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MB Financial, Inc. Reports Fourth Quarter 2011 Net Income Of $19.5 Million, Fourth Quarter Loan Growth, Strong Pre-Tax, Pre-Provision Income And Improving Credit Quality

Our net interest margin, on a fully tax equivalent basis, was 3.91% for the fourth quarter of 2011 compared to 3.90% for the third quarter of 2011 and 3.83% for the fourth quarter of 2010. The margin increase from 2010 was due to a decrease in our average cost of funds as a result of an improved deposit mix and downward repricing of interest bearing deposits, as well as an improved interest earning asset mix and a lower level of non-performing loans.

Our net interest margin, on a fully tax equivalent basis, was 3.90% for the year ended December 31, 2011 compared to 3.83% for the year ended December 31, 2010. The margin increase from 2010 was due to a decrease in our average cost of funds as a result of an improved deposit mix and downward repricing of interest bearing deposits, as well as a lower level of non-performing loans.

See the supplemental net interest margin tables for further detail.

Other Income (in thousands):

             
Three Months Ended Year Ended
December 31,   September 30, June 30, March 31, December 31, December 31, December 31,
2011   2011   2011   2011   2010   2011   2010
Core other income:
Loan service fees $ 1,601 $ 2,159 $ 2,812 $ 1,126 $ 1,532 $ 7,698 $ 6,517
Deposit service fees 10,085 9,932 9,023 10,030 9,920 39,070 38,934
Lease financing, net 7,801 6,494 6,861 5,783 7,185 26,939 21,853
Brokerage fees 1,577 1,273 1,615 1,419 1,231 5,884 5,012
Trust and asset management fees 4,166 4,272 4,455 4,431 4,243 17,324 15,037

Increase in cash surrender value of life insurance

944 1,014 1,451 968 930 4,377 3,516
Accretion of FDIC indemnification asset 683 985 1,339 1,831 3,009 4,838 9,678
Card fees 1,096 2,071 2,062 1,788 2,287 7,017 7,057
Other operating income   1,632       1,690       1,979       1,598       1,570       6,899       4,947  
Total core other income   29,585       29,890       31,597       28,974       31,907       120,046       112,551  
 
Non-core other income: (1)

Net gain (loss) on sale of investment securities

411 - 232 (3 ) (4 ) 640 18,648
Net (loss) gain on sale of other assets (87 ) - 13 357 419 283 630
Net gain on sale of loans held for sale (A) - - 1,790 - - 1,790 -

Net loss recognized on other real estate owned (B)

(3,620 ) (2,354 ) (3,628 ) (369 ) (1,656 ) (9,971 ) (8,511 )

Net loss recognized on other real estate owned related to FDIC transactions (B)

(1,858 ) (764 ) (1,017 ) (3 ) (468 ) (3,642 ) (773 )
Acquisition related gains - - - - - - 62,649

Increase (decrease) in market value of assets held in trust for deferred compensation (A)

  20       (405 )     158       187       597       (40 )     562  
Total non-core other income   (5,134 )     (3,523 )     (2,452 )     169       (1,112 )     (10,940 )     73,205  
                                       
Total other income $ 24,451     $ 26,367     $ 29,145     $ 29,143     $ 30,795     $ 109,106     $ 185,756  
 
(1)   Letter denotes the corresponding line items where these non-core other income items reside in the consolidated statements of income as follows: A – Other operating income, B – Net loss recognized on other real estate owned.
 

Core other income was relatively consistent from the third quarter of 2011 to the fourth quarter of 2011. Loan service fees decreased due to less prepayment, exit and letters of credit fees during the fourth quarter of 2011. Net lease financing income increased mainly as a result of an increase in the sales of third party equipment maintenance contracts and related income. Accretion of indemnification asset decreased as a result of the corresponding decrease in the indemnification asset balance during the fourth quarter of 2011. Card fees were down due to the impact of the Durbin Amendment to the Dodd-Frank Act on debit card interchange fees. Non-core other income was impacted by higher losses recognized on other real estate owned.

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