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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 expense in the second quarter of 2012 was consistent with first quarter of 2012. FDIC insurance premiums decreased due to a change in the assessment computation during the second quarter of 2012. Other real estate expense decreased as a result of lower holding costs related to OREO given we have fewer OREO properties. Other operating expenses were unusually low in the first quarter of 2012 as a result of recording a decrease during that period in the clawback liability related to our loss share agreements with the FDIC.

Core other expense increased by $1.6 million from the first six months of 2011 to the first six months of 2012. Salaries and employee benefits expense increased primarily due to annual salary increases and higher health insurance claims. FDIC insurance premiums decreased due to a change in the assessment computation during the second quarter of 2012 and the impact of improved credit quality on the computation. Other operating expenses were favorably impacted in the first half of 2012 by a decrease in the clawback liability related to our loss share agreements with the FDIC recorded during the period. Non-core other expense was primarily impacted by $1.0 million of fixed asset impairment charges due to our decision to close a branch in the first quarter of 2011.

Income Taxes

The Company had income tax expense of $9.0 million for the three months ended June 30, 2012 compared to $8.4 million for the three months ended March 31, 2012. Income tax expense was $17.5 million for the six months ended June 30, 2012 compared to a tax benefit of $11.5 million for the six months ended June 30, 2011. The change was due to the Company’s improvement in pre-tax income.

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):
    June 30,   March 31,   December 31,   September 30,   June 30,
  2012       2012       2011       2011       2011  
  % of   % of   % of   % of   % of
  Amount   Total     Amount   Total     Amount   Total     Amount   Total     Amount   Total
Commercial related credits:
Commercial loans $ 1,079,436 19 % $ 1,040,340 18 % $ 1,113,123 19 % $ 1,042,583 18 % $ 1,108,295 19 %
Commercial loans collateralized by
assignment of lease payments (lease loans) 1,221,199 21 % 1,209,942 21 % 1,208,575 20 % 1,067,191 18 % 1,031,677 17 %
Commercial real estate 1,794,777 31 % 1,877,380 32 % 1,853,788 31 % 1,844,894 32 % 1,863,223 32 %
Construction real estate 150,665   3 % 128,040   2 % 183,789   3 % 210,206   4 % 246,557   4 %
Total commercial related credits 4,246,077   74 % 4,255,702   73 % 4,359,275   73 % 4,164,874   72 % 4,249,752   72 %
Other loans:
Residential real estate 313,137 5 % 309,644 5 % 316,787 5 % 316,305 5 % 317,821 5 %
Indirect vehicle 198,848 3 % 186,736 3 % 187,481 3 % 189,033 4 % 182,536 3 %
Home equity 323,234 6 % 327,450 6 % 336,043 6 % 348,934 6 % 357,181 6 %
Consumer loans 89,115   2 % 89,705   2 % 88,865   2 % 76,025   1 % 75,069   1 %
Total other loans 924,334   16 % 913,535   16 % 929,176   16 % 930,297   16 % 932,607   15 %
Gross loans excluding covered loans 5,170,411 90 % 5,169,237 89 % 5,288,451 89 % 5,095,171 88 % 5,182,359 87 %
Covered loans (1) 552,838   10 % 620,528   11 % 662,544   11 % 718,566   12 % 755,670   13 %
Total loans $ 5,723,249 100 % $ 5,789,765 100 % $ 5,950,995 100 % $ 5,813,737 100 % $ 5,938,029 100 %

(1) Covered loans refer to loans we acquired in FDIC-assisted transactions that are subject to loss-sharing agreements with the FDIC.

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