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MB Financial, Inc. Reports Second Quarter 2012 Net Income Of $22.1 Million, Improved Return On Assets And Return On Equity And Improved Credit Metrics

Core other income increased by $577 thousand from the first quarter of 2012 to the second quarter of 2012. Loan service fees increased due to an increase in loan prepayment fees. Net lease financing increased due to an increase in remarketing revenues. Accretion of FDIC indemnification asset decreased as accretion is recorded based on the FDIC indemnification asset balance, which has declined as we have received loss-share payments. Card fee income increased due primarily to fees earned on prepaid cards and credit cards. Non-core other income was primarily impacted by lower losses recognized on OREO.

Core other income decreased by $2.1 million from the first six months of 2011 to the first six months of 2012 primarily due to a $2.5 million decrease in accretion of FDIC indemnification asset. Accretion is recorded based on the FDIC indemnification asset balance which has declined as we have received loss-share payments. Loan service fees decreased in the first six months of 2012 compared to the same period in 2011 due to a decrease in loan prepayment and exit fees. Net lease financing increased primarily due to an increase in remarketing revenues. Cash surrender value of life insurance decreased as a result of a death benefit recorded in the first six months of 2011. Card fee income increased due primarily to fees earned on prepaid cards and credit cards. Non-core other income was primarily impacted by higher losses recognized on OREO.

Other Expense (in thousands):

    Three Months Ended   Six Months Ended
June 30,   March 31,   December 31,   September 30,   June 30, June 30,   June 30,
  2012       2012     2011     2011       2011     2012     2011
Core other expense:
Salaries and employee benefits $ 40,295 $ 39,928 $ 39,826 $ 38,827 $ 37,657 $ 80,223 $ 75,245
Occupancy and equipment expense 9,188 9,570 8,498 9,092 8,483 18,758 17,877
Computer services and telecommunication expense 3,909 3,653 4,382 3,488 3,570 7,562 7,015
Advertising and marketing expense 1,930 2,066 1,831 1,740 1,748 3,996 3,467
Professional and legal expense 1,503 1,413 1,422 1,647 1,853 2,916 3,078
Other intangible amortization expense 1,251 1,257 1,410 1,414 1,416 2,508 2,841
FDIC insurance premiums 2,010 2,643 2,662 2,272 3,502 4,653 6,930
Other real estate expense, net 424 1,243 1,464 1,181 1,251 1,667 1,649
Other operating expenses   6,473       5,057     7,324     7,352       7,090     11,530     14,145
Total core other expense   66,983       66,830     68,819     67,013       66,570     133,813     132,247
 
Non-core other expense: (1)
Branch impairment charges - - 594 - - - 1,000
Increase (decrease) in market value of assets held
in trust for deferred compensation (A)   (149 )     501     20     (405 )     158     352     345
Total non-core other expense   (149 )     501     614     (405 )     158     352     1,345
 
Total other expense $ 66,834     $ 67,331   $ 69,433   $ 66,608     $ 66,728   $ 134,165   $ 133,592

(1) Letters denote the corresponding line items where these non-core other expense items reside in the consolidated statements of income as follows: A – Salaries and employee benefits.

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