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
Net interest margin ⁽⁵⁾					3.62	%					3.41	%
Tax equivalent effect					0.21	%					0.25	%
Net interest margin on a fully tax equivalent basis ⁽⁵⁾					3.83	%					3.66	%

⁽¹⁾Non-accrual loans are included in average loans.
⁽²⁾Interest income includes amortization of deferred loan origination fees and costs.
⁽³⁾Non-taxable loan and investment income is presented on a fully tax equivalent basis assuming a 35% tax rate.
⁽⁴⁾Interest rate spread represents the difference between the average yield on interest earning assets and the average cost of interest bearing liabilities and is presented on a fully tax equivalent basis.
⁽⁵⁾Net interest margin represents net interest income as a percentage of average interest earning assets.

The table below reflects the impact the acquisition accounting loan discount accretion on Taylor Capital loans had on the loan yield and net interest margin on a fully tax equivalent basis for the three months ended September 30, 2015, September 30, 2014 and June 30, 2015 (dollars in thousands):

	3Q15							3Q14							2Q15
	Average Balance			Interest		Yield		Average Balance			Interest		Yield		Average Balance			Interest		Yield
Loan yield excluding acquisition accounting discount accretion on Taylor Capital loans:
Total loans, as reported	$	9,185,419		$	96,182	4.15	%	$	7,182,084		$	80,561	4.45	%	$	8,969,813		$	95,404	4.27	%
Less acquisition accounting discount accretion on non-PCI loans	(43,899		)	5,875				(35,285		)	5,797				(50,333		)	6,992
Less acquisition accounting discount accretion on PCI loans	(31,745		)	1,533				(18,579		)	377				(34,514		)	960
Total loans, excluding acquisition accounting discount accretion on Taylor Capital loans	$	9,261,063		$	88,774	3.80	%	$	7,235,948		$	74,387	4.08	%	$	9,054,660		$	87,452	3.87	%

Net interest margin on a fully tax equivalent basis, excluding acquisition accounting discount accretion on Taylor Capital loans:
Total interest earning assets, as reported	$	13,065,798		$	122,988	3.73	%	$	10,666,689		$	101,699	3.78	%	$	12,643,745		$	121,149	3.84	%
Less acquisition accounting discount accretion on non-PCI loans	(43,899		)	5,875				(35,285		)	5,797				(50,333		)	6,992
Less acquisition accounting discount accretion on PCI loans	(31,745		)	1,533				(18,579		)	377				(34,514		)	960
Total interest earning assets/net interest margin on a fully tax equivalent basis, excluding acquisition accounting discount accretion on Taylor Capital loans	$	13,141,442		$	115,580	3.49	%	$	10,720,553		$	95,525	3.54	%	$	12,728,592		$	113,197	3.57	%

The table below reflects the impact the acquisition accounting loan discount accretion on Taylor Capital loans had on the loan yield and net interest margin on a fully tax equivalent basis for the nine months ended September 30, 2015 and 2014 (dollars in thousands):

	Nine Months Ended September 30,
	2015							2014
	Average Balance			Interest		Yield		Average Balance			Interest		Yield
Loan yield excluding acquisition accounting discount accretion on Taylor Capital loans:
Total loans, as reported	$	9,015,726		$	287,991	4.27	%	$	6,107,670		$	195,161	4.27	%
Less acquisition accounting discount accretion on non-PCI loans	(50,627		)	20,815				(8,894		)	5,797
Less acquisition accounting discount accretion on PCI loans	(33,772		)	3,121				(4,683		)	377
Total loans, excluding acquisition accounting discount accretion on Taylor Capital loans	$	9,100,125		$	264,055	3.88	%	$	6,121,247		$	188,987	4.13	%

Net interest margin on a fully tax equivalent basis, excluding acquisition accounting discount accretion on Taylor Capital loans:
Total interest earning assets, as reported	$	12,683,163		$	363,610	3.83	%	$	9,061,866		$	248,357	3.66	%
Less acquisition accounting discount accretion on non-PCI loans	(50,627		)	20,815				(8,894		)	5,797
Less acquisition accounting discount accretion on PCI loans	(33,772		)	3,121				(4,683		)	377
Total interest earning assets/net interest margin on a fully tax equivalent basis, excluding acquisition accounting discount accretion on Taylor Capital loans	$	12,767,562		$	339,674	3.56	%	$	9,075,443		$	242,183	3.57	%

Provision for credit losses will be recognized on acquired Taylor Capital loans as they renew and will largely offset the positive impact of the loan discount accretion on non-purchased credit-impaired loans. During the third and second quarters of 2015, a provision for credit losses of approximately $4.1 million and $4.9 million, respectively, was recorded related to acquired Taylor Capital loans.

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

	3Q15		2Q15
Acquisition accounting discount accretion on Taylor Capital loans	$	7,408	$	7,952
Provision for credit losses on Taylor Capital loans	4,133		4,896
Earnings impact of discount accretion and merger related provision	3,275		3,056
Tax expense	1,300		1,213
Earnings impact of discount accretion and merger related provision, net of tax	$	1,975	$	1,843

CONTACT: For Information at MB Financial, Inc. contact:
Berry Allen - Investor Relations
E-Mail: [email protected]