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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

Below is a reconciliation of the activity in our allowance for credit and loan losses for the periods indicated (dollar amounts 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

Allowance for credit losses, balance at the beginning of period

$ 141,861 $ 147,107 $ 178,410 $ 192,217 $ 193,926 $ 192,217 $ 177,072
Provision for credit losses 8,000 11,500 61,250 40,000 49,000 120,750 246,200
Charge-offs:
Commercial loans (2,932 ) (3,497 ) (7,991 ) (3,151 ) (9,141 ) (17,571 ) (58,077 )

Commercial loans collateralized by assignment of lease payments (lease loans)

(1,373 ) - (93 ) - (43 ) (1,466 ) (1,711 )
Commercial real estate loans (3,793 ) (7,815 ) (55,250 ) (29,775 ) (27,360 ) (96,633 ) (79,828 )
Construction real estate (6,989 ) (6,008 ) (18,826 ) (21,094 ) (17,136 ) (52,917 ) (94,533 )
Residential real estate (860 ) (141 ) (8,080 ) (3,562 ) (1,363 ) (12,643 ) (3,326 )
Indirect vehicle (954 ) (611 ) (553 ) (718 ) (968 ) (2,836 ) (3,199 )
Home equity (2,061 ) (1,605 ) (5,493 ) (1,907 ) (1,364 ) (11,066 ) (4,632 )
Consumer loans (285 ) (475 ) (344 ) (544 ) (428 ) (1,648 ) (1,755 )
Total charge-offs (19,247 ) (20,152 ) (96,630 ) (60,751 ) (57,803 ) (196,780 ) (247,061 )
Recoveries:
Commercial loans 634 1,413 758 2,565 3,842 5,370 8,788

Commercial loans collateralized by assignment of lease payments (lease loans)

1 5 153 66 26 225 184
Commercial real estate loans 747 739 312 1,534 800 3,332 2,070
Construction real estate 3,519 681 2,364 2,026 1,672 8,590 3,170
Residential real estate 9 7 26 7 127 49 184
Indirect vehicle 378 327 369 325 286 1,399 1,163
Home equity 6 151 19 48 250 224 351
Consumer loans 67   83   76   373   91   599   96  
Total recoveries 5,361   3,406   4,077   6,944   7,094   19,788   16,006  
             
Total net charge-offs (13,886 ) (16,746 ) (92,553 ) (53,807 ) (50,709 ) (176,992 ) (231,055 )
 
Allowance for credit losses 135,975 141,861 147,107 178,410 192,217 135,975 192,217
 
Allowance for unfunded credit commitments (1) (9,177 ) (13,251 ) (17,050 ) -   -   (9,177 ) -  
 
Allowance for loan losses (2) $ 126,798   $ 128,610   $ 130,057   $ 178,410   $ 192,217   $ 126,798   $ 192,217  
 
Total loans, excluding loans held for sale $ 5,966,221 $ 5,813,737 $ 5,938,029 $ 6,367,996 $ 6,617,811 $ 5,966,221 $ 6,617,811
Average loans, excluding loans held for sale $ 5,818,425 $ 5,827,181 $ 6,299,990 $ 6,460,508 $ 6,723,840 $ 6,097,291 $ 6,758,776
 

Ratio of allowance for loan losses to total loans, excluding loans held for sale

2.13 % 2.21 % 2.19 % 2.80 % 2.90 % 2.13 % 2.90 %

Ratio of allowance for credit losses to total loans, excluding loans held for sale, and unfunded credit commitments

2.25 % 2.40 % 2.43 % 2.75 % 2.85 % 2.25 % 2.85 %

Net loan charge-offs to average loans, excluding loans held for sale (annualized)

0.95 % 1.14 % 5.89 % 3.38 % 2.99 % 2.90 % 3.42 %
 
(1)   The reserve for unfunded credit commitments (primarily letters of credit) was reclassified from the allowance for loan losses to other liabilities as of June 30, 2011.
(2) Includes $12.7 million and $13.6 million for unfunded credit commitments at March 31, 2011 and December 31, 2010, respectively.
 

The activity in the second quarter of 2011 reflects the previously disclosed sale of certain performing, sub-performing and non-performing loans, which resulted in approximately $87 million in charge-offs and an increase in the provision for losses of approximately $50 million.

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