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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

Core other expense increased by $9.9 million from the year ended December 31, 2010 to the year ended December 31, 2011. Salaries and employee benefits expense increased due to additional employees added in April 2010 in connection with the New Century and Broadway FDIC-assisted acquisitions, problem loan remediation staff added throughout 2010, and increased leasing incentive compensation on higher leasing revenues. FDIC insurance premiums decreased due to lower deposits, a change in the assessment computation during the second quarter of 2011, and the impact of improved credit quality on the computation. Other real estate expense increased as a result of more properties in other real estate owned throughout 2011 compared to 2010. Non-core other expense was primarily impacted by $1.6 million of fixed asset impairment charges due to our decision to close three branches throughout 2011.

Income Taxes

The Company had income tax expense of $7.8 million for the three months ended December 31, 2011 and $5.3 million for the year ended December 31, 2011. The three month and annual tax expenses are calculated based on pre-tax income excluding tax-exempt items. The annual amount also reflects a $2 million increase in deferred tax assets as a result of an increase in the Illinois corporate income tax rate which was enacted and effective in the first quarter of 2011.

LOAN PORTFOLIO

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

               
December 31, September 30, June 30, March 31, December 31,
2011   2011   2011   2011   2010
Amount   % of Total   Amount   % of Total   Amount   % of Total   Amount   % of Total   Amount   % of Total
Commercial related credits:      
Commercial loans $ 1,113,123 19% $ 1,042,583 18% $ 1,108,295 19% $ 1,154,451 18% $ 1,206,984 18%
Commercial loans collateralized by assignment of lease payments (lease loans) 1,208,575 20% 1,067,191 18% 1,031,677 17% 1,038,507 16% 1,053,446 16%
Commercial real estate 1,853,788 31% 1,844,894 32% 1,863,223 32% 2,084,651 33% 2,176,584 33%
Construction real estate 183,789   3% 210,206   4% 246,557   4% 356,579   6% 423,339   6%
Total commercial related credits 4,359,275   73% 4,164,874   72% 4,249,752   72% 4,634,188   73% 4,860,353   73%
Other loans:
Residential real estate 316,787 5% 316,305 5% 317,821 5% 335,423 5% 328,482 5%
Indirect vehicle 187,481 3% 189,033 4% 182,536 3% 175,058 3% 175,664 3%
Home equity 336,043 6% 348,934 6% 357,181 6% 371,108 6% 381,662 6%
Consumer loans 88,865   2% 76,025   1% 75,069   1% 74,585   1% 59,320   1%
Total other loans 929,176   16% 930,297   16% 932,607   15% 956,174   15% 945,128   15%
Gross loans excluding covered loans 5,288,451 89% 5,095,171 88% 5,182,359 87% 5,590,362 88% 5,805,481 88%
Covered loans (1) 677,770   11% 718,566   12% 755,670   13% 777,634   12% 812,330   12%
Total loans $ 5,966,221 100% $ 5,813,737 100% $ 5,938,029 100% $ 6,367,996 100% $ 6,617,811 100%
 
(1)   Covered loans refer to loans we acquired in FDIC-assisted transactions that are subject to loss-sharing agreements with the FDIC.
 

During the second quarter of 2011, we sold certain performing, sub-performing and non-performing loans. The loans sold had an aggregate carrying amount of $281.6 million prior to the transfer to loans held for sale, which was comprised of $160.8 million in commercial real estate loans, $73.7 million in construction real estate loans, $14.5 million in commercial loans and $32.6 million in residential real estate and home equity loans.

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