$	113,462
Allowance for unfunded credit commitments acquired through business combination	—			—			—			1,261			—			—			—
Utilization of allowance for unfunded credit commitments	—			—			—			(637		)	—			—			—
Provision for credit losses - legacy	(600		)	(550		)	2,472			(1,600		)	(1,950		)	(1,150		)	(800		)
Provision for credit losses - acquired Taylor Capital loan portfolio renewals	4,896			5,524			7,271			4,709			—			10,420			—
Charge-offs:
Commercial loans	57			569			197			606			446			626			536
Commercial loans collateralized by assignment of lease payments (lease loans)	100			—			885			—			40			100			40
Commercial real estate	108			2,034			1,528			1,027			1,727			2,142			8,883
Construction real estate	3			3			4			5			14			6			70
Residential real estate	318			579			280			740			433			897			698
Home equity	276			444			1,381			566			817			720			1,436
Indirect vehicle	627			874			1,189			1,043			583			1,501			1,503
Consumer loans	500			424			546			497			590			924			1,085
Total charge-offs	1,989			4,927			6,010			4,484			4,650			6,916			14,251
Recoveries:
Commercial loans	816			242			869			564			696			1,058			2,324
Commercial loans collateralized by assignment of lease payments (lease loans)	340			749			384			425			130			1,089			130
Commercial real estate	2,561			1,375			741			2,227			567			3,936			1,052
Construction real estate	35			2			51			25			77			37			176
Residential real estate	8			72			661			4			6			80			525
Home equity	160			101			176			46			127			261			260
Indirect vehicle	545			475			453			402			439			1,020			881
Consumer loans	169			69			77			65			68			238			146
Total recoveries	4,634			3,085			3,412			3,758			2,110			7,719			5,494
Total net (recoveries) charge-offs	(2,645		)	1,842			2,598			726			2,540			(803		)	8,757
Allowance for credit losses	124,130			117,189			114,057			106,912			103,905			124,130			103,905
Allowance for unfunded credit commitments	(4,060		)	(3,777		)	(4,031		)	(4,102		)	(2,995		)	(4,060		)	(2,995		)
Allowance for loan and lease losses	$	120,070		$	113,412		$	110,026		$	102,810		$	100,910		$	120,070		$	100,910
Total loans, excluding loans held for sale	$	9,093,956		$	8,921,328		$	9,083,217		$	8,975,924		$	5,556,724		$	9,093,956		$	5,556,724
Average loans, excluding loans held for sale	8,969,813			8,888,686			8,978,139			7,182,084			5,516,735			8,929,474			5,561,559
Ratio of allowance for loan and lease losses to total loans, excluding loans held for sale	1.32		%	1.27		%	1.21		%	1.15		%	1.82		%	1.32		%	1.82		%
Net loan (recoveries) charge-offs to average loans, excluding loans held for sale (annualized)	(0.12		)	0.08			0.11			0.04			0.18			(0.02		)	0.32

The following table presents the three elements of the Company's allowance for loan and lease losses as of the dates indicated (in thousands):



	6/30/2015		3/31/2015		12/31/2014		9/30/2014		6/30/2014
Commercial related loans:
General reserve	$	92,154	$	88,425	$	85,087	$	76,604	$	70,855
Specific reserve	8,791		5,658		5,189		5,802		10,270
Consumer related reserve	19,125		19,329		19,750		20,404		19,785
Total allowance for loan and lease losses	$	120,070	$	113,412	$	110,026	$	102,810	$	100,910

Purchased loans acquired in a business combination are recorded at estimated fair value on their purchase date without a carryover of the related allowance for loan and lease losses. These acquired loans are segregated into three types: pass rated loans with no discount attributable to credit quality, non-impaired loans with a discount attributable at least in part to credit quality and impaired loans with evidence of significant credit deterioration.


•	Pass rated loans (typically performing loans) are accounted for in accordance with ASC 310-20 "Nonrefundable Fees and Other Costs" as these loans do not have evidence of credit deterioration since origination.


•	Non-impaired loans (typically performing substandard loans) are accounted for in accordance with ASC 310-30 if they display at least some level of credit deterioration since origination.


•	Impaired loans (typically substandard loans on non-accrual status) are accounted for in accordance with ASC 310-30 as they display significant credit deterioration since origination.

For pass rated loans (non-purchased credit-impaired loans), the difference between the estimated fair value of the loans (computed on a loan by loan basis) and the principal outstanding is accreted over the remaining life of the loans. We anticipate recording a provision for the acquired portfolio in future quarters related to renewing Taylor Capital loans which will largely offset the accretion from the pass rated loans.

In accordance with ASC 310-30, for both purchased non-impaired loans and purchased credit-impaired loans ("PCI loans"), the difference between contractually required payments at acquisition and the cash flows expected to be collected is referred to as the non-accretable difference. Further, any excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable yield and is recognized into interest income over the remaining life of the loan when there is a reasonable expectation about the amount and timing of such cash flows.

Changes in the purchase accounting discount for loans acquired in the Merger were as follows for the three months ended June 30, 2015 (in thousands):



	Non-Accretable Discount - PCI Loans			Accretable Discount - PCI Loans			Accretable Discount - Non-PCI Loans			Total
Balance at beginning of period	$	30,793		$	3,861		$	53,828		$	88,482
Charge-offs	681			—			—			681
Accretion	—			(960		)	(6,992		)	(7,952		)
Transfer	(8,000		)	8,000			—			—
Balance at end of period	$	23,474		$	10,901		$	46,836		$	81,211

The $8.0 million purchase accounting discount transfer from non-accretable discount on purchased credit-impaired loans to accretable discount was due to the performance of the purchased credit-impaired loans being better than expected. We have had a number of positive purchased credit-impaired loan resolutions since their acquisition.

Changes in the purchase accounting discount for loans acquired in the Merger were as follows for the three months ended March 31, 2015 (in thousands):



	Non-Accretable Discount - PCI Loans			Accretable Discount - PCI Loans			Accretable Discount - Non-PCI Loans			Total
Balance at beginning of period	$	31,041		$	4,489		$	61,776		$	97,306
Charge-offs	(248		)	—			—			(248		)
Accretion	—			(628		)	(7,948		)	(8,576		)
Balance at end of period	$	30,793		$	3,861		$	53,828		$	88,482

INVESTMENT SECURITIES

The following table sets forth, by type, the fair value and amortized cost of our investment securities, excluding FHLB and FRB stock, as well as the unrealized gain, net of our investment securities available for sale as of the dates indicated (in thousands):



	6/30/2015		3/31/2015		12/31/2014			9/30/2014			6/30/2014
Securities available for sale:
Fair value
Government sponsored agencies and enterprises	$	65,485	$	66,070	$	65,873		$	65,829		$	51,727
States and political subdivisions	395,912		403,628		410,854			409,033			19,498
Mortgage-backed securities	902,017		856,933		908,225			1,006,102			797,783
Corporate bonds	246,468		252,042		259,203			267,239			275,529
Equity securities	10,669		10,751		10,597			10,447			10,421
Total fair value	$	1,620,551	$	1,589,424	$	1,654,752		$	1,758,650		$	1,154,958

Amortized cost
Government sponsored agencies and enterprises	$	64,211	$	64,411	$	64,612		$	64,809		$	50,096
States and political subdivisions	380,221		381,704		390,076			391,900			19,228
Mortgage-backed securities	890,334		841,727		899,523			999,630			786,496
Corporate bonds	245,506		250,543		259,526			265,720			271,351
Equity securities	10,644		10,587		10,531			10,470			10,414
Total amortized cost	$	1,590,916	$	1,548,972	$	1,624,268		$	1,732,529		$	1,137,585

Unrealized gain, net
Government sponsored agencies and enterprises	$	1,274	$	1,659	$	1,261		$	1,020		$	1,631
States and political subdivisions	15,691		21,924		20,778			17,133			270
Mortgage-backed securities	11,683		15,206		8,702			6,472			11,287
Corporate bonds	962		1,499		(323		)	1,519			4,178
Equity securities	25		164		66			(23		)	7
Total unrealized gain, net	$	29,635	$	40,452	$	30,484		$	26,121		$	17,373

Securities held to maturity, at amortized cost:
States and political subdivisions	$	974,032	$	764,931	$	752,558		$	760,674		$	993,937
Mortgage-backed securities	229,595		235,928		240,822			244,675			247,455
Total amortized cost	$	1,203,627	$	1,000,859	$	993,380		$	1,005,349		$	1,241,392

DEPOSIT MIX

The following table shows the composition of deposits based on period end balances as of the dates indicated (dollars in thousands):



	6/30/2015				3/31/2015				12/31/2014				9/30/2014				6/30/2014
	Amount		% of Total		Amount		% of Total		Amount		% of Total		Amount		% of Total		Amount		% of Total
Low cost deposits:
Noninterest bearing deposits	$	4,378,005	40	%	$	4,290,499	39	%	$	4,118,256	37	%	$	3,807,448	34	%	$	2,605,367	34	%
Money market and NOW	3,842,264		35		4,002,818		36		3,913,765		36		4,197,166		37		2,932,089		38
Savings	970,875		9		969,560		9		940,345		9		931,985		8		872,324		11
Total low cost deposits	9,191,144		84		9,262,877		84		8,972,366		82		8,936,599		79		6,409,780		83
Certificates of deposit:
Certificates of deposit	1,261,843		12		1,354,633		12		1,479,928		13		1,646,000		15		1,137,262		14
Brokered certificates of deposit	408,827		4		401,991		4		538,648		5		655,843		6		216,022		3
Total certificates of deposit	1,670,670		16		1,756,624		16		2,018,576		18		2,301,843		21		1,353,284		17
Total deposits	$	10,861,814	100	%	$	11,019,501	100	%	$	10,990,942	100	%	$	11,238,442	100	%	$	7,763,064	100	%

Non-interest bearing deposits grew by $87.5 million (+2.0%, or +8.2% annualized) during the second quarter of 2015 and comprise 40% of total deposits at quarter-end. Total low cost deposits decreased $71.7 million (-0.8%, or -3.1% annualized) to $9.2 billion at June 30, 2015 compared to the prior quarter and represent 84% of total deposits at quarter-end.

The following table shows the composition of deposits based on quarterly average balances for the periods indicated (dollars in thousands):



	2Q15				1Q15				4Q14				3Q14				2Q14
	Amount		% of Total		Amount		% of Total		Amount		% of Total		Amount		% of Total		Amount		% of Total
Low cost deposits:
Noninterest bearing deposits	$	4,273,931	39	%	$	4,199,948	38	%	$	4,072,797	36	%	$	3,175,512	34	%	$	2,476,396	33	%
Money market and NOW	3,940,201		36		3,937,707		36		4,023,657		37		3,518,314		37		2,880,910		38
Savings	972,327		9		952,345		9		936,960		8		906,630		10		868,694		11
Total low cost deposits	9,186,459		84		9,090,000		83		9,033,414		81		7,600,456		81		6,226,000		82
Certificates of deposit:
Certificates of deposit	1,302,031		12		1,420,320		13		1,563,011		14		1,411,407		15		1,157,805		15
Brokered certificates of deposit	412,517		4		476,245		4		606,166		5		417,346		4		220,396		3
Total certificates of deposit	1,714,548		16		1,896,565		17		2,169,177		19		1,828,753		19		1,378,201		18
Total deposits	$	10,901,007	100	%	$	10,986,565	100	%	$	11,202,591	100	%	$	9,429,209	100	%	$	7,604,201	100	%

CAPITAL

Tangible book value per common share was $16.36 at June 30, 2015 compared to $16.08 last quarter and $16.81 a year ago.

Our regulatory capital ratios remain strong. MB Financial Bank, N.A. (the "Bank") was categorized as “well capitalized” at June 30, 2015 under the Prompt Corrective Action (“PCA”) provisions. The Company and Bank have implemented the changes required under the Basel III regulatory capital reform. The Bank would be categorized as "well capitalized" under the fully phased in rules.

FORWARD-LOOKING STATEMENTS

When used in this press release and in reports filed with or furnished to the Securities and Exchange Commission, in other press releases or other public stockholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases “believe,” “will,” “should,” “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 our 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 revenues, cost savings, synergies and other benefits from the Merger and our other merger and acquisition activities might not be realized within the anticipated time frames or at all, and costs or difficulties relating to integration matters, including but not limited to customer and employee retention, 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 and lease losses, which could necessitate additional provisions for loan losses, resulting both from loans we originate and loans we acquire from other financial institutions; (3) results of examinations by the Office of Comptroller of Currency, the Federal Reserve Board, the Consumer Financial Protection Bureau and other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our allowance for loan and lease losses or write-down assets; (4) competitive pressures among depository institutions; (5) interest rate movements and their impact on customer behavior, net interest margin and the value of our mortgage servicing rights; (6) the possibility that our mortgage banking business may increase volatility in our revenues and earnings and the possibility that the profitability of our mortgage banking business could be significantly reduced if we are unable to originate and sell mortgage loans at profitable margins or if changes in interest rates negatively impact the value of our mortgage servicing rights; (7) the impact of repricing and competitors’ pricing initiatives on loan and deposit products; (8) fluctuations in real estate values; (9) the ability to adapt successfully to technological changes to meet customers’ needs and developments in the market-place; (10) our ability to realize the residual values of our direct finance, leveraged, and operating leases; (11) our ability to access cost-effective funding; (12) changes in financial markets; (13) changes in economic conditions in general and in the Chicago metropolitan area in particular; (14) the costs, effects and outcomes of litigation; (15) new legislation or regulatory changes, including but not limited to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) and regulations adopted thereunder, changes in capital requirements pursuant to the Dodd-Frank Act, other governmental initiatives affecting the financial services industry and changes in federal and/or state tax laws or interpretations thereof by taxing authorities; (16) changes in accounting principles, policies or guidelines; (17) our future acquisitions of other depository institutions or lines of business; and (18) future goodwill impairment due to changes in our business, changes in market conditions, or other factors.

We do 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.

TABLES TO FOLLOW

MB FINANCIAL, INC. & SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited)

As of the dates indicated

(In thousands)



	6/30/2015			3/31/2015			12/31/2014			9/30/2014			6/30/2014
ASSETS
Cash and due from banks	$	290,266		$	248,840		$	256,804		$	267,405		$	294,475
Interest earning deposits with banks	144,154			52,212			55,277			179,391			466,820
Total cash and cash equivalents	434,420			301,052			312,081			446,796			761,295
Federal funds sold	5			—			—			—			10,000
Investment securities:
Securities available for sale, at fair value	1,620,551			1,589,424			1,654,752			1,758,650			1,154,958
Securities held to maturity, at amortized cost	1,203,627			1,000,859			993,380			1,005,349			1,241,392
Non-marketable securities - FHLB and FRB Stock	111,400			87,677			75,569			75,569			51,432
Total investment securities	2,935,578			2,677,960			2,723,701			2,839,568			2,447,782
Loans held for sale	801,343			686,838			737,209			553,627			1,219
Loans:
Total loans, excluding purchased credit-impaired loans	8,929,181			8,693,814			8,831,572			8,687,738			5,421,758
Purchased credit-impaired loans	164,775			227,514			251,645			288,186			134,966
Total loans	9,093,956			8,921,328			9,083,217			8,975,924			5,556,724
Less: Allowance for loan and lease losses	120,070			113,412			110,026			102,810			100,910
Net loans	8,973,886			8,807,916			8,973,191			8,873,114			5,455,814
Lease investments, net	167,966			159,191			162,833			137,120			127,194
Premises and equipment, net	234,651			234,077			238,377			243,814			224,245
Cash surrender value of life insurance	135,237			134,401			133,562			132,697			131,842
Goodwill	711,521			711,521			711,521			711,521			423,369
Other intangibles	34,979			36,488			38,006			39,623			21,014
Mortgage servicing rights, at fair value	261,034			219,254			235,402			241,391			344
Other real estate owned, net	28,517			21,839			19,198			18,817			20,306
Other real estate owned related to FDIC transactions	13,867			17,890			19,328			22,028			15,349
Other assets	285,190			319,883			297,690			244,481			178,918
Total assets	$	15,018,194		$	14,328,310		$	14,602,099		$	14,504,597		$	9,818,691
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits:
Noninterest bearing	$	4,378,005		$	4,290,499		$	4,118,256		$	3,807,448		$	2,605,367
Interest bearing	6,483,809			6,729,002			6,872,686			7,430,994			5,157,697
Total deposits	10,861,814			11,019,501			10,990,942			11,238,442			7,763,064
Short-term borrowings	1,382,635			615,231			931,415			667,160			229,809
Long-term borrowings	89,639			85,477			82,916			77,269			71,473
Junior subordinated notes issued to capital trusts	185,971			185,874			185,778			185,681			152,065
Accrued expenses and other liabilities	420,396			363,934			382,762			335,677			236,964
Total liabilities	12,940,455			12,270,017			12,573,813			12,504,229			8,453,375
Stockholders' Equity
Preferred stock	115,280			115,280			115,280			115,280			—
Common stock	754			754			751			751			553
Additional paid-in capital	1,273,333			1,268,851			1,267,761			1,265,050			742,824
Retained earnings	677,246			651,178			629,677			606,097			611,741
Accumulated other comprehensive income	18,778			26,101			20,356			18,431			13,034
Treasury stock	(9,035		)	(5,277		)	(6,974		)	(6,692		)	(4,295		)
Controlling interest stockholders' equity	2,076,356			2,056,887			2,026,851			1,998,917			1,363,857
Noncontrolling interest	1,383			1,406			1,435			1,451			1,459
Total stockholders' equity	2,077,739			2,058,293			2,028,286			2,000,368			1,365,316
Total liabilities and stockholders' equity	$	15,018,194		$	14,328,310		$	14,602,099		$	14,504,597		$	9,818,691

MB FINANCIAL, INC. & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)



															Six Months Ended
															June 30,
(Dollars in thousands, except per share data)	2Q15			1Q15			4Q14		3Q14			2Q14			2015			2014
Interest income:
Loans:
Taxable	$	98,768		$	98,846		$	104,531	$	79,902		$	53,649		$	197,614		$	107,595
Nontaxable	2,259			2,174			2,203		2,265			2,256			4,433			4,554
Investment securities:
Taxable	10,002			9,934			10,651		11,028			8,794			19,936			16,940
Nontaxable	10,140			9,113			9,398		9,041			8,285			19,253			16,352
Federal funds sold	—			—			2		14			4			—			9
Other interest earning accounts	57			62			62		211			277			119			390
Total interest income	121,226			120,129			126,847		102,461			73,265			241,355			145,840
Interest expense:
Deposits	4,554			4,645			4,889		4,615			3,754			9,199			7,523
Short-term borrowings	355			277			354		231			95			632			195
Long-term borrowings and junior subordinated notes	1,844			1,812			1,793		2,003			1,344			3,656			2,722
Total interest expense	6,753			6,734			7,036		6,849			5,193			13,487			10,440
Net interest income	114,473			113,395			119,811		95,612			68,072			227,868			135,400
Provision for credit losses	4,296			4,974			9,743		3,109			(1,950		)	9,270			(800		)
Net interest income after provision for credit losses	110,177			108,421			110,068		92,503			70,022			218,598			136,200
Non-interest income:
Lease financing, net	15,564			25,080			18,542		17,719			14,853			40,644			28,049
Mortgage banking revenue	35,648			24,544			29,080		16,823			187			60,192			246
Commercial deposit and treasury management fees	11,062			11,038			10,720		9,345			7,106			22,100			14,250
Trust and asset management fees	5,752			5,714			5,515		5,712			5,405			11,466			10,612
Card fees	4,409			3,927			3,900		3,836			3,304			8,336			6,005
Capital markets and international banking service fees	1,508			1,928			1,648		1,472			1,360			3,436			2,338
Consumer and other deposit service fees	3,260			3,083			3,335		3,362			3,156			6,343			6,091
Brokerage fees	1,543			1,678			1,350		1,145			1,356			3,221			2,681
Loan service fees	1,353			1,485			1,864		1,069			916			2,838			1,881
Increase in cash surrender value of life insurance	836			839			865		855			834			1,675			1,661
Net (loss) gain on investment securities	(84		)	(460		)	491		(3,246		)	(87		)	(544		)	230
Net (loss) gain on sale of assets	(7		)	4			3,476		(7		)	(24		)	(3		)	(17		)
Gain on early extinguishment of debt	—			—			—		1,895			—			—			—
Other operating income	2,105			2,408			2,892		1,107			1,562			4,513			2,513
Total non-interest income	82,949			81,268			83,678		61,087			39,928			164,217			76,540
Non-interest expense:
Salaries and employee benefits	86,145			84,786			85,483		79,492			46,622			170,931			90,999
Occupancy and equipment expense	12,177			12,940			14,058		11,742			9,518			25,117			19,110
Computer services and telecommunication expense	8,537			8,904			10,009		11,506			5,079			17,441			10,163
Advertising and marketing expense	2,497			2,446			2,317		2,235			2,221			4,943			4,302
Professional and legal expense	2,413			2,670			2,442		8,864			1,567			5,083			3,346
Other intangible amortization expense	1,509			1,518			1,617		1,470			1,174			3,027			2,414
Branch exit and facilities impairment charges	438			7,391			2,270		—			—			7,829			—
Net loss (gain) recognized on other real estate owned and other expense	724			896			286		2,178			528			1,620			1,111
Prepayment fees on interest bearing liabilities	—			85			—		—			—			85			—
Other operating expenses	18,297			18,284			22,022		24,714			11,321			36,581			22,632
Total non-interest expense	132,737			139,920			140,504		142,201			78,030			272,657			154,077
Income before income taxes	60,389			49,769			53,242		11,389			31,920			110,158			58,663
Income tax expense	19,437			15,658			17,117		4,488			8,814			35,095			15,588
Net income	40,952			34,111			36,125		6,901			23,106			75,063			43,075
Dividends on preferred shares	2,000			2,000			2,000		2,000			—			4,000			—
Net income available to common stockholders	$	38,952		$	32,111		$	34,125	$	4,901		$	23,106		$	71,063		$	43,075



											Six Months Ended
											June 30,
	2Q15		1Q15		4Q14		3Q14		2Q14		2015		2014
Common share data:
Basic earnings per common share	$	0.52	$	0.43	$	0.46	$	0.08	$	0.42	$	0.95	$	0.79
Diluted earnings per common share	0.52		0.43		0.45		0.08		0.42		0.94		0.78
Weighted average common shares outstanding for basic earnings per common share	74,596,925		74,567,104		74,525,990		63,972,902		54,669,868		74,582,097		54,654,992
Weighted average common shares outstanding for diluted earnings per common share	75,296,029		75,164,716		75,130,331		64,457,978		55,200,054		75,230,455		55,232,703



Selected Financial Data:
																Six Months Ended
																June 30,
	2Q15			1Q15			4Q14			3Q14			2Q14			2015			2014
Performance Ratios:
Annualized return on average assets	1.12		%	0.96		%	0.99		%	0.22		%	0.97		%	1.04		%	0.92		%
Annualized operating return on average assets ⁽¹⁾	1.14			1.11			1.09			1.16			0.99			1.13			0.96
Annualized return on average common equity	8.02			6.78			7.12			1.21			6.86			7.41			6.47
Annualized operating return on average common equity ⁽¹⁾	8.19			7.87			7.84			8.29			6.98			8.03			6.76
Annualized cash return on average tangible common equity ⁽²⁾	13.21			11.31			11.98			2.23			10.47			12.28			9.94
Annualized cash operating return on average tangible common equity ⁽³⁾	13.47			13.09			13.16			13.19			10.66			13.28			10.38
Net interest rate spread	3.72			3.80			3.88			3.66			3.40			3.75			3.46
Cost of funds ⁽⁴⁾	0.22			0.23			0.23			0.26			0.26			0.22			0.27
Efficiency ratio ⁽⁵⁾	64.26			65.29			63.35			63.46			67.68			64.77			67.27
Annualized net non-interest expense to average assets ⁽⁶⁾	1.32			1.40			1.39			1.35			1.55			1.36			1.57
Core non-interest income to revenues ⁽⁷⁾	40.80			40.66			38.78			38.23			35.22			40.73			34.33
Net interest margin	3.63			3.73			3.81			3.56			3.26			3.68			3.31
Tax equivalent effect	0.21			0.20			0.20			0.22			0.27			0.21			0.28
Net interest margin - fully tax equivalent basis ⁽⁸⁾	3.84			3.93			4.01			3.78			3.53			3.89			3.59
Loans to deposits	83.72			80.96			82.64			79.87			71.58			83.72			71.58
Asset Quality Ratios:
Non-performing loans ⁽⁹⁾ to total loans	1.08		%	0.93		%	0.96		%	1.12		%	1.99		%	1.08		%	1.99		%
Non-performing assets ⁽⁹⁾ to total assets	0.84			0.73			0.73			0.82			1.34			0.84			1.34
Allowance for loan and lease losses to non-performing loans ⁽⁹⁾	122.45			136.18			126.34			102.54			91.09			122.45			91.09
Allowance for loan and lease losses to total loans	1.32			1.27			1.21			1.15			1.82			1.32			1.82
Net loan (recoveries) charge-offs to average loans (annualized)	(0.12		)	0.08			0.11			0.04			0.18			(0.02		)	0.32
Capital Ratios:
Tangible equity to tangible assets ⁽¹⁰⁾	9.41		%	9.73		%	9.32		%	9.17		%	9.89		%	9.41		%	9.89		%
Tangible common equity to tangible assets ⁽¹¹⁾	8.60			8.89			8.49			8.34			9.89			8.60			9.89
Tangible common equity to risk weighted assets ⁽¹²⁾	10.02			10.09			10.38			10.34			13.97			10.02			13.97
Total capital (to risk-weighted assets) ⁽¹³⁾	13.08			13.22			13.62			13.60			17.18			13.08			17.18		%
Tier 1 capital (to risk-weighted assets) ⁽¹³⁾	12.06			12.24			12.61			12.64			15.92			12.06			15.92
Common equity tier 1 capital (to risk-weighted assets) ⁽¹³⁾	9.67			9.79			N/A			N/A			N/A			9.67			N/A
Tier 1 capital (to average assets) ⁽¹³⁾	10.69			10.80			10.47			12.29			11.61			10.69			11.61
Book Value Per Share Data:
Book value per common share ⁽¹⁴⁾	$	26.14		$	25.86		$	25.58		$	25.09		$	24.73		$	26.14		$	24.73
Less: goodwill and other intangible assets, net of benefit, per common share	9.78			9.78			9.84			9.73			7.92			9.78			7.92
Tangible book value per common share ⁽¹⁵⁾	$	16.36		$	16.08		$	15.74		$	15.36		$	16.81		$	16.36		$	16.81


⁽¹⁾	Annualized operating return on average assets is computed by dividing annualized operating earnings by average total assets. Annualized operating return on average common equity is computed by dividing annualized operating earnings by average common equity. Operating earnings is defined as net income as reported less non-core items, net of tax.


⁽²⁾	Annualized cash return on average tangible equity is computed by dividing net cash flow available to common stockholders (net income available to common stockholders, plus other intangibles amortization expense, net of tax benefit) by average tangible common equity (average common stockholders' equity less average goodwill and average other intangibles, net of tax benefit).


⁽³⁾	Annualized cash operating return on average tangible common equity is computed by dividing annualized cash operating earnings (operating earnings plus other intangibles amortization expense, net of tax benefit, less dividends on preferred shares) by average tangible common equity. Operating earnings is defined as net income as reported less non-core items, net of tax.


⁽⁴⁾	Equals total interest expense divided by the sum of average interest bearing liabilities and noninterest bearing deposits.


⁽⁵⁾	Equals total non-interest expense excluding non-core items divided by the sum of net interest income on a fully tax equivalent basis, total non-interest income less non-core items, and tax equivalent adjustment on the increase in cash surrender value of life insurance.


⁽⁶⁾	Equals total non-interest expense excluding non-core items less total non-interest income excluding non-core items, and including tax equivalent adjustment on the increase in cash surrender value of life insurance divided by average assets.


⁽⁷⁾	Equals total non-interest income excluding non-core items and tax equivalent adjustment on the increase in cash surrender value of life insurance divided by the sum of net interest income on a fully tax equivalent basis, total non-interest income less non-core items, and tax equivalent adjustment on the increase in cash surrender value of life insurance.


⁽⁸⁾	Represents net interest income on a fully tax equivalent basis assuming a 35% tax rate, as a percentage of average interest earning assets.


⁽⁹⁾	Non-performing loans excludes purchased credit-impaired loans and loans held for sale. Non-performing assets excludes purchased credit-impaired loans, loans held for sale, and other real estate owned related to FDIC transactions.


⁽¹⁰⁾	Equals total ending stockholders’ equity less goodwill and other intangibles, net of tax benefit, divided by total assets less goodwill and other intangibles, net of tax benefit.


⁽¹¹⁾	Equals total ending common stockholders’ equity less goodwill and other intangibles, net of tax benefit, divided by total assets less goodwill and other intangibles, net of tax benefit.


⁽¹²⁾	Equals total ending common stockholders’ equity less goodwill and other intangibles, net of tax benefit, divided by risk-weighted assets. Current quarter risk-weighted assets are estimated.


⁽¹³⁾	Current quarter ratios are estimated. 2015 ratios reflect the new capital regulation changes required under the Basel III regulatory capital reform.


⁽¹⁴⁾	Equals total ending common stockholders’ equity divided by common shares outstanding.


⁽¹⁵⁾	Equals total ending common stockholders’ equity less goodwill and other intangibles, net of tax benefit, divided by common shares outstanding.

NON-GAAP FINANCIAL INFORMATION

This press release contains certain financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (GAAP). These measures include operating earnings; annualized operating return on average assets; core non-interest income; core non-interest income to revenues (with non-core items excluded from both core non-interest income and revenues); core non-interest expense; non-core non-interest income and non-core non-interest expense, net interest income on a fully tax equivalent basis; net interest margin on a fully tax equivalent basis; net interest margin on a fully tax equivalent basis excluding acquisition discount accretion on Taylor Capital loans; efficiency ratio and the ratio of annualized net non-interest expense to average assets with net gains and losses on investment securities, net gains and losses on sale of other assets, gain on extinguishment of debt and increase (decrease) in market value of assets held in trust for deferred compensation excluded from the non-interest income components of these ratios, and contingent consideration expense, Merger related expenses, loss on low to moderate income real estate investment, prepayment fees on interest bearing liabilities, contribution to MB Financial Charitable Foundation and increase (decrease) in market value of assets held in trust for deferred compensation excluded from the non-interest expense components of these ratios, with tax equivalent adjustment for tax-exempt interest income and increase in cash surrender value of life insurance, as applicable; ratios of tangible equity to tangible assets and tangible common equity to tangible assets; tangible book value per common share; annualized operating return on average common equity; annualized cash return on average tangible common equity; and annualized cash operating return on average tangible common equity. Our management uses these non-GAAP measures, together with the related GAAP measures, in its analysis of our performance and in making business decisions. Management also uses these measures for peer comparisons.

Management believes that operating earnings, annualized operating return on average assets, annualized operating return on average common equity, annualized cash return on average tangible common equity, annualized cash operating return on average tangible common equity, net interest margin on a fully tax equivalent basis excluding acquisition discount accretion on Taylor Capital loans, core and non-core non-interest income and non-interest expense are useful in assessing our core operating performance and, in the case of core and non-core non-interest income and non-interest expense, in understanding the primary drivers of our non-interest income and non-interest expense when comparing periods.

The tax equivalent adjustment to net interest income, net interest margin, tax-exempt interest income and increase in cash surrender value of life insurance recognizes the income tax savings when comparing taxable and tax-exempt assets and assumes a 35% tax rate. Management believes that it is a standard practice in the banking industry to present net interest income and net interest margin on a fully tax equivalent basis, and accordingly believes that providing these measures may be useful for peer comparison purposes. For the same reasons, management believes that the tax equivalent adjustments to tax-exempt interest income and increase in cash surrender value of life insurance are useful.

Management also believes that by excluding net gains and losses on investment securities, net gains and losses on sale of other assets, gain on extinguishment of debt and increase (decrease) in market value of assets held in trust for deferred compensation from the non-interest income components, and excluding contingent consideration expense, merger related expenses, loss on low to moderate income real estate investment, prepayment fees on interest bearing liabilities, contribution to MB Financial Charitable

Foundation and increase (decrease) in market value of assets held in trust for deferred compensation from the non-interest expense components, of the efficiency ratio and the ratio of annualized net non-interest expense to average assets, these ratios better reflect our core operating performance, as the excluded items do not pertain to our core business operations and their exclusion makes these ratios more meaningful when comparing our operating results from period to period.

The other measures exclude the acquisition-related goodwill and other intangible assets, net of tax benefit, in determining tangible assets, tangible equity, tangible common equity and average tangible common equity and exclude other intangible amortization expense, net of tax benefit, in determining net cash flow available to common stockholders. Management believes the presentation of these other financial measures, excluding the impact of such items, provides useful supplemental information that is helpful in understanding our financial results, as they provide a method to assess management’s success in utilizing our tangible capital, as well as our capital strength. Management also believes that providing measures that exclude balances of acquisition-related goodwill and other intangible assets, which are subjective components of valuation, facilitates the comparison of our performance with the performance of our peers. In addition, management believes that these are standard financial measures used in the banking industry to evaluate performance.

The non-GAAP disclosures contained herein should not be viewed as substitutes for the results determined to be in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

A reconciliation of net interest margin on a fully tax equivalent basis to net interest margin is contained in the tables under “Net Interest Margin.” A reconciliation of tangible book value per common share to book value per common share is contained in the “Selected Financial Ratios” table. Reconciliations of core and non-core non-interest income and non-interest expense to non-interest income and non-interest expense are contained in the tables under “Results of Operations—Second Quarter Results.”

The following table presents a reconciliation of tangible equity to stockholders' equity (in thousands):



	6/30/2015		3/31/2015		12/31/2014		9/30/2014		6/30/2014
Stockholders' equity - as reported	$	2,077,739	$	2,058,293	$	2,028,286	$	2,000,368	$	1,365,316
Less: goodwill	711,521		711,521		711,521		711,521		423,369
Less: other intangible assets, net of tax benefit	22,736		23,717		24,704		25,755		13,659
Tangible equity	$	1,343,482	$	1,323,055	$	1,292,061	$	1,263,092	$	928,288

The following table presents a reconciliation of tangible assets to total assets (in thousands):



	6/30/2015		3/31/2015		12/31/2014		9/30/2014		6/30/2014
Total assets - as reported	$	15,018,194	$	14,328,310	$	14,602,099	$	14,504,597	$	9,818,691
Less: goodwill	711,521		711,521		711,521		711,521		423,369
Less: other intangible assets, net of tax benefit	22,736		23,717		24,704		25,755		13,659
Tangible assets	$	14,283,937	$	13,593,072	$	13,865,874	$	13,767,321	$	9,381,663

The following table presents a reconciliation of tangible common equity to common stockholders' equity (in thousands):



	6/30/2015		3/31/2015		12/31/2014		9/30/2014		6/30/2014
Common stockholders' equity - as reported	$	1,962,459	$	1,943,013	$	1,913,006	$	1,885,088	$	1,365,316
Less: goodwill	711,521		711,521		711,521		711,521		423,369
Less: other intangible assets, net of tax benefit	22,736		23,717		24,704		25,755		13,659
Tangible common equity	$	1,228,202	$	1,207,775	$	1,176,781	$	1,147,812	$	928,288

The following table presents a reconciliation of average tangible equity to average common stockholders’ equity (in thousands):



											Six Months Ended
											June 30,
	2Q15		1Q15		4Q14		3Q14		2Q14		2015		2014
Average common stockholders' equity - as reported	$	1,947,231	$	1,922,151	$	1,901,830	$	1,613,375	$	1,351,604	$	1,934,760	$	1,343,458
Less: average goodwill	711,521		711,521		711,521		550,667		423,369		711,521		423,369
Less: average other intangible assets, net of tax benefit	23,092		24,157		25,149		19,734		13,990		23,622		14,372
Average tangible common equity	$	1,212,618	$	1,186,473	$	1,165,160	$	1,042,974	$	914,245	$	1,199,617	$	905,717

The following table presents a reconciliation of net cash flow available to common stockholders to net income available to common stockholders (in thousands):



											Six Months Ended
											June 30,
	2Q15		1Q15		4Q14		3Q14		2Q14		2015		2014
Net income available to common stockholders - as reported	$	38,952	$	32,111	$	34,125	$	4,901	$	23,106	$	71,063	$	43,075
Add: other intangible amortization expense, net of tax benefit	981		987		1,051		956		763		1,968		1,569
Net cash flow available to common stockholders	$	39,933	$	33,098	$	35,176	$	5,857	$	23,869	$	73,031	$	44,644

The following table presents a reconciliation of net income to operating earnings (in thousands):



																Six Months Ended
																June 30,
	2Q15			1Q15			4Q14			3Q14			2Q14			2015			2014
Net income - as reported	$	40,952		$	34,111		$	36,125		$	6,901		$	23,106		$	75,063		$	43,075
Less non-core items:
Net (loss) gain on investment securities	(84		)	(460		)	491			(3,246		)	(87		)	(544		)	230
Net (loss) gain on sale of other assets	(7		)	4			3,476			(7		)	(24		)	(3		)	(17		)
Gain on extinguishment of debt	—			—			—			1,895			—			—			—
Merger related expenses	(1,234		)	(8,069		)	(6,494		)	(27,161		)	(488		)	(9,303		)	(1,168		)
Prepayment fees on interest bearing liabilities	—			(85		)	—			—			—			(85		)	—
Loss on low-income housing investment	—			—			—			—			(96		)	—			(2,124		)
Contingent consideration expense - Celtic acquisition	—			—			—			(10,600		)	—			—			—
Contribution to MB Financial Charitable Foundation	—			—			(3,250		)	—			—			—			—
Total non-core items	(1,325		)	(8,610		)	(5,777		)	(39,119		)	(695		)	(9,935		)	(3,079		)
Income tax expense on non-core items	(526		)	(3,417		)	(2,314		)	(10,295		)	(266		)	(3,943		)	(1,121		)
Non-core items, net of tax	(799		)	(5,193		)	(3,463		)	(28,824		)	(429		)	(5,992		)	(1,958		)
Operating earnings	$	41,751		$	39,304		$	39,588		$	35,725		$	23,535		$	81,055		$	45,033

Efficiency Ratio Calculation (Dollars in Thousands)



																Six Months Ended
																June 30,
	2Q15			1Q15			4Q14			3Q14			2Q14			2015			2014
Non-interest expense	$	132,737		$	139,920		$	140,504		$	142,201		$	78,030		$	272,657		$	154,077
Less merger related expenses	1,234			8,069			6,494			27,161			488			9,303			1,168
Less prepayment fees on interest bearing liabilities	—			85			—			—			—			85			—
Less loss on low to moderate income real estate investment	—			—			—			—			96			—			2,124
Less contingent consideration expense	—			—			—			10,600			—			—			—
Less contribution to MB Financial Charitable Foundation	—			—			3,250			—			—			—			—
Less increase (decrease) in market value of assets held in trust for deferred compensation	7			306			315			(38		)	400			313			552
Non-interest expense - as adjusted	$	131,496		$	131,460		$	130,445		$	104,478		$	77,046		$	262,956		$	150,233

Net interest income	$	114,473		$	113,395		$	119,811		$	95,612		$	68,072		$	227,868		$	135,400
Tax equivalent adjustment	6,676			6,078			6,246			6,087			5,677			12,754			11,258
Net interest income on a fully tax equivalent basis	121,149			119,473			126,057			101,699			73,749			240,622			146,658
Plus non-interest income	82,949			81,268			83,678			61,087			39,928			164,217			76,540
Plus tax equivalent adjustment on the increase in cash surrender value of life insurance	450			452			466			460			449			902			894
Less net (loss) gain on investment securities	(84		)	(460		)	491			(3,246		)	(87		)	(544		)	230
Less net (loss) gain on sale of other assets	(7		)	4			3,476			(7		)	(24		)	(3		)	(17		)
Less gain on extinguishment of debt	—			—			—			1,895			—			—			—
Less increase (decrease) in market value of assets held in trust for deferred compensation	7			306			315			(38		)	400			313			552
Net interest income plus non-interest income - as adjusted	$	204,632		$	201,343		$	205,919		$	164,642		$	113,837		$	405,975		$	223,327
Efficiency ratio	64.26		%	65.29		%	63.35		%	63.46		%	67.68		%	64.77		%	67.27		%
Efficiency ratio (without adjustments)	67.24		%	71.88		%	69.05		%	90.75		%	72.25		%	69.54		%	72.70		%

Annualized Net Non-interest Expense to Average Assets Calculation (Dollars in Thousands)



																Six Months Ended
																June 30,
	2Q15			1Q15			4Q14			3Q14			2Q14			2015			2014
Non-interest expense	$	132,737		$	139,920		$	140,504		$	142,201		$	78,030		$	272,657		$	154,077
Less merger related expenses	1,234			8,069			6,494			27,161			488			9,303			1,168
Less prepayment fees on interest bearing liabilities	—			85			—			—			—			85			—
Less loss on low to moderate income real estate investment	—			—			—			—			96			—			2,124
Less contingent consideration expense	—			—			—			10,600			—			—			—
Less contribution to MB Financial Charitable Foundation	—			—			3,250			—			—			—			—
Less increase (decrease) in market value of assets held in trust for deferred compensation	7			306			315			(38		)	400			313			552
Non-interest expense - as adjusted	131,496			131,460			130,445			104,478			77,046			262,956			150,233

Non-interest income	82,949			81,268			83,678			61,087			39,928			164,217			76,540
Less net (loss) gain on investment securities	(84		)	(460		)	491			(3,246		)	(87		)	(544		)	230
Less net (loss) gain on sale of other assets	(7		)	4			3,476			(7		)	(24		)	(3		)	(17		)
Less gain on extinguishment of debt	—			—			—			1,895			—			—			—
Less increase (decrease) in market value of assets held in trust for deferred compensation	7			306			315			(38		)	400			313			552
Non-interest income - as adjusted	83,033			81,418			79,396			62,483			39,639			164,451			75,775
Less tax equivalent adjustment on the increase in cash surrender value of life insurance	450			452			466			460			449			902			894
Net non-interest expense	$	48,013		$	49,590		$	50,583		$	41,535		$	36,958		$	97,603		$	73,564
Average assets	$	14,631,999		$	14,363,244		$	14,466,066		$	12,206,014		$	9,575,896		$	14,498,364		$	9,472,493
Annualized net non-interest expense to average assets	1.32		%	1.40		%	1.39		%	1.35		%	1.55		%	1.36		%	1.57		%
Annualized net non-interest expense to average assets (without adjustments)	1.38		%	1.66		%	1.56		%	2.64		%	1.60		%	1.51		%	1.65		%

Core Non-interest Income to Revenues Ratio Calculation (Dollars in Thousands)



																Six Months Ended
																June 30,
	2Q15			1Q15			4Q14			3Q14			2Q14			2015			2014
Non-interest income	$	82,949		$	81,268		$	83,678		$	61,087		$	39,928		$	164,217		$	76,540
Plus tax equivalent adjustment on the increase in cash surrender value of life insurance	450			452			466			460			449			902			894
Less net (loss) gain on investment securities	(84		)	(460		)	491			(3,246		)	(87		)	(544		)	230
Less net (loss) gain on sale of other assets	(7		)	4			3,476			(7		)	(24		)	(3		)	(17		)
Less gain on extinguishment of debt	—			—			—			1,895			—			—			—
Less increase (decrease) in market value of assets held in trust for deferred compensation	7			306			315			(38		)	400			313			552
Non-interest income - as adjusted	$	83,483		$	81,870		$	79,862		$	62,943		$	40,088		$	165,353		$	76,669

Net interest income	$	114,473		$	113,395		$	119,811		$	95,612		$	68,072		$	227,868		$	135,400
Tax equivalent adjustment	6,676			6,078			6,246			6,087			5,677			12,754			11,258
Net interest income on a fully tax equivalent basis	121,149			119,473			126,057			101,699			73,749			240,622			146,658
Plus non-interest income	82,949			81,268			83,678			61,087			39,928			164,217			76,540
Plus tax equivalent adjustment on the increase in cash surrender value of life insurance	450			452			466			460			449			902			894
Less net (loss) gain on investment securities	(84		)	(460		)	491			(3,246		)	(87		)	(544		)	230
Less net (loss) gain on sale of other assets	(7		)	4			3,476			(7		)	(24		)	(3		)	(17		)
Less gain on extinguishment of debt	—			—			—			1,895			—			—			—
Less increase (decrease) in market value of assets held in trust for deferred compensation	7			306			315			(38		)	400			313			552
Total revenue - as adjusted and on a fully tax equivalent basis	$	204,632		$	201,343		$	205,919		$	164,642		$	113,837		$	405,975		$	223,327

Total revenue - unadjusted	$	197,422		$	194,663		$	203,489		$	156,699		$	108,000		$	392,085		$	211,940

Core non-interest income to revenues ratio	40.80		%	40.66		%	38.78		%	38.23		%	35.22		%	40.73		%	34.33		%
Non-interest income to revenues ratio (without adjustments)	42.02		%	41.75		%	41.12		%	38.98		%	36.97		%	41.88		%	36.11		%

NET INTEREST MARGIN

The following table presents, for the periods indicated, the total dollar amount of interest income from average interest earning assets and the resultant yields, as well as the interest expense on average interest bearing liabilities, and the resultant costs, expressed both in dollars and rates (dollars in thousands):



	2Q15						2Q14						1Q15
	Average Balance		Interest		Yield/ Rate		Average Balance		Interest		Yield/ Rate		Average Balance		Interest		Yield/ Rate
Interest Earning Assets:
Loans held for sale	$	781,020	$	6,839	3.50	%	$	497	$	—	—	%	$	658,169	$	5,785	3.52	%
Loans ^{(1) (2) (3)}:
Commercial related credits
Commercial	3,309,519		34,884		4.17		1,229,799		11,912		3.83		3,190,755		32,623		4.09
Commercial loans collateralized by assignment of lease payments	1,634,583		15,235		3.73		1,476,618		14,693		3.98		1,647,761		15,438		3.75
Real estate commercial	2,522,473		27,145		4.26		1,620,658		17,008		4.15		2,538,995		27,548		4.34
Real estate construction	191,935		2,388		4.92		133,557		1,274		3.77		191,257		4,081		8.54
Total commercial related credits	7,658,510		79,652		4.11		4,460,632		44,887		3.98		7,568,768		79,690		4.21
Other loans
Real estate residential	512,766		4,785		3.73		309,848		2,809		3.62		493,366		5,028		4.08
Home equity	233,867		2,301		3.95		252,891		2,678		4.25		246,537		2,468		4.06
Indirect	286,107		3,769		5.28		269,556		3,579		5.33		267,265		3,485		5.29
Consumer loans	76,189		780		4.11		65,437		725		4.44		72,374		797		4.47
Total other loans	1,108,929		11,635		4.21		897,732		9,791		4.37		1,079,542		11,778		4.42
Total loans, excluding purchased credit-impaired loans	8,767,439		91,287		4.18		5,358,364		54,678		4.09		8,648,310		91,468		4.29
Purchased credit-impaired loans	202,374		4,117		8.16		158,371		2,441		6.18		240,376		4,937		8.33
Total loans	8,969,813		95,404		4.27		5,516,735		57,119		4.15		8,888,686		96,405		4.40
Taxable investment securities	1,545,284		10,002		2.59		1,434,300		8,794		2.45		1,556,530		9,934		2.55
Investment securities exempt from federal income taxes ⁽³⁾	1,261,567		15,600		4.95		966,518		12,748		5.28		1,126,133		14,021		4.98
Federal funds sold	126		—		—		4,359		4		0.36		16		—		—
Other interest earning deposits	85,935		57		0.27		448,173		277		0.25		102,346		62		0.25
Total interest earning assets	$	12,643,745	$	127,902	4.06	%	$	8,370,582	$	78,942	3.78	%	$	12,331,880	$	126,207	4.15	%
Non-interest earning assets	1,988,254						1,205,314						2,031,364
Total assets	$	14,631,999					$	9,575,896					$	14,363,244
Interest Bearing Liabilities:
Core funding:
Money market and NOW deposits	$	3,940,201	$	1,634	0.17	%	$	2,880,910	$	899	0.13	%	$	3,937,707	$	1,595	0.16	%
Savings deposits	972,327		135		0.06		868,694		97		0.04		952,345		120		0.05
Certificates of deposit	1,302,031		1,259		0.39		1,157,805		1,124		0.40		1,420,320		1,452		0.42
Customer repurchase agreements	241,942		104		0.17		184,178		95		0.21		245,875		119		0.20
Total core funding	6,456,501		3,132		0.19		5,091,587		2,215		0.17		6,556,247		3,286		0.20
Wholesale funding:
Brokered certificates of deposit (includes fee expense)	412,517		1,526		1.48		220,396		1,634		2.97		476,245		1,478		1.26
Other borrowings	1,078,297		2,095		0.77		236,292		1,344		2.25		731,688		1,970		1.08
Total wholesale funding	1,490,814		3,621		0.96		456,688		2,978		2.33		1,207,933		3,448		1.12
Total interest bearing liabilities	$	7,947,315	$	6,753	0.34	%	$	5,548,275	$	5,193	0.38	%	$	7,764,180	$	6,734	0.35	%
Non-interest bearing deposits	4,273,931						2,476,396						4,199,948
Other non-interest bearing liabilities	348,242						199,621						361,685
Stockholders' equity	2,062,511						1,351,604						2,037,431
Total liabilities and stockholders' equity	$	14,631,999					$	9,575,896					$	14,363,244
Net interest income/interest rate spread ⁽⁴⁾			$	121,149	3.72	%			$	73,749	3.40	%			$	119,473	3.80	%
Taxable equivalent adjustment			6,676						5,677						6,078
Net interest income, as reported			$	114,473					$	68,072					$	113,395
Net interest margin ⁽⁵⁾					3.63	%					3.26	%					3.73	%
Tax equivalent effect					0.21	%					0.27	%					0.20	%
Net interest margin on a fully tax equivalent basis ⁽⁵⁾					3.84	%					3.53	%					3.93	%


⁽¹⁾	Non-accrual loans are included in average loans.


⁽²⁾	Interest income includes amortization of deferred loan origination fees and costs.


⁽³⁾	Non-taxable loan and investment income is presented on a fully tax equivalent basis assuming a 35% tax rate.


⁽⁴⁾	Interest rate spread represents the difference between the average yield on interest earning assets and the average cost of interest bearing liabilities and is presented on a fully tax equivalent basis.


⁽⁵⁾	Net interest margin represents net interest income as a percentage of average interest earning assets.



	Six Months Ended June 30,
	2015						2014
	Average Balance		Interest		Yield/ Rate		Average Balance		Interest		Yield/ Rate
Interest Earning Assets:
Loans held for sale	$	719,934	$	12,624	3.51	%	$	394	$	—	—	%
Loans ^{(1) (2) (3)}:
Commercial related credits
Commercial	3,250,466		67,507		4.13		1,231,171		24,224		3.91
Commercial loans collateralized by assignment of lease payments	1,641,135		30,673		3.74		1,478,299		29,012		3.93
Real estate commercial	2,530,688		54,693		4.30		1,625,821		34,340		4.20
Real estate construction	191,598		6,469		6.72		137,219		2,552		3.70
Total commercial related credits	7,613,887		159,342		4.16		4,472,510		90,128		4.01
Other loans
Real estate residential	503,120		9,813		3.90		310,655		5,801		3.73
Home equity	240,167		4,769		4.00		258,060		5,390		4.21
Indirect	276,738		7,254		5.29		266,549		6,970		5.27
Consumer loans	74,292		1,577		4.28		64,034		1,401		4.41
Total other loans	1,094,317		23,413		4.31		899,298		19,562		4.38
Total loans, excluding purchased credit-impaired loans	8,708,204		182,755		4.23		5,371,808		109,690		4.12
Purchased credit-impaired loans	221,270		9,054		8.25		189,751		4,911		5.22
Total loans	8,929,474		191,809		4.33		5,561,559		114,601		4.16
Taxable investment securities	1,550,876		19,936		2.57		1,409,473		16,940		2.40
Investment securities exempt from federal income taxes ⁽³⁾	1,194,224		29,621		4.96		951,275		25,158		5.29
Federal funds sold	71		—		—		5,120		9		0.35
Other interest earning deposits	94,095		119		0.26		318,332		390		0.25
Total interest earning assets	$	12,488,674	$	254,109	4.10	%	$	8,246,153	$	157,098	3.84	%
Non-interest earning assets	2,009,690						1,226,340
Total assets	$	14,498,364					$	9,472,493
Interest Bearing Liabilities:
Core funding:
Money market and NOW accounts	$	3,938,962	$	3,229	0.17	%	$	2,804,688	$	1,747	0.13	%
Savings accounts	962,391		255		0.05		865,463		206		0.05
Certificates of deposit	1,360,849		2,711		0.40		1,183,852		2,298		0.40
Customer repurchase agreements	243,897		223		0.18		187,305		191		0.21
Total core funding	6,506,099		6,418		0.20		5,041,308		4,442		0.18
Wholesale funding:
Brokered accounts (includes fee expense)	444,205		3,004		1.36		222,151		3,272		2.97
Other borrowings	905,950		4,065		0.89		234,062		2,726		2.32
Total wholesale funding	1,350,155		7,069		1.03		456,213		5,998		2.36
Total interest bearing liabilities	$	7,856,254	$	13,487	0.35	%	$	5,497,521	$	10,440	0.38	%
Non-interest bearing deposits	4,237,144						2,424,917
Other non-interest bearing liabilities	354,926						206,597
Stockholders' equity	2,050,040						1,343,458
Total liabilities and stockholders' equity	$	14,498,364					$	9,472,493
Net interest income/interest rate spread ⁽⁴⁾			$	240,622	3.75	%			$	146,658	3.46	%
Taxable equivalent adjustment			12,754						11,258
Net interest income, as reported			$	227,868					$	135,400
Net interest margin ⁽⁵⁾					3.68	%					3.31	%
Tax equivalent effect					0.21	%					0.28	%
Net interest margin on a fully tax equivalent basis ⁽⁵⁾					3.89	%					3.59	%


⁽¹⁾	Non-accrual loans are included in average loans.


⁽²⁾	Interest income includes amortization of deferred loan origination fees and costs.


⁽³⁾	Non-taxable loan and investment income is presented on a fully tax equivalent basis assuming a 35% tax rate.


⁽⁴⁾	Interest rate spread represents the difference between the average yield on interest earning assets and the average cost of interest bearing liabilities and is presented on a fully tax equivalent basis.


⁽⁵⁾	Net interest margin represents net interest income as a percentage of average interest earning assets.

The table below reflects the impact the acquisition accounting loan discount accretion on Taylor Capital loans had on the loan yield and net interest margin on a fully tax equivalent basis for the three months ended June 30, 2015 and March 31, 2015 and six months ended June 30, 2015 (dollars in thousands):



	Three months ended							Three months ended							Six months ended
	June 30, 2015							March 31, 2015							June 30, 2015
	Average Balance			Interest		Yield		Average Balance			Interest		Yield		Average Balance			Interest		Yield
Loan yield excluding acquisition accounting discount accretion on Taylor Capital loans:
Total loans, as reported	$	8,969,813		$	95,404	4.27	%	$	8,888,686		$	96,405	4.40	%	$	8,929,474		$	191,809	4.33	%
Less acquisition accounting discount accretion on non-PCI loans	(50,333		)	6,992				(57,802		)	7,948				(54,047		)	14,940
Less acquisition accounting discount accretion on PCI loans	(34,514		)	960				(35,092		)	628				(34,802		)	1,588
Total loans, excluding acquisition accounting discount accretion on Taylor Capital loans	$	9,054,660		$	87,452	3.87	%	$	8,981,580		$	87,829	3.97	%	$	9,018,323		$	175,281	3.92	%

Net interest margin on a fully tax equivalent basis, excluding acquisition accounting discount accretion on Taylor Capital loans:
Total interest earning assets, as reported	$	12,643,745		$	121,149	3.84	%	$	12,331,880		$	119,473	3.93	%	$	12,488,674		$	240,622	3.89	%
Less acquisition accounting discount accretion on non-PCI loans	(50,333		)	6,992				(57,802		)	7,948				(54,047		)	14,940
Less acquisition accounting discount accretion on PCI loans	(34,514		)	960				(35,092		)	628				(34,802		)	1,588
Total interest earning assets, excluding acquisition accounting discount accretion on Taylor Capital loans	$	12,728,592		$	113,197	3.57	%	$	12,424,774		$	110,897	3.62	%	$	12,577,523		$	224,094	3.59	%

Provision for credit losses will be recognized on acquired Taylor Capital loans as they renew and will largely offset the positive impact of the loan discount accretion on non-purchased credit-impaired loans. During the second and first quarters of 2015, a provision for credit losses of approximately $4.9 million and $5.5 million, respectively, was recorded related to acquired Taylor Capital loans.

The table below reflects the impact that the loan discount accretion and provision for credit losses on Taylor Capital loans had earnings for the three months ended June 30, 2015 and March 31, 2015 (dollars in thousands):



	2Q15		1Q15
Acquisition accounting discount accretion on Taylor Capital loans	$	7,952	$	8,576
Provision for credit losses on Taylor Capital loans	4,896		5,524
Earnings impact of discount accretion and merger related provision	3,056		3,052
Tax expense	1,213		1,211
Earnings impact of discount accretion and merger related provision, net of tax	$	1,843	$	1,841

MB FINANCIAL INC /MD - FORM 8-K - EX-99 - EXHIBIT 99 - July 16, 2015

Attached files

MB FINANCIAL INC /MD Reports