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MB Financial, Inc. Reports Third Quarter 2012 Net Income Of $23.1 Million And An Increase Of The Quarterly Dividend To $0.10 Per Share

(2) Accruing restructured loans consists primarily of residential real estate and home equity loans that have been modified and are performing in accordance with those modified terms as of the dates indicated.

The following table presents data related to non-performing loans by category, excluding loans held for sale and credit-impaired loans that were acquired as part of our FDIC-assisted transactions (dollar amounts in thousands):
  September 30,   June 30,   March 31,   December 31,   September 30,
  2012     2012     2012     2011     2011
 
Commercial and lease $ 22,648 $ 24,402 $ 34,471 $ 36,995 $ 37,644
Commercial real estate 55,387 62,512 70,939 76,551 86,907
Construction real estate 1,225 1,470 1,553 1,145 2,913
Consumer 26,023 25,146 17,727 14,700 13,515
Total non-performing loans $ 105,283 $ 113,530 $ 124,690 $ 129,391 $ 140,979
 

We define potential problem loans as performing loans rated substandard that do not meet the definition of a non-performing loan (See “Asset Quality” section above for non-performing loans). Potential problem loans carry a higher probability of default and require additional attention by management. The following table presents data related to potential problem loans by category, excluding loans held for sale and credit-impaired loans that were acquired as part of our FDIC-assisted transactions (dollar amounts in thousands):
  September 30,   June 30,   March 31,   December 31,   September 30,
  2012     2012     2012     2011     2011
 
Commercial and lease $ 48,933 $ 46,532 $ 49,197 $ 39,193 $ 55,019
Commercial real estate 73,941 82,596 98,834 99,588 108,557
Construction real estate 11,415 11,938 11,409 10,375 15,528
Consumer - - - 600 603
Total non-performing loans $ 134,289 $ 141,066 $ 159,440 $ 149,756 $ 179,707
 

The following table represents a summary of OREO, excluding OREO related to assets acquired in FDIC-assisted transactions (in thousands):
  September 30,   June 30,   March 31,   December 31,   September 30,
2012   2012   2012   2011   2011  
 
Balance at the beginning of quarter $ 49,690 $ 63,077 $ 78,452 $ 87,469 $ 88,185
Transfers in at fair value less estimated costs to sell 63 910 1,751 3,657 15,014
Capitalized OREO costs 978 967 359 552 644
Fair value adjustments (4,648 ) (4,507 ) (4,764 ) (3,733 ) (2,524 )
Net gains on sales of OREO 497 351 416 113 170
Cash received upon disposition (4,153 ) (11,108 ) (13,137 ) (9,606 ) (14,020 )
Balance at the end of quarter $ 42,427   $ 49,690   $ 63,077   $ 78,452   $ 87,469  
 

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   Nine Months Ended
September 30,   June 30,   March 31,   December 31,   September 30,   September 30,   September 30,
  2012       2012       2012       2011       2011       2012       2011  
 
Allowance for credit losses, balance at the beginning of period $ 128,840 $ 133,255 $ 135,975 $ 141,861 $ 147,107 $ 135,975 $ 192,217
Provision for credit losses (13,000 ) - 3,100 8,000 11,500 (9,900 ) 112,750
Charge-offs:
Commercial loans (75 ) (1,451 ) (539 ) (2,932 ) (3,497 ) (2,065 ) (14,639 )
Commercial loans collateralized by
assignment of lease payments (lease loans) - (1,720 ) - (1,373 ) - (1,720 ) (93 )
Commercial real estate loans (2,994 ) (2,415 ) (3,003 ) (3,793 ) (7,815 ) (8,412 ) (92,840 )
Construction real estate (71 ) (444 ) (3,436 ) (6,989 ) (6,008 ) (3,951 ) (45,928 )
Residential real estate (474 ) (1,108 ) (294 ) (860 ) (141 ) (1,876 ) (11,783 )
Indirect vehicle (433 ) (488 ) (715 ) (954 ) (611 ) (1,636 ) (1,882 )
Home equity (1,209 ) (876 ) (1,072 ) (2,061 ) (1,605 ) (3,157 ) (9,005 )
Consumer loans (332 ) (274 ) (258 ) (285 ) (475 ) (864 ) (1,363 )
Total charge-offs (5,588 ) (8,776 ) (9,317 ) (19,247 ) (20,152 ) (23,681 ) (177,533 )
Recoveries:
Commercial loans 306 386 2,038 634 1,413 2,730 4,736
Commercial loans collateralized by
assignment of lease payments (lease loans) 111 93 256 1 5 460 224
Commercial real estate loans 12,893 3,061 162 747 739 16,116 2,585
Construction real estate 752 141 565 3,519 681 1,458 5,071
Residential real estate 8 188 34 9 7 230 40
Indirect vehicle 224 300 311 378 327 835 1,021
Home equity 303 100 20 6 151 423 218
Consumer loans 77   92   111   67   83   280   532  
Total recoveries 14,674   4,361   3,497   5,361   3,406   22,532   14,427  
 
Total net recoveries (charge-offs) 9,086   (4,415 ) (5,820 ) (13,886 ) (16,746 ) (1,149 ) (163,106 )
 
Allowance for credit losses 124,926 128,840 133,255 135,975 141,861 124,926 141,861
 
Allowance for unfunded credit commitments (3,744 ) (7,084 ) (7,824 ) (9,177 ) (13,251 ) (3,744 ) (13,251 )
 
Allowance for loan losses $ 121,182   $ 121,756   $ 125,431   $ 126,798   $ 128,610   $ 121,182   $ 128,610  
 
Total loans, excluding loans held for sale $ 5,624,845 $ 5,723,249 $ 5,789,765 $ 5,950,995 $ 5,813,737 $ 5,624,845 $ 5,813,737
Average loans, excluding loans held for sale $ 5,630,232 $ 5,712,630 $ 5,802,037 $ 5,818,425 $ 5,827,181 $ 5,714,657 $ 6,191,268
 
Ratio of allowance for loan losses to total loans, excluding loans held for sale 2.15 % 2.13 % 2.17 % 2.13 % 2.21 % 2.15 % 2.21 %
 
Net loan (recoveries) charge-offs to average loans, excluding loans held for sale (annualized) (0.64 )% 0.31 % 0.40 % 0.95 % 1.14 % 0.03 % 3.52 %
 

Our allowance for loan losses is comprised of three elements: a general loss reserve, a specific reserve for impaired loans and a reserve for smaller-balance homogenous loans. The following table presents these three elements of our allowance for loan losses (in thousands):
  September 30,   June 30,   March 31,   December 31,   September 30,
  2012     2012     2012     2011     2011
 
General loss reserve $ 95,586 $ 93,904 $ 98,673 $ 102,196 $ 102,752
Specific reserve 11,300 13,674 13,734 10,804 11,416
Smaller-balance homogenous loans reserve 14,296 14,178 13,024 13,798 14,442
Total allowance for loan losses $ 121,182 $ 121,756 $ 125,431 $ 126,798 $ 128,610
 

Although management believes that adequate general, specific and smaller-balance homogenous loan loss allowances have been established, actual losses are dependent upon future events and, as such, further additions to the level of general, specific and smaller-balance homogenous loan loss allowances may become necessary.

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