MB Financial, Inc. Reports Earnings for the Third Quarter of 2015

CHICAGO, Oct. 15, 2015 (GLOBE NEWSWIRE) — MB Financial, Inc. (NASDAQ:MBFI), the holding company for MB Financial Bank, N.A., today announced 2015 third quarter net income available to common stockholders of $38.3 million, or $0.51 per diluted common share, compared to $39.0 million, or $0.52 per diluted common share, last quarter and $4.9 million, or $0.08 per diluted common share, in the third quarter a year ago.

Highlights Include:

Loan Growth During the Quarter

Loan balances, excluding purchased credit-impaired loans, increased $304.3 million (+3.4%, or +13.5% annualized) during the third quarter of 2015 primarily due to increases in commercial-related loans across several categories.

            Change from 6/30/2015 to 9/30/2015
(Dollars in thousands)   9/30/2015   6/30/2015   Amount   Percent
Commercial-related credits:                
Commercial loans   $ 3,440,632     $ 3,354,889     $ 85,743     2.6 %
Commercial loans collateralized by assignment of lease payments (lease loans)   1,693,540     1,690,866     2,674     0.2  
Commercial real estate   2,580,009     2,539,991     40,018     1.6  
Construction real estate   255,620     189,599     66,021     34.8  
Total commercial-related credits   7,969,801     7,775,345     194,456     2.5  
Other loans:                
Residential real estate   607,171     533,118     74,053     13.9  
Indirect vehicle   345,731     303,777     41,954     13.8  
Home equity   223,173     230,478     (7,305 )   (3.2 )
Consumer loans   87,612     86,463     1,149     1.3  
Total other loans   1,263,687     1,153,836     109,851     9.5  
Total loans, excluding purchased credit-impaired   9,233,488     8,929,181     304,307     3.4  
Purchased credit-impaired   155,693     164,775     (9,082 )   (5.5 )
Total loans   $ 9,389,181     $ 9,093,956     $ 295,225     3.2 %

Deposit Growth During the Quarter

  • Non-interest bearing deposits increased $56.1 million (+1.3%, or +5.1% annualized) during the third quarter of 2015 and comprised 39% of total deposits at quarter-end.
  • Low cost deposits increased $326.1 million (+3.5%, or +14.1% annualized) in the third quarter of 2015 and continued to represent 84% of total deposits at quarter-end.
            Change from 6/30/2015 to 9/30/2015
(Dollars in thousands)   9/30/2015   6/30/2015   Amount   Percent
Low cost deposits:                
Noninterest bearing deposits   $ 4,434,067     $ 4,378,005     $ 56,062     1.3 %
Money market and NOW   4,129,414     3,842,264     287,150     7.5  
Savings   953,746     970,875     (17,129 )   (1.8 )
Total low cost deposits   9,517,227     9,191,144     326,083     3.5  
Certificates of deposit:                
Certificates of deposit   1,279,842     1,261,843     17,999     1.4  
Brokered certificates of deposit   457,509     408,827     48,682     11.9  
Total certificates of deposit   1,737,351     1,670,670     66,681     4.0  
Total deposits   $ 11,254,578     $ 10,861,814     $ 392,764     3.6 %

Credit Quality

  • Provision for credit losses on legacy loans (which excludes loans acquired through the Taylor Capital merger (the “Merger”)) was $1.2 million in the third quarter of 2015 compared to a negative provision of $600 thousand in the second quarter of 2015.
  • Taylor Capital related provision for credit losses was $4.1 million in the third quarter of 2015 compared to $4.9 million in the second 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 $7.4 million in the third quarter of 2015 and $8.0 million in the second quarter of 2015.
  • Our net loan charge-offs during the third quarter of 2015 were $1.5 million compared to net loan recoveries of $2.6 million in the second quarter of 2015.
  • Non-performing loans decreased by $1.5 million while potential problem loans increased by $6.5 million from June 30, 2015.  The increase in potential problem loans was more than offset by a $9.1 million decline in purchased credit-impaired loans.

Key Earnings Components

  • Net interest income on a fully tax equivalent basis increased $1.8 million (1.5%) to $123.0 million  in the third 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.
  • Our net interest margin on a fully tax equivalent basis, excluding accretion on loans acquired in the Merger, declined eight basis points from the prior quarter and five basis points from the third quarter of 2014, due to a seven basis point decrease in average yields earned on loans (excluding accretion).  
  • Our core non-interest income was $82.8 million compared to $83.0 million in the prior quarter.  Lease financing revenues increased due to an increase in fees and promotional revenue from the sale of third-party equipment maintenance contracts.  The increase in leasing revenue was partially offset by lower mortgage banking revenue primarily as a result of reduced origination fees due to lower loan origination volumes.  Our core non-interest income was also impacted by the Durbin amendment of the Dodd-Frank Act, which decreased card fees by approximately $1.2 million in the quarter.
  • Our core non-interest expense increased 2.5% compared to the prior quarter.  Salaries and employee benefits expense was up due to an extra day in the quarter and annual pay increases for hourly employees.  Excluding salaries and employee benefits expense, core non-interest expense increased $631 thousand in the third quarter compared to the prior quarter.  This increase was primarily due to an increase in the clawback liability of $306 thousand related to our loss share agreements with the FDIC as well as an increase in debit card production cost of $294 thousand from replacing magnetic strip only cards with cards having new chip technology and an increase in advertising and marketing expense.

RESULTS OF OPERATIONS

Third Quarter Results

Net Interest Income

            Change
from
2Q15 to 3Q15
      Change
from
3Q14 to 3Q15
    Nine Months Ended   Change from
2014 to 2015
                      September 30,  
    3Q15   2Q15     3Q14       2015   2014  
(Dollars in thousands)                                  
Net interest income – fully tax equivalent   $ 122,988     $ 121,149     +1.5 %   $ 101,699     +20.9 %     $ 363,610     $ 248,357     +46.4 %
Net interest margin – fully tax equivalent   3.73 %   3.84 %   -0.11 %   3.78 %   -0.05       3.83 %   3.66 %   +0.17 %
Net interest margin – fully tax equivalent, excluding acquisition accounting discount accretion on Taylor Capital loans   3.49 %   3.57 %   -0.08 %   3.54 %   -0.05       3.56 %   3.57 %   -0.01 %

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 third 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 third 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 eight basis points to 3.49% for the third quarter of 2015 compared to 3.57% for the prior quarter.  This decrease was primarily due to a seven basis point decrease in average yields earned on loans (excluding accretion) of which three basis points was due to a decrease in fees and interest recoveries.

See the supplemental net interest margin tables for further detail.

Non-interest Income (in thousands):

                          Nine Months Ended
                          September 30,
    3Q15   2Q15   1Q15   4Q14   3Q14     2015   2014
Core non-interest income:                              
Key fee initiatives:                              
Lease financing, net   $ 20,000     $ 15,564     $ 25,080     $ 18,542     $ 17,719       $ 60,644     $ 45,768  
Mortgage banking revenue   30,692     35,648     24,544     29,080     16,823       90,884     17,069  
Commercial deposit and treasury management fees   11,472     11,062     11,038     10,720     9,345       33,572     23,595  
Trust and asset management fees   6,002     5,752     5,714     5,515     5,712       17,468     16,324  
Card fees   3,335     4,409     3,927     3,900     3,836       11,671     9,841  
Capital markets and international banking service fees   2,357     1,508     1,928     1,648     1,472       5,793     3,810  
Total key fee initiatives   73,858     73,943     72,231     69,405     54,907       220,032     116,407  
Consumer and other deposit service fees   3,499     3,260     3,083     3,335     3,362       9,842     9,453  
Brokerage fees   1,281     1,543     1,678     1,350     1,145       4,502     3,826  
Loan service fees   1,531     1,353     1,485     1,864     1,069       4,369     2,950  
Increase in cash surrender value of life insurance   852     836     839     865     855       2,527     2,516  
Other operating income   1,730     2,098     2,102     2,577     1,145       5,930     3,106  
Total core non-interest income   82,751     83,033     81,418     79,396     62,483       247,202     138,258  
Non-core non-interest income:                              
Net gain (loss) on investment securities   371     (84 )   (460 )   491     (3,246 )     (173 )   (3,016 )
Net gain (loss) on sale of other assets   1     (7 )   4     3,476     (7 )     (2 )   (24 )
Gain on extinguishment of debt                   1,895           1,895  
(Decrease) increase in market value of assets held in trust for deferred compensation (1)   (872 )   7     306     315     (38 )     (559 )   514  
Total non-core non-interest income   (500 )   (84 )   (150 )   4,282     (1,396 )     (734 )   (631 )
Total non-interest income   $ 82,251     $ 82,949     $ 81,268     $ 83,678     $ 61,087       $ 246,468     $ 137,627  

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

Core non-interest income for the third quarter of 2015 decreased slightly by $282 thousand, or 0.3%, to $82.8 million from the second quarter of 2015.

  • Leasing revenues increased due to an increase in fees and promotional revenue from the sale of third-party equipment maintenance contracts. 
  • Capital markets and international banking services fees increased due to higher swap and syndication fees.
  • Commercial deposit and treasury management fees increased primarily due to new business.
  • Trust and asset management fees increased due to the acquisition of the Illinois court-appointed guardianship and special needs trust business of JPMorgan Chase in August 2015.  This acquisition added approximately $200 million of assets under management to our existing guardianship business.
  • Mortgage banking revenue decreased due to reduced origination fees due to lower loan origination volumes and reduced mortgage servicing fees as the result of the sale of certain mortgage servicing assets in July 2015.  
  • Card fees decreased by $1.1 million primarily as a result of the impact from being subject to the Durbin amendment of the Dodd-Frank Act for the first time, which decreased card fees by approximately $1.2 million in the quarter.

Core non-interest income for the nine months ended September 30, 2015 increased by $108.9 million, or 78.8%, to $247.2 million from the nine months ended September 30, 2014. 

  • Mortgage banking revenue increased due to 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.
  • Capital markets and international banking services fees increased due to higher swap and syndication fees partly offset by a decrease in M&A advisory fees.
  • 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.
  • Loan service fees increased due to increased unused line 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):

                          Nine Months Ended
                          September 30,
    3Q15   2Q15   1Q15   4Q14   3Q14     2015   2014
Core non-interest expense:(1)                              
Salaries and employee benefits   $ 88,760     $ 86,138     $ 84,447     $ 83,242     $ 65,271       $ 259,345     $ 155,614  
Occupancy and equipment expense   12,456     12,081     12,763     13,757     11,314       37,300     30,410  
Computer services and telecommunication expense   8,558     8,407     8,634     8,612     6,194       25,599     16,174  
Advertising and marketing expense   2,578     2,497     2,446     2,233     1,973       7,521     6,077  
Professional and legal expense   1,496     1,902     2,480     2,184     2,501       5,878     5,358  
Other intangible amortization expense   1,542     1,509     1,518     1,617     1,470       4,569     3,884  
Net loss (gain) recognized on other real estate owned (A)   520     662     888     (120 )   1,348       2,070     1,674  
Net (gain) loss recognized on other real estate owned related to FDIC transactions (A)   65     (88 )   (273 )   (27 )   421       (296 )   473  
Other real estate expense, net (A)   (8 )   150     281     433     409       423     1,142  
Other operating expenses   18,782     18,238     18,276     18,514     13,577       55,296     33,905  
Total core non-interest expense   134,749     131,496     131,460     130,445     104,478       397,705     254,711  
Non-core non-interest expense: (1)                              
Merger related expenses (B)   319     1,234     8,069     6,494     27,161       9,622     28,329  
Branch impairment charges   70                       70      
Prepayment fees on interest bearing liabilities           85               85      
Loss on low to moderate income real estate investment (C)                             2,124  
Contingent consideration – Celtic acquisition (C)                   10,600           10,600  
Contribution to MB Financial Charitable Foundation (C)               3,250                
(Decrease) increase in market value of assets held in trust for deferred compensation (D)   (872 )   7     306     315     (38 )     (559 )   514  
Total non-core non-interest expense   (483 )   1,241     8,460     10,059     37,723       9,218     41,567  
Total non-interest expense   $ 134,266     $ 132,737     $ 139,920     $ 140,504     $ 142,201       $ 406,923     $ 296,278  

(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 $3.3 million from the second quarter of 2015 to $134.7 million for the third quarter of 2015.

  • Salaries and employee benefits expense was up due to an extra day in the quarter and annual pay increases for hourly employees.
  • Other operating expenses increased due to an increase in the clawback liability related to our loss share agreements with the FDIC of $306 thousand as well as an increase in debit card production cost of $294 thousand from replacing magnetic strip only cards with cards having new chip technology.
  • Occupancy and equipment expense increased due to higher repair and maintenance expense as well as higher rental operating expenses.
  • Professional and legal expense decreased due to lower legal fees.

Core non-interest expense increased by $143.0 million, or 56.1%, from the nine months ended September 30, 2014 to $397.7 million for the nine months ended September 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 other IT projects.
  • Advertising and marketing expense was higher due to increased advertising and sponsorships.
  • Professional and legal expense increased due to higher consulting expense.

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

                          Nine Months Ended
                          September 30,
    3Q15   2Q15   1Q15   4Q14   3Q14     2015   2014
Merger related expenses:                              
Salaries and employee benefits   $ 3     $     $ 33     $ 1,926     $ 14,259       $ 36     $ 14,363  
Occupancy and equipment expense   2     96     177     301     428       275     442  
Computer services and telecommunication expense   9     130     270     1,397     5,312       409     5,495  
Advertising and marketing expense               84     262           460  
Professional and legal expense   305     511     190     258     6,363       1,006     6,852  
Branch exit and facilities impairment charges       438     7,391     2,270           7,829      
Other operating expenses       59     8     258     537       67     717  
Total merger related expenses   $ 319     $ 1,234     $ 8,069     $ 6,494     $ 27,161       $ 9,622     $ 28,329  

Income Tax Expense

Income tax expense was $18.3 million for the third quarter of 2015 compared to $19.4 million for the second quarter of 2015.  The decrease in income tax expense was primarily due to the $1.8 million decrease in income before taxes from $60.4 million in the second quarter of 2015 to $58.6 million in the third 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, LLC.  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 September 30, 2015                  
Net interest income $ 104,714     $ 2,832     $ 8,423     $     $ 115,969  
Provision for credit losses 4,965     242     151         5,358  
Net interest income after provision for credit losses 99,749     2,590     8,272         110,611  
Non-interest income:                  
Lease financing, net 637     19,363             20,000  
Mortgage origination fees         23,449         23,449  
Mortgage servicing fees         7,243         7,243  
Other non-interest income 30,563     624         372     31,559  
Total non-interest income 31,200     19,987     30,692     372     82,251  
Non-interest expense:                  
Salaries and employee benefits 54,547     8,475     24,866     3     87,891  
Occupancy and equipment expense 9,982     843     1,631     2     12,458  
Computer services and telecommunication expense 6,179     335     2,044     9     8,567  
Professional and legal expense 1,206     290         305     1,801  
Other operating expenses 15,973     1,439     6,067     70     23,549  
Total non-interest expense 87,887     11,382     34,608     389     134,266  
Income before income taxes 43,062     11,195     4,356     (17 )   58,596  
Income tax expense 12,184     4,398     1,742     (6 )   18,318  
Net income $ 30,878     $ 6,797     $ 2,614     $ (11 )   $ 40,278  
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  

Net income from our banking segment for the third quarter of 2015 decreased compared to the prior quarter.  This decrease in net income was primarily due to an increase in provision for credit losses and other operating expenses.  Other operating expenses increased due to an increase in the clawback liability of $306 thousand related to our loss share agreements with the FDIC as well as an increase in debit card production cost of $294 thousand from replacing magnetic strip only cards with cards having new chip technology and an increase in advertising and marketing expense.  Other non-interest income was also impacted by the Durbin amendment of the Dodd-Frank Act, which decreased card fees by approximately $1.2 million in the quarter.

Net income from our leasing segment for the third quarter of 2015 increased compared to the prior quarter.  Lease financing revenues increased due to an increase in fees and promotional revenue from the sale of third-party equipment maintenance contracts.

Net income from our mortgage segment for the third quarter of 2015 decreased compared to the prior quarter primarily as a result of reduced origination fees due to lower loan origination volumes.  In July 2015, we sold approximately $106 million of mortgage servicing rights at book value.  This sale reduced mortgage servicing fees in the third quarter of 2015.  Partially offsetting the decrease in mortgage banking revenue, net interest income increased due to higher average balances and rates on mortgage loans held for sale.

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

    3Q15   2Q15   1Q15   4Q14   3Q14 (1)
Origination volume   $ 1,880,960     $ 2,010,175     $ 1,688,541     $ 1,511,909     $ 724,713  
Refinance   34 %   43 %   61 %   44 %   35 %
Purchase   66     57     39     56     65  
                     
Origination volume by channel:                    
Retail   18 %   18 %   18 %   19 %   18 %
Third party   82     82     82     81     82  
                     
Mortgage servicing book (unpaid principal balance of loans serviced for others) at period end (2)   $ 15,593,630     $ 23,539,865     $ 22,927,263     $ 22,479,008     $ 21,989,278  
Mortgage servicing rights, recorded at fair value, at period end   148,097     261,034     219,254     235,402     241,391  
Notional value of rate lock commitments, at period end   800,162     992,025     1,069,145     645,287     610,818  

(1) For the 44 day period subsequent to the Merger.
(2) Does not include the unpaid principal balance of serviced loans sold in July 2015 that will continue to be sub-serviced through October 2015.

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):

    9/30/2015   6/30/2015   3/31/2015   12/31/2014   9/30/2014
    Amount   % of Total   Amount   % of Total   Amount   % of Total   Amount   % of Total   Amount   % of Total
Commercial-related credits:                                        
Commercial loans   $ 3,440,632     37 %   $ 3,354,889     37 %   $ 3,258,652     37 %   $ 3,245,206     36 %   $ 3,064,669     34 %
Commercial loans collateralized by assignment of lease payments (lease loans)   1,693,540     18     1,690,866     18     1,628,031     18     1,692,258     18     1,631,660     18  
Commercial real estate   2,580,009     27     2,539,991     28     2,525,640     28     2,544,867     28     2,647,412     29  
Construction real estate   255,620     3     189,599     2     184,105     2     247,068     3     222,120     3  
Total commercial-related credits   7,969,801     85     7,775,345     85     7,596,428     85     7,729,399     85     7,565,861     84  
Other loans:                                        
Residential real estate   607,171     6     533,118     6     505,558     5     503,287     5     516,834     6  
Indirect vehicle   345,731     4     303,777     3     273,105     3     268,840     3     273,038     3  
Home equity   223,173     2     230,478     3     241,078     3     251,909     3     262,977     3  
Consumer loans   87,612     1     86,463     1     77,645     1     78,137     1     69,028     1  
Total other loans   1,263,687     13     1,153,836     13     1,097,386     12     1,102,173     12     1,121,877     13  
Total loans, excluding purchased credit-impaired loans   9,233,488     98     8,929,181     98     8,693,814     97     8,831,572     97     8,687,738     97  
Purchased credit-impaired loans   155,693     2     164,775     2     227,514     3     251,645     3     288,186     3  
Total loans   $ 9,389,181     100 %   $ 9,093,956     100 %   $ 8,921,328     100 %   $ 9,083,217     100 %   $ 8,975,924     100 %

Our loan balances, excluding purchased credit-impaired loans, increased $304.3 million (+3.4%, or +13.5% annualized) during the third 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):

    3Q15   2Q15   1Q15   4Q14   3Q14
    Amount   % of Total   Amount   % of Total   Amount   % of Total   Amount   % of Total   Amount   % of Total
Commercial-related credits:                                        
Commercial loans   $ 3,372,279     37 %   $ 3,309,519     37 %   $ 3,190,755     36 %   $ 3,110,016     35 %   $ 2,118,864     30 %
Commercial loans collateralized by assignment of lease payments (lease loans)   1,674,939     18     1,634,583     18     1,647,761     18     1,642,427     18     1,561,484     22  
Commercial real estate   2,568,539     28     2,522,473     28     2,538,995     29     2,611,410     29     2,108,492     29  
Construction real estate   210,506     2     191,935     2     191,257     2     232,679     3     170,017     2  
Total commercial-related credits   7,826,263     85     7,658,510     85     7,568,768     85     7,596,532     85     5,958,857     83  
Other loans:                                        
Residential real estate   566,115     6     512,766     6     493,366     5     503,211     5     405,589     6  
Indirect vehicle   325,323     4     286,107     3     267,265     3     273,063     3     251,969     3  
Home equity   226,365     2     233,867     3     246,537     3     256,933     3     274,841     4  
Consumer loans   85,044     1     76,189     1     72,374     1     75,264     1     69,699     1  
Total other loans   1,202,847     13     1,108,929     13     1,079,542     12     1,108,471     12     1,002,098     14  
Total loans, excluding purchased credit-impaired loans   9,029,110     98     8,767,439     98     8,648,310     97     8,705,003     97     6,960,955     97  
Purchased credit-impaired loans   156,309     2     202,374     2     240,376     3     273,136     3     221,129     3  
Total loans   $ 9,185,419     100 %   $ 8,969,813     100 %   $ 8,888,686     100 %   $ 8,978,139     100 %   $ 7,182,084     100 %

ASSET QUALITY

The following table presents a summary of criticized assets (excluding loans held for sale) as of the dates indicated (dollars in thousands):

    9/30/2015   6/30/2015   3/31/2015   12/31/2014   9/30/2014
Non-performing loans:                    
Non-accrual loans (1)   $ 92,302     $ 91,943     $ 81,571     $ 82,733     $ 97,580  
Loans 90 days or more past due, still accruing interest   4,275     6,112     1,707     4,354     2,681  
Total non-performing loans   96,577     98,055     83,278     87,087     100,261  
Other real estate owned   29,587     28,517     21,839     19,198     18,817  
Repossessed assets   216     78     160     93     126  
Total non-performing assets   $ 126,380     $ 126,650     $ 105,277     $ 106,378     $ 119,204  
Potential problem loans (2)   $ 122,966     $ 116,443     $ 107,703     $ 55,651     $ 51,690  
Purchased credit-impaired loans   $ 155,693     $ 164,775     $ 227,514     $ 251,645     $ 288,186  
                     
Total allowance for loan and lease losses   $ 124,626     $ 120,070     $ 113,412     $ 110,026     $ 102,810  
Accruing restructured loans (3)   20,120     16,875     16,874     15,603     16,877  
Total non-performing loans to total loans   1.03 %   1.08 %   0.93 %   0.96 %   1.12 %
Total non-performing assets to total assets   0.85     0.84     0.73     0.73     0.82  
Allowance for loan and lease losses to non-performing loans   129.04     122.45     136.18     126.34     102.54  

(1) Includes $21.4 million, $24.5 million, $25.5 million, $25.8 million and $22.4 million of restructured loans on non-accrual status at September 30, 2015, June 30, 2015, March 31, 2015, December 31, 2014 and September 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.

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):

    9/30/2015   6/30/2015   3/31/2015   12/31/2014   9/30/2014
Commercial and lease   $ 34,465     $ 31,053     $ 18,315     $ 20,058     $ 22,985  
Commercial real estate   25,437     32,358     29,645     32,663     42,832  
Construction real estate       337     337     337     337  
Consumer related   36,675     34,307     34,981     34,029     34,107  
Total non-performing loans   $ 96,577     $ 98,055     $ 83,278     $ 87,087     $ 100,261  

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):

    9/30/2015   6/30/2015   3/31/2015   12/31/2014   9/30/2014
Balance at the beginning of quarter   $ 28,517     $ 21,839     $ 19,198     $ 18,817     $ 20,306  
Transfers in at fair value less estimated costs to sell   2,402     8,595     4,615     1,261     221  
Acquired from business combination                   4,720  
Fair value adjustments   (565 )   (920 )   (922 )   (34 )   (2,083 )
Net gains on sales of other real estate owned   45     258     34     154     735  
Cash received upon disposition   (812 )   (1,255 )   (1,086 )   (1,000 )   (5,082 )
Balance at the end of quarter   $ 29,587     $ 28,517     $ 21,839     $ 19,198     $ 18,817  

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

                          Nine Months Ended
                          September 30,
    3Q15   2Q15   1Q15   4Q14   3Q14     2015   2014
Allowance for credit losses, balance at the beginning of period   $ 124,130     $ 117,189     $ 114,057     $ 106,912     $ 103,905       $ 114,057     $ 113,462  
Allowance for unfunded credit commitments acquired through business combination                   1,261           1,261  
Utilization of allowance for unfunded credit commitments                   (637 )         (637 )
Provision for credit losses – legacy   1,225     (600 )   (550 )   2,472     (1,600 )     75     (2,400 )
Provision for credit losses –  acquired Taylor Capital loan portfolio renewals   4,133     4,896     5,524     7,271     4,709       14,553     4,709  
Charge-offs:                              
Commercial loans   1,657     57     569     197     606       2,283     1,142  
Commercial loans collateralized by assignment of lease payments (lease loans)   1,980     100         885           2,080     40  
Commercial real estate   170     108     2,034     1,528     1,027       2,312     9,910  
Construction real estate   5     3     3     4     5       11     75  
Residential real estate   292     318     579     280     740       1,189     1,438  
Home equity   358     276     444     1,381     566       1,078     2,002  
Indirect vehicle   581     627     874     1,189     1,043       2,082     2,546  
Consumer loans   467     500     424     546     497       1,391     1,582  
Total charge-offs   5,510     1,989     4,927     6,010     4,484       12,426     18,735  
Recoveries:                              
Commercial loans   456     816     242     869     564       1,514     2,888  
Commercial loans collateralized by assignment of lease payments (lease loans)   11     340     749     384     425       1,100     555  
Commercial real estate   2,402     2,561     1,375     741     2,227       6,338     3,279  
Construction real estate   216     35     2     51     25       253     201  
Residential real estate   337     8     72     661     4       417     529  
Home equity   186     160     101     176     46       447     306  
Indirect vehicle   334     545     475     453     402       1,354     1,283  
Consumer loans   118     169     69     77     65       356     211  
Total recoveries   4,060     4,634     3,085     3,412     3,758       11,779     9,252  
Total net charge-offs (recoveries)   1,450     (2,645 )   1,842     2,598     726       647     9,483  
Allowance for credit losses   128,038     124,130     117,189     114,057     106,912       128,038     106,912  
Allowance for unfunded credit commitments   (3,412 )   (4,060 )   (3,777 )   (4,031 )   (4,102 )     (3,412 )   (4,102 )
Allowance for loan and lease losses   $ 124,626     $ 120,070     $ 113,412     $ 110,026     $ 102,810       $ 124,626     $ 102,810  
Total loans, excluding loans held for sale   $ 9,389,181     $ 9,093,956     $ 8,921,328     $ 9,083,217     $ 8,975,924       $ 9,389,181     $ 8,975,924  
Average loans, excluding loans held for sale   9,185,419     8,969,813     8,888,686     8,978,139     7,182,084       9,015,726     6,107,670  
Ratio of allowance for loan and lease losses to total loans, excluding loans held for sale   1.33 %   1.32 %   1.27 %   1.21 %   1.15 %     1.33 %   1.15 %
Net loan charge-offs (recoveries) to average loans, excluding loans held for sale (annualized)   0.06     (0.12 )   0.08     0.11     0.04       0.01     0.21  

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

    9/30/2015   6/30/2015   3/31/2015   12/31/2014   9/30/2014
Commercial related loans:                    
General reserve   $ 93,903     $ 89,642     $ 88,425     $ 85,087     $ 76,604  
Specific reserve   13,683     11,303     5,658     5,189     5,802  
Consumer related reserve   17,040     19,125     19,329     19,750     20,404  
Total allowance for loan and lease losses   $ 124,626     $ 120,070     $ 113,412     $ 110,026     $ 102,810  

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 September 30, 2015 (in thousands):

    Non-
Accretable
Discount –
PCI Loans
  Accretable
Discount –
PCI Loans
  Accretable
Discount –
Non-PCI
Loans
  Total
Balance at beginning of period   $ 23,474     $ 10,901     $ 46,836     $ 81,211  
Charge-offs   (3,727 )           (3,727 )
Accretion       (1,533 )   (5,875 )   (7,408 )
Balance at end of period   $ 19,747     $ 9,368     $ 40,961     $ 70,076  

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 better than expected cash flows on two pools of purchased credit-impaired loans.

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):

    9/30/2015   6/30/2015   3/31/2015   12/31/2014   9/30/2014
Securities available for sale:                    
Fair value                    
Government sponsored agencies and enterprises   $ 65,461     $ 65,485     $ 66,070     $ 65,873     $ 65,829  
States and political subdivisions   399,274     395,912     403,628     410,854     409,033  
Mortgage-backed securities   847,426     902,017     856,933     908,225     1,006,102  
Corporate bonds   228,251     246,468     252,042     259,203     267,239  
Equity securities   10,826     10,669     10,751     10,597     10,447  
Total fair value   $ 1,551,238     $ 1,620,551     $ 1,589,424     $ 1,654,752     $ 1,758,650  
                     
Amortized cost                    
Government sponsored agencies and enterprises   $ 64,008     $ 64,211     $ 64,411     $ 64,612     $ 64,809  
States and political subdivisions   379,015     380,221     381,704     390,076     391,900  
Mortgage-backed securities   834,791     890,334     841,727     899,523     999,630  
Corporate bonds   228,711     245,506     250,543     259,526     265,720  
Equity securities   10,701     10,644     10,587     10,531     10,470  
Total amortized cost   $ 1,517,226     $ 1,590,916     $ 1,548,972     $ 1,624,268     $ 1,732,529  
                     
Unrealized gain, net                    
Government sponsored agencies and enterprises   $ 1,453     $ 1,274     $ 1,659     $ 1,261     $ 1,020  
States and political subdivisions   20,259     15,691     21,924     20,778     17,133  
Mortgage-backed securities   12,635     11,683     15,206     8,702     6,472  
Corporate bonds   (460 )   962     1,499     (323 )   1,519  
Equity securities   125     25     164     66     (23 )
Total unrealized gain, net   $ 34,012     $ 29,635     $ 40,452     $ 30,484     $ 26,121  
                     
Securities held to maturity, at amortized cost:                    
States and political subdivisions   $ 1,002,963     $ 974,032     $ 764,931     $ 752,558     $ 760,674  
Mortgage-backed securities   221,889     229,595     235,928     240,822     244,675  
Total amortized cost   $ 1,224,852     $ 1,203,627     $ 1,000,859     $ 993,380     $ 1,005,349  

DEPOSIT MIX

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

    9/30/2015   6/30/2015   3/31/2015   12/31/2014   9/30/2014
    Amount   % of
Total
  Amount   % of
Total
  Amount   % of
Total
  Amount   % of
Total
  Amount   % of
Total
Low cost deposits:                                        
Noninterest bearing deposits   $ 4,434,067     39 %   $ 4,378,005     40 %   $ 4,290,499     39 %   $ 4,118,256     37 %   $ 3,807,448     34 %
Money market and NOW   4,129,414     37     3,842,264     35     4,002,818     36     3,913,765     36     4,197,166     37  
Savings   953,746     8     970,875     9     969,560     9     940,345     9     931,985     8  
Total low cost deposits   9,517,227     84     9,191,144     84     9,262,877     84     8,972,366     82     8,936,599     79  
Certificates of deposit:                                        
Certificates of deposit   1,279,842     12     1,261,843     12     1,354,633     12     1,479,928     13     1,646,000     15  
Brokered certificates of deposit   457,509     4     408,827     4     401,991     4     538,648     5     655,843     6  
Total certificates of deposit   1,737,351     16     1,670,670     16     1,756,624     16     2,018,576     18     2,301,843     21  
Total deposits   $ 11,254,578     100 %   $ 10,861,814     100 %   $ 11,019,501     100 %   $ 10,990,942     100 %   $ 11,238,442     100 %

Non-interest bearing deposits grew by $56.1 million (+1.3%, or +5.1% annualized) during the third quarter of 2015 and comprise 39% of total deposits at quarter-end.  Total low cost deposits increased $326.1 million (+3.5%, or +14.1% annualized) to $9.5 billion at September 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):

    3Q15   2Q15   1Q15   4Q14   3Q14
    Amount   % of
Total
  Amount   % of
Total
  Amount   % of
Total
  Amount   % of
Total
  Amount   % of
Total
Low cost deposits:                                        
Noninterest bearing deposits   $ 4,428,065     39 %   $ 4,273,931     39 %   $ 4,199,948     38 %   $ 4,072,797     36 %   $ 3,175,512     34 %
Money market and NOW   4,119,625     36     3,940,201     36     3,937,707     36     4,023,657     37     3,518,314     37  
Savings   965,060     9     972,327     9     952,345     9     936,960     8     906,630     10  
Total low cost deposits   9,512,750     84     9,186,459     84     9,090,000     83     9,033,414     81     7,600,456     81  
Certificates of deposit:                                        
Certificates of deposit   1,304,516     12     1,302,031     12     1,420,320     13     1,563,011     14     1,411,407     15  
Brokered certificates of deposit   427,649     4     412,517     4     476,245     4     606,166     5     417,346     4  
Total certificates of deposit   1,732,165     16     1,714,548     16     1,896,565     17     2,169,177     19     1,828,753     19  
Total deposits   $ 11,244,915     100 %   $ 10,901,007     100 %   $ 10,986,565     100 %   $ 11,202,591     100 %   $ 9,429,209     100 %

CAPITAL

Tangible book value per common share was $16.43 at September 30, 2015 compared to $16.36 last quarter and $15.36 a year ago.  In the second quarter of 2015, our Board of Directors authorized the purchase of up to $50 million of our common stock.  We purchased $47.2 million, or approximately 1.5 million shares, of our common stock through September 30, 2015.

Our regulatory capital ratios remain strong.  MB Financial Bank, N.A. (the “Bank”) was categorized as “well capitalized” at September 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; (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) the possibility that our security measures might not be sufficient to mitigate the risk of a cyber attack or cyber theft, and that our security measures might not protect us from systems failures or interruptions; (11) our ability to realize the residual values of our direct finance, leveraged, and operating leases; (12) our ability to access cost-effective funding; (13) changes in financial markets; (14) changes in economic conditions in general and in the Chicago metropolitan area in particular; (15) the costs, effects and outcomes of litigation; (16) 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; (17) changes in accounting principles, policies or guidelines; (18) our future acquisitions of other depository institutions or lines of business; and (19) 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)

    9/30/2015   6/30/2015   3/31/2015   12/31/2014   9/30/2014
ASSETS                    
Cash and due from banks   $ 234,220     $ 290,266     $ 248,840     $ 256,804     $ 267,405  
Interest earning deposits with banks   66,025     144,154     52,212     55,277     179,391  
Total cash and cash equivalents   300,245     434,420     301,052     312,081     446,796  
Federal funds sold       5              
Investment securities:                    
Securities available for sale, at fair value   1,551,238     1,620,551     1,589,424     1,654,752     1,758,650  
Securities held to maturity, at amortized cost   1,224,852     1,203,627     1,000,859     993,380     1,005,349  
Non-marketable securities – FHLB and FRB Stock   91,400     111,400     87,677     75,569     75,569  
Total investment securities   2,867,490     2,935,578     2,677,960     2,723,701     2,839,568  
Loans held for sale   676,020     801,343     686,838     737,209     553,627  
Loans:                    
Total loans, excluding purchased credit-impaired loans   9,233,488     8,929,181     8,693,814     8,831,572     8,687,738  
Purchased credit-impaired loans   155,693     164,775     227,514     251,645     288,186  
Total loans   9,389,181     9,093,956     8,921,328     9,083,217     8,975,924  
Less: Allowance for loan and lease losses   124,626     120,070     113,412     110,026     102,810  
Net loans   9,264,555     8,973,886     8,807,916     8,973,191     8,873,114  
Lease investments, net   184,223     167,966     159,191     162,833     137,120  
Premises and equipment, net   234,115     234,651     234,077     238,377     243,814  
Cash surrender value of life insurance   136,089     135,237     134,401     133,562     132,697  
Goodwill   711,521     711,521     711,521     711,521     711,521  
Other intangibles   37,520     34,979     36,488     38,006     39,623  
Mortgage servicing rights, at fair value   148,097     261,034     219,254     235,402     241,391  
Other real estate owned, net   29,587     28,517     21,839     19,198     18,817  
Other real estate owned related to FDIC transactions   13,825     13,867     17,890     19,328     22,028  
Other assets   346,814     285,190     319,883     297,690     244,481  
Total assets   $ 14,950,101     $ 15,018,194     $ 14,328,310     $ 14,602,099     $ 14,504,597  
LIABILITIES AND STOCKHOLDERS’ EQUITY                    
Liabilities                    
Deposits:                    
Noninterest bearing   $ 4,434,067     $ 4,378,005     $ 4,290,499     $ 4,118,256     $ 3,807,448  
Interest bearing   6,820,511     6,483,809     6,729,002     6,872,686     7,430,994  
Total deposits   11,254,578     10,861,814     11,019,501     10,990,942     11,238,442  
Short-term borrowings   940,529     1,382,635     615,231     931,415     667,160  
Long-term borrowings   95,175     89,639     85,477     82,916     77,269  
Junior subordinated notes issued to capital trusts   186,068     185,971     185,874     185,778     185,681  
Accrued expenses and other liabilities   410,523     420,396     363,934     382,762     335,677  
Total liabilities   12,886,873     12,940,455     12,270,017     12,573,813     12,504,229  
Stockholders’ Equity                    
Preferred stock   115,280     115,280     115,280     115,280     115,280  
Common stock   756     754     754     751     751  
Additional paid-in capital   1,277,348     1,273,333     1,268,851     1,267,761     1,265,050  
Retained earnings   702,789     677,246     651,178     629,677     606,097  
Accumulated other comprehensive income   20,968     18,778     26,101     20,356     18,431  
Treasury stock   (55,258 )   (9,035 )   (5,277 )   (6,974 )   (6,692 )
Controlling interest stockholders’ equity   2,061,883     2,076,356     2,056,887     2,026,851     1,998,917  
Noncontrolling interest   1,345     1,383     1,406     1,435     1,451  
Total stockholders’ equity   2,063,228     2,077,739     2,058,293     2,028,286     2,000,368  
Total liabilities and stockholders’ equity   $ 14,950,101     $ 15,018,194     $ 14,328,310     $ 14,602,099     $ 14,504,597  

MB FINANCIAL, INC. & SUBSIDIARIES 
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

                          Nine Months Ended
                          September 30,
(Dollars in thousands, except per share data)   3Q15   2Q15   1Q15   4Q14   3Q14     2015   2014
Interest income:                              
Loans:                              
Taxable   $ 100,573     $ 98,768     $ 98,846     $ 104,531     $ 79,902       $ 298,187     $ 187,497  
Nontaxable   2,283     2,259     2,174     2,203     2,265       6,716     6,819  
Investment securities:                              
Taxable   9,655     10,002     9,934     10,651     11,028       29,591     27,968  
Nontaxable   10,752     10,140     9,113     9,398     9,041       30,005     25,393  
Federal funds sold               2     14           23  
Other interest earning accounts   89     57     62     62     211       208     601  
Total interest income   123,352     121,226     120,129     126,847     102,461       364,707     248,301  
Interest expense:                              
Deposits   5,102     4,554     4,645     4,889     4,615       14,301     12,138  
Short-term borrowings   395     355     277     354     231       1,027     426  
Long-term borrowings and junior subordinated notes   1,886     1,844     1,812     1,793     2,003       5,542     4,725  
Total interest expense   7,383     6,753     6,734     7,036     6,849       20,870     17,289  
Net interest income   115,969     114,473     113,395     119,811     95,612       343,837     231,012  
Provision for credit losses   5,358     4,296     4,974     9,743     3,109       14,628     2,309  
Net interest income after provision for credit losses   110,611     110,177     108,421     110,068     92,503       329,209     228,703  
Non-interest income:                              
Lease financing, net   20,000     15,564     25,080     18,542     17,719       60,644     45,768  
Mortgage banking revenue   30,692     35,648     24,544     29,080     16,823       90,884     17,069  
Commercial deposit and treasury management fees   11,472     11,062     11,038     10,720     9,345       33,572     23,595  
Trust and asset management fees   6,002     5,752     5,714     5,515     5,712       17,468     16,324  
Card fees   3,335     4,409     3,927     3,900     3,836       11,671     9,841  
Capital markets and international banking service fees   2,357     1,508     1,928     1,648     1,472       5,793     3,810  
Consumer and other deposit service fees   3,499     3,260     3,083     3,335     3,362       9,842     9,453  
Brokerage fees   1,281     1,543     1,678     1,350     1,145       4,502     3,826  
Loan service fees   1,531     1,353     1,485     1,864     1,069       4,369     2,950  
Increase in cash surrender value of life insurance   852     836     839     865     855       2,527     2,516  
Net gain (loss) on investment securities   371     (84 )   (460 )   491     (3,246 )     (173 )   (3,016 )
Net gain (loss) on sale of assets   1     (7 )   4     3,476     (7 )     (2 )   (24 )
Gain on early extinguishment of debt                   1,895           1,895  
Other operating income   858     2,105     2,408     2,892     1,107       5,371     3,620  
Total non-interest income   82,251     82,949     81,268     83,678     61,087       246,468     137,627  
Non-interest expense:                              
Salaries and employee benefits   87,891     86,145     84,786     85,483     79,492       258,822     170,491  
Occupancy and equipment expense   12,458     12,177     12,940     14,058     11,742       37,575     30,852  
Computer services and telecommunication expense   8,567     8,537     8,904     10,009     11,506       26,008     21,669  
Advertising and marketing expense   2,578     2,497     2,446     2,317     2,235       7,521     6,537  
Professional and legal expense   1,801     2,413     2,670     2,442     8,864       6,884     12,210  
Other intangible amortization expense   1,542     1,509     1,518     1,617     1,470       4,569     3,884  
Branch exit and facilities impairment charges   70     438     7,391     2,270           7,899      
Net loss recognized on other real estate owned and other expense   577     724     896     286     2,178       2,197     3,289  
Prepayment fees on interest bearing liabilities           85               85      
Other operating expenses   18,782     18,297     18,284     22,022     24,714       55,363     47,346  
Total non-interest expense   134,266     132,737     139,920     140,504     142,201       406,923     296,278  
Income before income taxes   58,596     60,389     49,769     53,242     11,389       168,754     70,052  
Income tax expense   18,318     19,437     15,658     17,117     4,488       53,413     20,076  
Net income   40,278     40,952     34,111     36,125     6,901       115,341     49,976  
Dividends on preferred shares   2,000     2,000     2,000     2,000     2,000       6,000     2,000  
Net income available to common stockholders   $ 38,278     $ 38,952     $ 32,111     $ 34,125     $ 4,901       $ 109,341     $ 47,976  

                          Nine Months Ended
                          September 30,
    3Q15   2Q15   1Q15   4Q14   3Q14     2015   2014
Common share data:                              
Basic earnings per common share   $ 0.52     $ 0.52     $ 0.43     $ 0.46     $ 0.08       $ 1.47     $ 0.83  
Diluted earnings per common share   0.51     0.52     0.43     0.45     0.08       1.45     0.82  
Weighted average common shares outstanding for basic earnings per common share   74,297,281     74,596,925     74,567,104     74,525,990     63,972,902       74,478,164     57,795,094  
Weighted average common shares outstanding for diluted earnings per common share   75,029,827     75,296,029     75,164,716     75,130,331     64,457,978       75,154,585     58,341,927  

Selected Financial Data:                              
                          Nine Months Ended
                          September 30,
    3Q15   2Q15   1Q15   4Q14   3Q14     2015   2014
Performance Ratios:                              
Annualized return on average assets   1.06 %   1.12 %   0.96 %   0.99 %   0.22 %     1.05 %   0.64 %
Annualized operating return on average assets (1)   1.06     1.14     1.11     1.09     1.16       1.10     1.04  
Annualized return on average common equity   7.75     8.02     6.78     7.12     1.21       7.52     4.47  
Annualized operating return on average common equity (1)   7.75     8.19     7.87     7.84     8.29       7.94     7.34  
Annualized cash return on average tangible common equity (2)   12.74     13.21     11.31     11.98     2.23       12.43     7.09  
Annualized cash operating return on average tangible common equity (3)   12.74     13.47     13.09     13.16     13.19       13.10     11.42  
Net interest rate spread   3.60     3.72     3.80     3.88     3.66       3.70     3.54  
Cost of funds (4)   0.23     0.22     0.23     0.23     0.26       0.23     0.27  
Efficiency ratio (5)   65.35     64.26     65.29     63.35     63.46       64.97     65.65  
Annualized net non-interest expense to average assets (6)   1.36     1.32     1.40     1.39     1.35       1.36     1.48  
Core non-interest income to revenues (7)   40.35     40.80     40.66     38.78     38.23       40.60     35.99  
Net interest margin   3.52     3.63     3.73     3.81     3.56       3.62     3.41  
Tax equivalent effect   0.21     0.21     0.20     0.20     0.22       0.21     0.25  
Net interest margin – fully tax equivalent basis (8)   3.73     3.84     3.93     4.01     3.78       3.83     3.66  
Loans to deposits   83.43     83.72     80.96     82.64     79.87       83.43     79.87  
Asset Quality Ratios:                              
Non-performing loans (9) to total loans   1.03 %   1.08 %   0.93 %   0.96 %   1.12 %     1.03 %   1.12 %
Non-performing assets (9) to total assets   0.85     0.84     0.73     0.73     0.82       0.85     0.82  
Allowance for loan and lease losses to non-performing loans (9)   129.04     122.45     136.18     126.34     102.54       129.04     102.54  
Allowance for loan and lease losses to total loans   1.33     1.32     1.27     1.21     1.15       1.33     1.15  
Net loan (recoveries) charge-offs to average loans (annualized)   0.06     (0.12 )   0.08     0.11     0.04       0.01     0.21  
Capital Ratios:                              
Tangible equity to tangible assets (10)   9.34 %   9.41 %   9.73 %   9.32 %   9.17 %     9.34 %   9.17 %
Tangible common equity to tangible assets (11)   8.53     8.60     8.89     8.49     8.34       8.53     8.34  
Tangible common equity to risk weighted assets (12)   9.69     10.02     10.09     10.38     10.34       9.69     10.34  
Total capital (to risk-weighted assets) (13)   12.94     13.07     13.22     13.62     13.60       12.94     13.60 %
Tier 1 capital (to risk-weighted assets) (13)   11.92     12.06     12.24     12.61     12.64       11.92     12.64  
Common equity tier 1 capital (to risk-weighted assets) (13)   9.56     9.66     9.79     N/A   N/A     9.56     N/A
Tier 1 capital (to average assets) (13)   10.43     10.69     10.80     10.47     12.29       10.43     12.29  
Per Share Data:                              
Book value per common share (14)   $ 26.40     $ 26.14     $ 25.86     $ 25.58     $ 25.09       $ 26.40     $ 25.09  
Less: goodwill and other intangible assets, net of benefit, per common share   9.97     9.78     9.78     9.84     9.73       9.97     9.73  
Tangible book value per common share (15)   $ 16.43     $ 16.36     $ 16.08     $ 15.74     $ 15.36       $ 16.43     $ 15.36  
Cash dividends per common share   $ 0.17     $ 0.17     $ 0.14     $ 0.14     $ 0.14       $ 0.48     $ 0.38  

(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—Third Quarter Results.”

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

    9/30/2015   6/30/2015   3/31/2015   12/31/2014   9/30/2014
Stockholders’ equity – as reported   $ 2,063,228     $ 2,077,739     $ 2,058,293     $ 2,028,286     $ 2,000,368  
Less: goodwill   711,521     711,521     711,521     711,521     711,521  
Less: other intangible assets, net of tax benefit   24,388     22,736     23,717     24,704     25,755  
Tangible equity   $ 1,327,319     $ 1,343,482     $ 1,323,055     $ 1,292,061     $ 1,263,092  

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

    9/30/2015   6/30/2015   3/31/2015   12/31/2014   9/30/2014
Total assets – as reported   $ 14,950,101     $ 15,018,194     $ 14,328,310     $ 14,602,099     $ 14,504,597  
Less: goodwill   711,521     711,521     711,521     711,521     711,521  
Less: other intangible assets, net of tax benefit   24,388     22,736     23,717     24,704     25,755  
Tangible assets   $ 14,214,192     $ 14,283,937     $ 13,593,072     $ 13,865,874     $ 13,767,321  

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

    9/30/2015   6/30/2015   3/31/2015   12/31/2014   9/30/2014
Common stockholders’ equity – as reported   $ 1,947,948     $ 1,962,459     $ 1,943,013     $ 1,913,006     $ 1,885,088  
Less: goodwill   711,521     711,521     711,521     711,521     711,521  
Less: other intangible assets, net of tax benefit   24,388     22,736     23,717     24,704     25,755  
Tangible common equity   $ 1,212,039     $ 1,228,202     $ 1,207,775     $ 1,176,781     $ 1,147,812  

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

                          Nine Months Ended
                          September 30,
    3Q15   2Q15   1Q15   4Q14   3Q14     2015   2014
Average common stockholders’ equity – as reported   $ 1,958,947     $ 1,947,231     $ 1,922,151     $ 1,901,830     $ 1,613,375       $ 1,942,911     $ 1,434,420  
Less: average goodwill   711,521     711,521     711,521     711,521     550,667       711,521     466,271  
Less: average other intangible assets, net of tax benefit   23,900     23,092     24,157     25,149     19,734       23,715     16,179  
Average tangible common equity   $ 1,223,526     $ 1,212,618     $ 1,186,473     $ 1,165,160     $ 1,042,974       $ 1,207,675     $ 951,970  

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

                          Nine Months Ended
                          September 30,
    3Q15   2Q15   1Q15   4Q14   3Q14     2015   2014
Net income available to common stockholders – as reported   $ 38,278     $ 38,952     $ 32,111     $ 34,125     $ 4,901       $ 109,341     $ 47,976  
Add: other intangible amortization expense, net of tax benefit   1,002     981     987     1,051     956       2,970     2,525  
Net cash flow available to common stockholders   $ 39,280     $ 39,933     $ 33,098     $ 35,176     $ 5,857       $ 112,311     $ 50,501  

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

                          Nine Months Ended
                          September 30,
    3Q15   2Q15   1Q15   4Q14   3Q14     2015   2014
Net income – as reported   $ 40,278     $ 40,952     $ 34,111     $ 36,125     $ 6,901       $ 115,341     $ 49,976  
Less non-core items:                              
Net (loss) gain on investment securities   371     (84 )   (460 )   491     (3,246 )     (173 )   (3,016 )
Net (loss) gain on sale of other assets   1     (7 )   4     3,476     (7 )     (2 )   (24 )
Gain on extinguishment of debt                   1,895           1,895  
Merger related expenses   (319 )   (1,234 )   (8,069 )   (6,494 )   (27,161 )     (9,622 )   (28,329 )
Branch impairment charges   (70 )                     (70 )    
Prepayment fees on interest bearing liabilities           (85 )             (85 )    
Loss on low to moderate income real estate investment                             (2,124 )
Contingent consideration expense – Celtic acquisition                   (10,600 )         (10,600 )
Contribution to MB Financial Charitable Foundation               (3,250 )              
Total non-core items   (17 )   (1,325 )   (8,610 )   (5,777 )   (39,119 )     (9,952 )   (42,198 )
Income tax expense on non-core items   (6 )   (526 )   (3,417 )   (2,314 )   (10,295 )     (3,949 )   (11,416 )
Non-core items, net of tax   (11 )   (799 )   (5,193 )   (3,463 )   (28,824 )     (6,003 )   (30,782 )
Operating earnings   40,289     41,751     39,304     39,588     35,725       121,344     80,758  
Dividends on preferred shares   2,000     2,000     2,000     2,000     2,000       6,000     2,000  
Operating earnings available to common stockholders   $ 38,289     $ 39,751     $ 37,304     $ 37,588     $ 33,725       $ 115,344     $ 78,758  
Diluted operating earnings per common share   $ 0.51     $ 0.53     $ 0.50     $ 0.50     $ 0.52       $ 1.53     $ 1.35  
Weighted average common shares outstanding for diluted operating earnings per common share   75,029,827     75,296,029     75,164,716     75,130,331     64,457,978       75,154,585     58,341,927  

Efficiency Ratio Calculation (Dollars in Thousands)

                          Nine Months Ended
                          September 30,
    3Q15   2Q15   1Q15   4Q14   3Q14     2015   2014
Non-interest expense   $ 134,266     $ 132,737     $ 139,920     $ 140,504     $ 142,201       $ 406,923     $ 296,278  
Less merger related expenses   319     1,234     8,069     6,494     27,161       9,622     28,329  
Less prepayment fees on interest bearing liabilities           85               85      
Less branch impairment charges   70                       70      
Less loss on low to moderate income real estate investment                             2,124  
Less contingent consideration expense                   10,600           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   (872 )   7     306     315     (38 )     (559 )   514  
Non-interest expense – as adjusted   $ 134,749     $ 131,496     $ 131,460     $ 130,445     $ 104,478       $ 397,705     $ 254,711  
                               
Net interest income   $ 115,969     $ 114,473     $ 113,395     $ 119,811     $ 95,612       $ 343,837     $ 231,012  
Tax equivalent adjustment   7,019     6,676     6,078     6,246     6,087       19,773     17,345  
Net interest income on a fully tax equivalent basis   122,988     121,149     119,473     126,057     101,699       363,610     248,357  
Plus non-interest income   82,251     82,949     81,268     83,678     61,087       246,468     137,627  
Plus tax equivalent adjustment on the increase in cash surrender value of life insurance   459     450     452     466     460       1,361     1,355  
Less net (loss) gain on investment securities   371     (84 )   (460 )   491     (3,246 )     (173 )   (3,016 )
Less net (loss) gain on sale of other assets   1     (7 )   4     3,476     (7 )     (2 )   (24 )
Less gain on extinguishment of debt                   1,895           1,895  
Less increase (decrease) in market value of assets held in trust for deferred compensation   (872 )   7     306     315     (38 )     (559 )   514  
Net interest income plus non-interest income – as adjusted   $ 206,198     $ 204,632     $ 201,343     $ 205,919     $ 164,642       $ 612,173     $ 387,970  
Efficiency ratio   65.35 %   64.26 %   65.29 %   63.35 %   63.46 %     64.97 %   65.65 %
Efficiency ratio (without adjustments)   67.74 %   67.24 %   71.88 %   69.05 %   90.75 %     68.93 %   80.37 %

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

                          Nine Months Ended
                          September 30,
    3Q15   2Q15   1Q15   4Q14   3Q14     2015   2014
Non-interest expense   $ 134,266     $ 132,737     $ 139,920     $ 140,504     $ 142,201       $ 406,923     $ 296,278  
Less merger related expenses   319     1,234     8,069     6,494     27,161       9,622     28,329  
Less prepayment fees on interest bearing liabilities           85               85      
Less branch impairment charges   70                       70      
Less loss on low to moderate income real estate investment                             2,124  
Less contingent consideration expense                   10,600           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   (872 )   7     306     315     (38 )     (559 )   514  
Non-interest expense – as adjusted   134,749     131,496     131,460     130,445     104,478       397,705     254,711  
                               
Non-interest income   82,251     82,949     81,268     83,678     61,087       246,468     137,627  
Less net (loss) gain on investment securities   371     (84 )   (460 )   491     (3,246 )     (173 )   (3,016 )
Less net (loss) gain on sale of other assets   1     (7 )   4     3,476     (7 )     (2 )   (24 )
Less gain on extinguishment of debt                   1,895           1,895  
Less increase (decrease) in market value of assets held in trust for deferred compensation   (872 )   7     306     315     (38 )     (559 )   514  
Non-interest income – as adjusted   82,751     83,033     81,418     79,396     62,483       247,202     138,258  
Less tax equivalent adjustment on the increase in cash surrender value of life insurance   459     450     452     466     460       1,361     1,355  
Net non-interest expense   $ 51,539     $ 48,013     $ 49,590     $ 50,583     $ 41,535       $ 149,142     $ 115,098  
Average assets   $ 15,059,429     $ 14,631,999     $ 14,363,244     $ 14,466,066     $ 12,206,014       $ 14,687,441     $ 10,393,680  
Annualized net non-interest expense to average assets   1.36 %   1.32 %   1.40 %   1.39 %   1.35 %     1.36 %   1.48 %
Annualized net non-interest expense to average assets (without adjustments)   1.37 %   1.38 %   1.66 %   1.56 %   2.64 %     1.46 %   2.04 %


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

                          Nine Months Ended
                          September 30,
    3Q15   2Q15   1Q15   4Q14   3Q14     2015   2014
Non-interest income   $ 82,251     $ 82,949     $ 81,268     $ 83,678     $ 61,087       $ 246,468     $ 137,627  
Plus tax equivalent adjustment on the increase in cash surrender value of life insurance   459     450     452     466     460       1,361     1,355  
Less net (loss) gain on investment securities   371     (84 )   (460 )   491     (3,246 )     (173 )   (3,016 )
Less net (loss) gain on sale of other assets   1     (7 )   4     3,476     (7 )     (2 )   (24 )
Less gain on extinguishment of debt                   1,895           1,895  
Less increase (decrease) in market value of assets held in trust for deferred compensation   (872 )   7     306     315     (38 )     (559 )   514  
Non-interest income – as adjusted   $ 83,210     $ 83,483     $ 81,870     $ 79,862     $ 62,943       $ 248,563     $ 139,613  
                               
Net interest income   $ 115,969     $ 114,473     $ 113,395     $ 119,811     $ 95,612       $ 343,837     $ 231,012  
Tax equivalent adjustment   7,019     6,676     6,078     6,246     6,087       19,773     17,345  
Net interest income on a fully tax equivalent basis   122,988     121,149     119,473     126,057     101,699       363,610     248,357  
Plus non-interest income   82,251     82,949     81,268     83,678     61,087       246,468     137,627  
Plus tax equivalent adjustment on the increase in cash surrender value of life insurance   459     450     452     466     460       1,361     1,355  
Less net (loss) gain on investment securities   371     (84 )   (460 )   491     (3,246 )     (173 )   (3,016 )
Less net (loss) gain on sale of other assets   1     (7 )   4     3,476     (7 )     (2 )   (24 )
Less gain on extinguishment of debt                   1,895           1,895  
Less increase (decrease) in market value of assets held in trust for deferred compensation   (872 )   7     306     315     (38 )     (559 )   514  
Total revenue – as adjusted and on a fully tax equivalent basis   $ 206,198     $ 204,632     $ 201,343     $ 205,919     $ 164,642       $ 612,173     $ 387,970  
                               
Total revenue – unadjusted   $ 198,220     $ 197,422     $ 194,663     $ 203,489     $ 156,699       $ 590,305     $ 368,639  
                               
Core non-interest income to revenues ratio   40.35 %   40.80 %   40.66 %   38.78 %   38.23 %     40.60 %   35.99 %
Non-interest income to revenues ratio (without adjustments)   41.49 %   42.02 %   41.75 %   41.12 %   38.98 %     41.75 %   37.33 %

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):

    3Q15   3Q14     2Q15
    Average
Balance
  Interest   Yield/
Rate
  Average
Balance
  Interest   Yield/
Rate
    Average
Balance
  Interest   Yield/
Rate
Interest Earning Assets:                                      
Loans held for sale   $ 841,663     $ 7,904     3.76 %   $ 313,695     $ 2,826     3.60 %     $ 781,020     $ 6,839     3.50 %
Loans (1) (2) (3):                                      
Commercial-related credits                                      
Commercial   3,372,279     34,481     4.00     2,118,864     23,536     4.35       3,309,519     34,884     4.17  
Commercial loans collateralized by assignment of lease payments   1,674,939     15,647     3.74     1,561,484     14,669     3.76       1,634,583     15,235     3.73  
Real estate commercial   2,568,539     27,558     4.20     2,108,492     24,213     4.49       2,522,473     27,145     4.26  
Real estate construction   210,506     2,431     4.52     170,017     2,565     5.90       191,935     2,388     4.92  
Total commercial-related credits   7,826,263     80,117     4.01     5,958,857     64,983     4.27       7,658,510     79,652     4.11  
Other loans                                      
Real estate residential   566,115     5,152     3.64     405,589     4,581     4.52       512,766     4,785     3.73  
Home equity   226,365     2,298     4.03     251,969     2,549     4.01       233,867     2,301     3.95  
Indirect   325,323     4,017     4.90     274,841     3,647     5.26       286,107     3,769     5.28  
Consumer loans   85,044     807     3.76     69,699     774     4.41       76,189     780     4.11  
Total other loans   1,202,847     12,274     4.05     1,002,098     11,551     4.57       1,108,929     11,635     4.21  
Total loans, excluding purchased credit-impaired loans   9,029,110     92,391     4.06     6,960,955     76,534     4.36       8,767,439     91,287     4.18  
Purchased credit-impaired loans   156,309     3,791     9.62     221,129     4,027     7.23       202,374     4,117     8.16  
Total loans   9,185,419     96,182     4.15     7,182,084     80,561     4.45       8,969,813     95,404     4.27  
Taxable investment securities   1,543,434     9,655     2.50     1,726,352     11,028     2.56       1,545,284     10,002     2.59  
Investment securities exempt from federal income taxes (3)   1,356,702     16,541     4.88     1,087,340     13,908     5.12       1,261,567     15,600     4.95  
Federal funds sold   38         1.00     15,460     14     0.38       126         1.00  
Other interest earning deposits   138,542     89     0.25     341,758     211     0.24       85,935     57     0.27  
Total interest earning assets   $ 13,065,798     $ 130,371     3.96 %   $ 10,666,689     $ 108,548     4.04 %     $ 12,643,745     $ 127,902     4.06 %
Non-interest earning assets   1,993,631             1,539,325               1,988,254          
Total assets   $ 15,059,429             $ 12,206,014               $ 14,631,999          
Interest Bearing Liabilities:                                      
Core funding:                                      
Money market and NOW deposits   $ 4,119,625     $ 1,832     0.18 %   $ 3,518,314     $ 1,469     0.17 %     $ 3,940,201     $ 1,634     0.17 %
Savings deposits   965,060     124     0.05     906,630     128     0.06       972,327     135     0.06  
Certificates of deposit   1,304,516     1,450     0.44     1,411,407     1,375     0.40       1,302,031     1,259     0.39  
Customer repurchase agreements   244,845     114     0.18     210,543     102     0.19       241,942     104     0.17  
Total core funding   6,634,046     3,520     0.21     6,046,894     3,074     0.20       6,456,501     3,132     0.19  
Wholesale funding:                                      
Brokered certificates of deposit (includes fee expense)   427,649     1,696     1.57     417,346     1,643     1.56       412,517     1,526     1.48  
Other borrowings   1,117,166     2,167     0.76     632,163     2,132     1.32       1,078,297     2,095     0.77  
Total wholesale funding   1,544,815     3,863     0.99     1,049,509     3,775     1.33       1,490,814     3,621     0.96  
Total interest bearing liabilities   $ 8,178,861     $ 7,383     0.36 %   $ 7,096,403     $ 6,849     0.38 %     $ 7,947,315     $ 6,753     0.34 %
Non-interest bearing deposits   4,428,065             3,175,512               4,273,931          
Other non-interest bearing liabilities   378,276             267,915               348,242          
Stockholders’ equity   2,074,227             1,666,184               2,062,511          
Total liabilities and stockholders’ equity   $ 15,059,429             $ 12,206,014               $ 14,631,999          
Net interest income/interest rate spread (4)       $ 122,988     3.60 %       $ 101,699     3.66 %         $ 121,149     3.72 %
Taxable equivalent adjustment       7,019             6,087               6,676      
Net interest income, as reported       $ 115,969             $ 95,612               $ 114,473      
Net interest margin (5)           3.52 %           3.56 %             3.63 %
Tax equivalent effect           0.21 %           0.22 %             0.21 %
Net interest margin on a fully tax equivalent basis (5)           3.73 %           3.78 %             3.84 %

(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.

    Nine Months Ended September 30,
    2015   2014
    Average
Balance
  Interest   Yield/
Rate
  Average
Balance
  Interest   Yield/
Rate
Interest Earning Assets:                        
Loans held for sale   $ 760,956     $ 20,528     3.60 %   $ 105,977     $ 2,826     3.56 %
Loans (1) (2) (3):                        
Commercial-related credits                        
Commercial   3,291,515     101,988     4.09     1,550,383     48,670     4.14  
Commercial loans collateralized by assignment of lease payments   1,652,527     46,320     3.74     1,506,332     43,681     3.87  
Real estate commercial   2,543,444     82,251     4.26     1,798,581     59,123     4.33  
Real estate construction   197,970     8,900     5.93     152,813     5,372     4.64  
Total commercial-related credits   7,685,456     239,459     4.11     5,008,109     156,846     4.13  
Other loans                        
Real estate residential   524,349     14,965     3.81     343,718     10,397     4.03  
Home equity   235,516     7,067     4.01     256,101     7,945     4.15  
Indirect   293,111     11,271     5.14     269,344     10,629     5.28  
Consumer loans   77,916     2,384     4.09     65,943     2,175     4.41  
Total other loans   1,130,892     35,687     4.22     935,106     31,146     4.50  
Total loans, excluding purchased credit-impaired loans   8,816,348     275,146     4.17     5,943,215     187,992     4.23  
Purchased credit-impaired loans   199,378     12,845     8.61     164,455     7,169     5.83  
Total loans   9,015,726     287,991     4.27     6,107,670     195,161     4.27  
Taxable investment securities   1,548,369     29,591     2.55     1,516,260     27,968     2.46  
Investment securities exempt from federal income taxes (3)   1,248,978     46,162     4.93     997,128     39,067     5.22  
Federal funds sold   60         1.00     8,605     23     0.37  
Other interest earning deposits   109,074     208     0.25     326,226     601     0.25  
Total interest earning assets   $ 12,683,163     $ 384,480     4.05 %   $ 9,061,866     $ 265,646     3.92 %
Non-interest earning assets   2,004,278             1,331,814          
Total assets   $ 14,687,441             $ 10,393,680          
Interest Bearing Liabilities:                        
Core funding:                        
Money market and NOW accounts   $ 3,999,844     $ 5,062     0.17 %   $ 3,045,178     $ 3,216     0.14 %
Savings accounts   963,291     379     0.05     879,336     334     0.05  
Certificates of deposit   1,341,865     4,160     0.42     1,260,537     3,673     0.40  
Customer repurchase agreements   244,217     337     0.18     195,136     293     0.20  
Total core funding   6,549,217     9,938     0.20     5,380,187     7,516     0.19  
Wholesale funding:                        
Brokered accounts (includes fee expense)   438,626     4,700     1.43     287,931     4,915     2.28  
Other borrowings   977,130     6,232     0.84     368,220     4,858     1.74  
Total wholesale funding   1,415,756     10,932     1.01     656,151     9,773     1.82  
Total interest bearing liabilities   $ 7,964,973     $ 20,870     0.35 %   $ 6,036,338     $ 17,289     0.38 %
Non-interest bearing deposits   4,301,483             2,677,865          
Other non-interest bearing liabilities   362,794             227,261          
Stockholders’ equity   2,058,191             1,452,216          
Total liabilities and stockholders’ equity   $ 14,687,441             $ 10,393,680          
Net interest income/interest rate spread (4)       $ 363,610     3.70 %       $ 248,357     3.54 %
Taxable equivalent adjustment       19,773             17,345      
Net interest income, as reported       $ 343,837             $ 231,012