MB FINANCIAL INC /MD - FORM 8-K - EX-99 - EXHIBIT 99

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8-K - 8-K - MB FINANCIAL INC /MD	form8-kearningsrelease1q14.htm

EXHIBIT 99




				MB Financial, Inc.
				800 West Madison Street
				Chicago, Illinois 60607
				(888) 422-6562
				NASDAQ: MBFI

PRESS RELEASE

For Information at MB Financial, Inc. contact:

Jill York - Vice President and Chief Financial Officer

E-Mail: jyork@mbfinancial.com

FOR IMMEDIATE RELEASE

MB FINANCIAL, INC. REPORTS FIRST QUARTER NET INCOME OF $20.0 MILLION

CHICAGO, April 29, 2014 – MB Financial, Inc. (NASDAQ: MBFI), the holding company for MB Financial Bank, N.A., today announced 2014 first quarter net income of $20.0 million.

Key items include:

Net Interest Margin Increased:


•	Fully taxable equivalent net interest margin was 3.64% for the first quarter of 2014 compared to 3.50% for the prior quarter and 3.59% for the first quarter of 2013.


•	The increase from the fourth quarter of 2013 was due to lower cash balances held during the first quarter of 2014 (approximately ten basis points of net interest margin improvement) as well as higher yields on taxable investment securities (approximately five basis points of net interest margin improvement).


•	The increase from the first quarter of 2013 was due to a lower cost of funds and improved taxable investment securities yields, partially offset by lower loan yields.

Fee Income Declined and Non-interest Expense Improved from the Prior Quarter:


•	Capital markets and international banking fees, treasury management fees and trust and asset management fees all increased from the prior quarter.


•	Leasing revenues declined due to lower equipment remarketing gains and lower fees from the sale of third-party equipment maintenance contracts.


•	Core non-interest expense improved from the prior quarter due to lower salaries and employee benefits expense, lower computer services expense, lower professional and legal expense and a reduction in expenses related to the clawback liability under loss sharing agreements with the FDIC.

Credit Quality Metrics:


•	Our provision for credit losses remained low at approximately $1.2 million for the quarter, but increased from a negative provision of $3.0 million in the prior quarter.


•	Non-performing loans increased during the quarter compared to the first and fourth quarters of 2013 due to a $22.7 million relationship being placed on non-accrual status during the first quarter of 2014.


•	Potential problem loan balances improved from year end and a year ago by $10.8 million and $46.7 million, respectively.


•	Other real estate owned balances improved from year end and a year ago by $2.4 million and $10.5 million, respectively.


•	Included in other operating expenses was a $2.0 million write-off of an investment in low-income housing funds that invested in real estate projects. We view this write-off as a credit cost due to the nature of the investment. See below for additional details.

Balance Sheet Activity - Average Loans and Average Deposits Increased, Low Cost Deposit Flows Strong:


•	Average loans, excluding covered loans, increased approximately $71 million (+1.3%) from the fourth quarter and approximately $142 million (+2.7%) from the first quarter one year ago. Loans, excluding covered loans, at the end of the quarter increased $88 million (+1.7%) from a year ago but decreased $82 million (-1.5%) from year end.

•

Average low cost deposit flows were strong, increasing approximately $76 million (+1.3%) during the first quarter. Low cost deposits at the end of the first quarter increased $161 million (+2.7%) from year end. We typically see low cost deposit outflows during the first quarter. Stable low cost deposits decrease our reliance on wholesale funding sources and allow us to maintain a lower cost of funds.


•	We continue to maintain robust capital and liquidity ratios and are positioned well for completion of our pending merger with Taylor Capital Group, Inc. Cash and interest bearing deposits at our holding company totaled approximately $140 million as of March 31, 2014.

Taylor Capital Group, Inc. Pending Merger Update:

The stockholders of both MB Financial and Taylor Capital approved the merger agreement in the first quarter of 2014. The completion of the merger remains subject to regulatory approvals and the satisfaction of customary closing conditions.

As disclosed in Taylor Capital’s Annual Report on Form 10-K for the year ended December 31, 2013, Taylor Capital has been notified by its regulators that its Cole Taylor Bank subsidiary may be cited with a violation of Section 5 of the Federal Trade Commission Act. The potential violation relates to the account opening process associated with a former deposit program relationship with an organization that provides electronic financial disbursements and payment services to the higher education industry. Cole Taylor Bank exited the relationship in August 2013. As part of the regulatory approval process for the merger, an evaluation of this situation is being conducted by Taylor Capital’s regulators. That evaluation is ongoing and the closing of the pending merger could be delayed beyond June 30, 2014.

RESULTS OF OPERATIONS

First Quarter Results

Net Interest Income

Net interest income on a fully tax equivalent basis decreased $1.0 million from the fourth quarter of 2013 due to two fewer days in the quarter. Our net interest margin on a fully tax equivalent basis for the first quarter of 2014 increased 14 basis points compared to the fourth quarter of 2013 primarily due to lower cash balances held during the first quarter of 2014 (approximately ten basis points of net interest margin improvement). Also positively impacting net interest margin were higher yields on taxable investment securities (approximately five basis points of net interest margin improvement). With the exception of covered loans, which declined by 133 basis points, loan yields were consistent with the prior quarter.

Net interest income on a fully tax equivalent basis decreased slightly from the first quarter of 2013. Our net interest margin on a fully tax equivalent basis for the first quarter of 2014 increased five basis points compared to the first quarter of 2013 due to a lower cost of funds and improved taxable investment securities yields, partially offset by lower loan yields.

See the supplemental net interest margin tables for further detail.

Non-interest Income (in thousands):



	1Q14		4Q13			3Q13		2Q13		1Q13
Core non-interest income:
Key fee initiatives:
Capital markets and international banking service fees	$	978	$	841		$	972	$	939	$	808
Commercial deposit and treasury management fees	7,144		6,545			6,327		6,029		5,966
Lease financing, net	13,196		15,808			14,070		15,102		16,263
Trust and asset management fees	5,207		4,975			4,799		4,874		4,494
Card fees	2,701		2,838			2,745		2,735		2,695
Total key fee initiatives	29,226		31,007			28,913		29,679		30,226

Loan service fees	965		1,214			1,427		1,911		1,011
Consumer and other deposit service fees	2,935		3,481			3,648		3,593		3,246
Brokerage fees	1,325		1,227			1,289		1,234		1,157
Increase in cash surrender value of life insurance	827		848			851		842		844
Accretion of FDIC indemnification asset	31		35			64		100		143
Net gain on sale of loans	59		342			177		506		639
Other operating income	768		641			878		1,039		955
Total core non-interest income	36,136		38,795			37,247		38,904		38,221
Non-core non-interest income: (1)
Net gain (loss) on investment securities	317		(15		)	1		14		(1		)
Net gain (loss) on sale of other assets	7		(323		)	—		—		—
Increase in market value of assets held in trust for deferred compensation (A)	152		588			459		21		483
Total non-core non-interest income	476		250			460		35		482

Total non-interest income	$	36,612	$	39,045		$	37,707	$	38,939	$	38,703


(1)	Letter denotes the corresponding line item where this non-core non-interest income item resides in the consolidated statements of income as follows: A – Other operating income.

Core non-interest income for the first quarter of 2014 decreased approximately 6.9% from the fourth quarter of 2013.


•	Leasing revenues declined due to lower equipment remarketing gains and lower fees from the sale of third-party equipment maintenance contracts.


•	Commercial deposit and treasury management fees increased during the first quarter due to robust new customer activity.


•	Trust and asset management fees increased due to the growth in investment management fees as a result of new customers added and the impact of higher equity values on assets under management and related fee revenue.

Core non-interest income for the first quarter of 2014 decreased approximately 5.5% from the first quarter of 2013.


•	Leasing revenues declined due to lower equipment remarketing gains and lower fees from the sale of third-party equipment maintenance contracts.


•	Commercial deposit and treasury management fees increased in the first quarter due to robust new customer activity.


•	Trust and asset management fees increased due to the growth in investment management fees as a result of new customers added and the impact of higher equity values on assets under management and related fee revenue.

Non-interest Expense (in thousands):



	1Q14		4Q13			3Q13		2Q13			1Q13
Core non-interest expense:
Salaries and employee benefits	$	44,121	$	44,929		$	44,459	$	43,888		$	43,031
Occupancy and equipment expense	9,592		9,269			8,797		9,408			9,404
Computer services and telecommunication expense	5,071		5,509			4,870		4,617			3,887
Advertising and marketing expense	1,991		2,081			1,917		2,167			2,103
Professional and legal expense	1,369		2,340			1,408		1,353			1,295
Other intangible amortization expense	1,240		1,489			1,513		1,538			1,544
Other real estate expense, net	396		175			240		193			139
Other operating expenses	9,220		10,171			10,052		9,083			9,213
Total core non-interest expense	73,000		75,963			73,256		72,247			70,616
Non-core non-interest expense: ⁽¹⁾
Merger related expenses (A)	680		724			1,759		—			—
Net loss (gain) recognized on other real estate owned (B)	122		(831		)	754		(2,130		)	319
Net loss recognized on other real estate owned related to FDIC transactions (B)	65		197			37		115			11
Loss on low-income housing investment (C)	2,028		—			—		—			—
Increase in market value of assets held in trust for deferred compensation (D)	152		588			459		21			483
Total non-core non-interest expense	3,047		678			3,009		(1,994		)	813

Total non-interest expense	$	76,047	$	76,641		$	76,265	$	70,253		$	71,429

⁽¹⁾

Letters denote the corresponding line items where these non-core non-interest expense items reside in the consolidated statements of income as follows: A – Salaries and employee benefits, computer services and telecommunication expense, advertising and marketing expense, professional and legal expense and other operating expenses, B – Net (gain) loss recognized on other real estate owned, C – Other operating expenses, D – Salaries and employee benefits.

Core non-interest expense decreased by $3.0 million, or 3.9%, from the fourth quarter of 2013 to the first quarter of 2014.


•	Professional and legal expense decreased due to lower consulting and legal costs.


•	Other operating expense decreased as a result of a decrease in the clawback liability related to our loss share agreements with the FDIC.


•	Salaries and employee benefits decreased primarily due to a decrease in leasing commissions as a result of lower leasing revenues.

Core non-interest expense increased by $2.4 million, or 3.4%, from the first quarter of 2013 to the first quarter of 2014.


•	Computer services and telecommunication expenses increased due primarily to an increase in spending on IT security, data warehouse, investments in our key fee initiatives, as well as higher transaction volumes in leasing, treasury management and card areas.


•	Salaries and employee benefits increased due to annual salary increases, long-term incentive expense, taxes and temporary staffing needs.

Non-core non-interest expense for the first quarter of 2014 increased from the preceding quarter primarily due to a write-off of an investment in low-income housing funds that invested in real estate projects. This investment was made in 2006 as a community development initiative. The extended slow real estate recovery in some low income areas of Chicago negatively impacted this investment.

LOAN PORTFOLIO

The following table sets forth the composition of the loan portfolio (excluding loans held for sale) based on quarterly average balances for the periods indicated (dollars in thousands):



	1Q14				4Q13				3Q13				2Q13				1Q13
	Amount		% of Total		Amount		% of Total		Amount		% of Total		Amount		% of Total		Amount		% of Total
Commercial related credits:
Commercial loans	$	1,232,562	22	%	$	1,167,924	21	%	$	1,166,887	21	%	$	1,206,740	21	%	$	1,205,903	21	%
Commercial loans collateralized by assignment of lease payments (lease loans)	1,479,998		26		1,468,257		26		1,429,169		26		1,340,854		25		1,300,818		23
Commercial real estate	1,631,041		29		1,629,270		29		1,652,339		30		1,716,170		30		1,730,051		31
Construction real estate	140,920		3		141,041		3		128,115		2		133,705		2		113,573		2
Total commercial related credits	4,484,521		80		4,406,492		79		4,376,510		79		4,397,469		78		4,350,345		77
Other loans:
Residential real estate	311,466		5		315,303		5		307,555		5		306,978		5		312,748		6
Indirect vehicle	263,510		5		260,918		5		250,003		5		231,577		5		212,153		4
Home equity	263,283		5		271,898		5		277,122		5		286,640		5		298,061		5
Consumer loans	62,616		1		60,054		1		61,950		1		70,603		1		70,364		1
Total other loans	900,875		16		908,173		16		896,630		16		895,798		16		893,326		16
Gross loans excluding covered loans	5,385,396		96		5,314,665		95		5,273,140		95		5,293,267		94		5,243,671		93
Covered loans (1)	221,481		4		258,094		5		281,896		5		335,148		6		424,688		7
Total loans	$	5,606,877	100	%	$	5,572,759	100	%	$	5,555,036	100	%	$	5,628,415	100	%	$	5,668,359	100	%


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

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



	3/31/2014				12/31/2013				9/30/2013				6/30/2013				3/31/2013
	Amount		% of Total		Amount		% of Total		Amount		% of Total		Amount		% of Total		Amount		% of Total
Commercial related credits:
Commercial loans	$	1,267,398	23	%	$	1,281,377	22	%	$	1,169,009	21	%	$	1,198,862	22	%	$	1,207,638	21	%
Commercial loans collateralized by assignment of lease payments (lease loans)	1,472,621		27		1,494,188		26		1,468,814		26		1,422,901		25		1,347,666		24
Commercial real estate	1,623,509		29		1,647,700		29		1,638,368		29		1,710,964		30		1,743,329		30
Construction real estate	132,997		2		141,253		3		136,146		2		121,420		2		101,581		2
Total commercial related credits	4,496,525		81		4,564,518		80		4,412,337		78		4,454,147		79		4,400,214		77
Other loans:
Residential real estate	309,137		5		314,440		5		311,256		6		305,710		5		312,804		5
Indirect vehicle	266,044		5		262,632		5		257,740		5		242,964		5		220,739		4
Home equity	258,120		5		268,289		5		274,484		5		281,334		5		291,190		5
Consumer loans	64,812		1		66,952		1		57,418		1		75,476		1		81,932		2
Total other loans	898,113		16		912,313		16		900,898		17		905,484		16		906,665		16
Gross loans excluding covered loans	5,394,638		97		5,476,831		96		5,313,235		95		5,359,631		95		5,306,879		93
Covered loans (1)	173,677		3		235,720		4		273,497		5		308,556		5		400,789		7
Total loans	$	5,568,315	100	%	$	5,712,551	100	%	$	5,586,732	100	%	$	5,668,187	100	%	$	5,707,668	100	%


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

ASSET QUALITY

The following table presents a summary of classified assets (excluding loans held for sale, credit-impaired loans and other real estate owned that were acquired as part of our FDIC-assisted transactions) as of the dates indicated (dollars in thousands):



	3/31/2014			12/31/2013			9/30/2013			6/30/2013			3/31/2013
Non-performing loans:
Non-accrual loans (1)	$	118,023		$	106,115		$	102,042		$	112,926		$	108,765
Loans 90 days or more past due, still accruing interest	747			446			410			2,322			5,193
Total non-performing loans	118,770			106,561			102,452			115,248			113,958
Other real estate owned	20,928			23,289			31,356			32,993			31,462
Repossessed assets	772			840			861			749			757
Total non-performing assets	140,470			130,690			134,669			148,990			146,177
Potential problem loans (2)	68,785			79,589			96,405			131,746			115,451
Total classified assets	$	209,255		$	210,279		$	231,074		$	280,736		$	261,628

Total allowance for loan losses	$	106,752		$	111,746		$	118,031		$	123,685		$	121,802
Accruing restructured loans (3)	25,797			29,430			29,911			28,270			21,630
Total non-performing loans to total loans	2.13		%	1.87		%	1.83		%	2.03		%	2.00		%
Total non-performing assets to total assets	1.49			1.36			1.45			1.59			1.56
Allowance for loan losses to non-performing loans	89.88			104.87			115.21			107.32			106.88


(1)	Includes $15.6 million, $25.0 million, $22.3 million, $20.9 million and $26.3 million of restructured loans on non-accrual status at March 31, 2014, December 31, 2013, September 30, 2013, June 30, 2013 and March 31, 2013, respectively.


(2)	We define potential problem loans as loans rated substandard that do not meet the definition of a non-performing loan. Potential problem loans carry a higher probability of default and require additional attention by management.


(3)	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 increase in accruing restructured loans in the second quarter of 2013 was primarily a result of non-accrual loans upgraded to accrual status due to continued performance.

Non-performing loans increased during the quarter compared to the first and fourth quarters of 2013 due to a $22.7 million relationship being placed on non-accrual status during the first quarter of 2014. We believe the relationship is well collateralized and minimal additional allowance was required when the relationship migrated to non-performing status during the quarter.

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) as of the dates indicated (in thousands):



	3/31/2014		12/31/2013		9/30/2013		6/30/2013		3/31/2013
Commercial and lease	$	42,532	$	22,348	$	22,293	$	25,968	$	22,247
Commercial real estate	49,541		58,292		54,276		62,335		57,604
Construction real estate	782		475		496		519		1,025
Consumer related	25,915		25,446		25,387		26,426		33,082
Total non-performing loans	$	118,770	$	106,561	$	102,452	$	115,248	$	113,958

The following table represents a summary of other real estate owned (excluding other real estate owned related to assets acquired in FDIC-assisted transactions) as of the dates indicated (in thousands):



	3/31/2014			12/31/2013			9/30/2013			6/30/2013			3/31/2013
Balance at the beginning of quarter	$	23,289		$	31,356		$	32,993		$	31,462		$	36,977
Transfers in at fair value less estimated costs to sell	539			104			1,846			3,503			711
Capitalized other real estate owned costs	—			21			45			8			—
Fair value adjustments	(140		)	(176		)	(741		)	1,170			(349		)
Net gains (losses) on sales of other real estate owned	18			1,007			(13		)	960			30
Cash received upon disposition	(2,778		)	(9,023		)	(2,774		)	(4,110		)	(5,907		)
Balance at the end of quarter	$	20,928		$	23,289		$	31,356		$	32,993		$	31,462

Below is a reconciliation of the activity in our allowance for credit and loan losses for the periods indicated (dollars in thousands):



	1Q14			4Q13			3Q13			2Q13			1Q13
Allowance for credit losses, balance at the beginning of period	$	113,462		$	119,725		$	125,497		$	124,733		$	128,279
Provision for credit losses	1,150			(3,000		)	(3,304		)	500			—
Charge-offs:
Commercial loans	90			676			1,686			433			911
Commercial loans collateralized by assignment of lease payments (lease loans)	—			—			—			—			—
Commercial real estate loans	7,156			2,386			1,236			1,978			1,917
Construction real estate	56			125			26			747			82
Residential real estate	265			722			713			399			962
Home equity	619			1,145			437			1,323			787
Indirect vehicle	920			981			572			629			729
Consumer loans	495			572			485			451			565
Total charge-offs	9,601			6,607			5,155			5,960			5,953
Recoveries:
Commercial loans	1,628			1,348			579			777			452
Commercial loans collateralized by assignment of lease payments (lease loans)	—			—			—			987			144
Commercial real estate loans	485			672			966			3,647			740
Construction real estate	99			789			420			131			276
Residential real estate	519			18			48			199			214
Home equity	133			152			228			100			114
Indirect vehicle	442			300			372			324			415
Consumer loans	78			65			74			59			52
Total recoveries	3,384			3,344			2,687			6,224			2,407
Total net charge-offs (recoveries)	6,217			3,263			2,468			(264		)	3,546
Allowance for credit losses	108,395			113,462			119,725			125,497			124,733
Allowance for unfunded credit commitments	(1,643		)	(1,716		)	(1,694		)	(1,812		)	(2,931		)
Allowance for loan losses	$	106,752		$	111,746		$	118,031		$	123,685		$	121,802

Total loans, excluding loans held for sale	$	5,568,315		$	5,712,551		$	5,586,732		$	5,668,187		$	5,707,668
Average loans, excluding loans held for sale	5,606,877			5,572,759			5,555,036			5,628,415			5,668,359
Ratio of allowance for loan losses to total loans, excluding loans held for sale	1.92		%	1.96		%	2.11		%	2.18		%	2.13		%
Net loan charge-offs (recoveries) to average loans, excluding loans held for sale (annualized)	0.45			0.23			0.18			(0.02		)	0.25

The following table presents the three elements of our allowance for loan losses (in thousands):



	3/31/2014		12/31/2013		9/30/2013		6/30/2013		3/31/2013
Commercial related loans:
General reserve	$	75,695	$	78,270	$	87,112	$	87,836	$	92,433
Specific reserve	11,325		12,834		12,378		16,679		12,137
Consumer related reserve	19,732		20,642		18,541		19,170		17,232
Total allowance for loan losses	$	106,752	$	111,746	$	118,031	$	123,685	$	121,802

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

INVESTMENT SECURITIES

The following table sets forth, by type, the fair value and amortized cost of our investment securities, excluding FHLB and FRB stock, as well as the unrealized gain of our investment securities available for sale (in thousands):



	3/31/2014			12/31/2013			9/30/2013			6/30/2013			3/31/2013
Securities available for sale:
Fair value
Government sponsored agencies and enterprises	$	51,836		$	52,068		$	52,527		$	33,935		$	40,949
States and political subdivisions	19,350			19,143			19,312			684,710			719,761
Mortgage-backed securities	726,439			754,174			744,722			701,201			842,605
Corporate bonds	273,853			283,070			263,021			215,256			197,675
Equity securities	10,572			10,457			10,541			10,570			11,179
Total fair value	$	1,082,050		$	1,118,912		$	1,090,123		$	1,645,672		$	1,812,169

Amortized cost
Government sponsored agencies and enterprises	$	50,291		$	50,486		$	50,678		$	32,050		$	38,478
States and political subdivisions	19,285			19,398			19,461			669,791			680,978
Mortgage-backed securities	717,548			747,306			736,070			690,681			827,384
Corporate bonds	272,490			284,083			265,293			219,362			197,162
Equity securities	10,703			10,649			10,574			10,560			10,820
Total amortized cost	$	1,070,317		$	1,111,922		$	1,082,076		$	1,622,444		$	1,754,822

Unrealized gain
Government sponsored agencies and enterprises	$	1,545		$	1,582		$	1,849		$	1,885		$	2,471
States and political subdivisions	65			(255		)	(149		)	14,919			38,783
Mortgage-backed securities	8,891			6,868			8,652			10,520			15,221
Corporate bonds	1,363			(1,013		)	(2,272		)	(4,106		)	513
Equity securities	(131		)	(192		)	(33		)	10			359
Total unrealized gain	$	11,733		$	6,990		$	8,047		$	23,228		$	57,347

Securities held to maturity, at cost:
States and political subdivisions	$	940,610		$	932,955		$	941,273		$	282,655		$	262,310
Mortgage-backed securities	248,082			249,578			252,271			253,779			255,475
Total amortized cost	$	1,188,692		$	1,182,533		$	1,193,544		$	536,434		$	517,785

Securities of states and political subdivisions with an approximate fair value of $656.6 million were transferred from available for sale to held to maturity during the third quarter of 2013, which is the new cost basis.

We do not have any meaningful direct or indirect holdings of subprime residential mortgage loans, home equity lines of credit, or any Fannie Mae or Freddie Mac preferred or common equity securities in our investment securities portfolio. Additionally, more than 95% of our mortgage-backed securities are agency guaranteed.

DEPOSIT MIX

The following table shows the composition of deposits based on quarterly average balances for the periods indicated (dollars in thousands):



	1Q14				4Q13				3Q13				2Q13				1Q13
	Amount		% of Total		Amount		% of Total		Amount		% of Total		Amount		% of Total		Amount		% of Total
Low cost deposits:
Noninterest bearing deposits	$	2,372,866	32	%	$	2,352,901	32	%	$	2,258,357	31	%	$	2,179,284	30	%	$	2,145,058	29	%
Money market and NOW accounts	2,727,620		37		2,685,343		36		2,695,479		37		2,675,189		36		2,737,494		36
Savings accounts	862,197		12		848,734		12		844,647		11		840,154		11		822,214		11
Total low cost deposits	5,962,683		81		5,886,978		80		5,798,483		79		5,694,627		77		5,704,766		76
Certificates of deposit:
Certificates of deposit	1,210,189		16		1,250,049		17		1,309,539		17		1,406,693		19		1,512,600		20
Brokered deposit accounts	223,926		3		229,635		3		263,448		4		294,277		4		294,295		4
Total certificates of deposit	1,434,115		19		1,479,684		20		1,572,987		21		1,700,970		23		1,806,895		24
Total deposits	$	7,396,798	100	%	$	7,366,662	100	%	$	7,371,470	100	%	$	7,395,597	100	%	$	7,511,661	100	%

Average low cost deposits increased by $75.7 million (+1.3%) and $257.9 million (+4.5%) from the fourth and first quarters of 2013, respectively, to the first quarter of 2014, driven by growth in noninterest bearing deposits. Our deposit mix improved over the past twelve months as low cost deposits now comprise 81% of total deposits at March 31, 2014 compared to 76% at March 31, 2013.

The following table shows the composition of deposits as of the dates indicated (dollars in thousands):



	3/31/2014				12/31/2013				9/30/2013				6/30/2013				3/31/2013
	Amount		% of Total		Amount		% of Total		Amount		% of Total		Amount		% of Total		Amount		% of Total
Low cost deposits:
Noninterest bearing deposits	$	2,435,868	32	%	$	2,375,863	32	%	$	2,269,367	31	%	$	2,230,384	30	%	$	2,067,310	28	%
Money market and NOW accounts	2,772,766		37		2,682,419		36		2,680,127		37		2,718,989		37		2,778,916		37
Savings accounts	865,910		12		855,394		12		843,671		12		845,742		11		833,251		11
Total low cost deposits	6,074,544		81		5,913,676		80		5,793,165		80		5,795,115		78		5,679,477		76
Certificates of deposit:
Certificates of deposit	1,188,896		16		1,243,433		17		1,266,989		17		1,357,777		18		1,478,039		20
Brokered deposit accounts	222,307		3		224,150		3		238,532		3		292,504		4		294,390		4
Total certificates of deposit	1,411,203		19		1,467,583		20		1,505,521		20		1,650,281		22		1,772,429		24
Total deposits	$	7,485,747	100	%	$	7,381,259	100	%	$	7,298,686	100	%	$	7,445,396	100	%	$	7,451,906	100	%

CAPITAL

Tangible book value per common share increased to $16.43 at March 31, 2014 compared to $15.57 a year ago primarily due to retained net income less dividends. Our regulatory capital ratios remain strong. MB Financial Bank, N.A. was categorized as “well capitalized” at March 31, 2014 under the Prompt Corrective Action (“PCA”) provisions.

FORWARD-LOOKING STATEMENTS

When used in this press release and in reports filed with or furnished to the Securities and Exchange Commission, in other press releases or other public stockholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases “believe,” “will,” “should,” “will likely result,” “are expected to,” “will continue” “is anticipated,” “estimate,” “project,” “plans,” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date made. These statements may relate to our future financial performance, strategic plans or objectives, revenues or earnings projections, or other financial items. By their nature, these statements are subject to numerous uncertainties that could cause actual results to differ materially from those anticipated in the statements.

Important factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to, the following: (1) expected revenues, cost savings, synergies and other benefits from the pending Taylor Capital merger and our other merger and acquisition activities might not be realized within the anticipated time frames or at all, and costs or difficulties relating to integration matters, including but not limited to, customer and employee retention, might be greater than expected; (2) the possibility that the requisite regulatory approvals for the pending Taylor Capital merger might not be obtained; (3) the credit risks of lending activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses, which could necessitate additional provisions for loan losses; (4) results of examinations by the Office of Comptroller of Currency, the Board of Governors of the Federal Reserve System and other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our allowance for loan losses or write-down assets; (5) competitive pressures among depository institutions; (6) interest rate movements and their impact on customer behavior and net interest margin; (7) the impact of repricing and competitors’ pricing initiatives on loan and deposit products; (8) fluctuations in real estate values; (9) the ability to adapt successfully to technological changes to meet customers’ needs and developments in the market place; (10) our ability to realize the residual values of our direct finance, leveraged, and operating leases; (11) our ability to access cost-effective funding; (12) changes in financial markets; (13) changes in economic conditions in general and in the Chicago metropolitan area in particular; (14) the costs, effects and outcomes of litigation; (15) new legislation or regulatory changes, including but not limited to, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act") and regulations adopted thereunder, changes in capital requirements pursuant to the Dodd-Frank Act and the implementation of the Basel III capital standards, other governmental initiatives affecting the financial services industry and changes in federal and/or state tax laws or interpretations thereof by taxing authorities; (16) changes in accounting principles, policies or guidelines; (17) our future acquisitions of other depository institutions or lines of business; and (18) future goodwill impairment due to changes in our business, changes in market conditions or other factors.

We do not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date on which the forward-looking statement is made.

TABLES TO FOLLOW

MB FINANCIAL, INC. & SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited)

As of the dates indicated

(Dollars in thousands)



	3/31/2014			12/31/2013			9/30/2013			6/30/2013			3/31/2013
ASSETS
Cash and due from banks	$	268,803		$	205,193		$	215,017		$	152,302		$	131,146
Interest earning deposits with banks	244,819			268,266			41,700			280,618			108,885
Total cash and cash equivalents	513,622			473,459			256,717			432,920			240,031
Federal funds sold	7,500			42,950			47,500			7,500			—
Investment securities:
Securities available for sale, at fair value	1,082,050			1,118,912			1,090,123			1,645,672			1,812,169
Securities held to maturity, at amortized cost	1,188,692			1,182,533			1,193,544			536,434			517,785
Non-marketable securities - FHLB and FRB Stock	51,432			51,417			50,870			50,870			52,434
Total investment securities	2,322,174			2,352,862			2,334,537			2,232,976			2,382,388
Loans held for sale	802			629			1,120			2,528			3,030
Loans:
Total loans, excluding covered loans	5,394,638			5,476,831			5,313,235			5,359,631			5,306,879
Covered loans	173,677			235,720			273,497			308,556			400,789
Total loans	5,568,315			5,712,551			5,586,732			5,668,187			5,707,668
Less: Allowance for loan losses	106,752			111,746			118,031			123,685			121,802
Net loans	5,461,563			5,600,805			5,468,701			5,544,502			5,585,866
Lease investments, net	122,589			131,089			112,491			113,958			117,744
Premises and equipment, net	221,711			221,065			220,574			219,783			219,662
Cash surrender value of life insurance	131,008			130,181			129,332			130,565			129,723
Goodwill	423,369			423,369			423,369			423,369			423,369
Other intangibles	22,188			23,428			24,917			26,430			27,968
Other real estate owned, net	20,928			23,289			31,356			32,993			31,462
Other real estate owned related to FDIC transactions	22,682			20,472			24,792			19,014			20,011
FDIC indemnification asset	8,055			11,675			11,074			16,337			29,197
Other assets	159,112			186,154			171,138			166,784			175,379
Total assets	$	9,437,303		$	9,641,427		$	9,257,618		$	9,369,659		$	9,385,830
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits:
Noninterest bearing	$	2,435,868		$	2,375,863		$	2,269,367		$	2,230,384		$	2,067,310
Interest bearing	5,049,879			5,005,396			5,029,319			5,215,012			5,384,596
Total deposits	7,485,747			7,381,259			7,298,686			7,445,396			7,451,906
Short-term borrowings	189,872			493,389			240,600			230,547			224,379
Long-term borrowings	65,664			62,159			62,428			62,786			64,019
Junior subordinated notes issued to capital trusts	152,065			152,065			152,065			152,065			152,065
Accrued expenses and other liabilities	200,175			225,873			194,371			182,784			198,658
Total liabilities	8,093,523			8,314,745			7,948,150			8,073,578			8,091,027
Stockholders' Equity
Common stock	553			551			551			550			550
Additional paid-in capital	740,245			738,053			736,294			736,281			734,057
Retained earnings	595,301			581,998			564,779			547,116			527,332
Accumulated other comprehensive income	10,362			8,383			9,918			14,231			34,928
Treasury stock	(4,132		)	(3,747		)	(3,525		)	(3,558		)	(3,529		)
Controlling interest stockholders' equity	1,342,329			1,325,238			1,308,017			1,294,620			1,293,338
Noncontrolling interest	1,451			1,444			1,451			1,461			1,465
Total stockholders' equity	1,343,780			1,326,682			1,309,468			1,296,081			1,294,803
Total liabilities and stockholders' equity	$	9,437,303		$	9,641,427		$	9,257,618		$	9,369,659		$	9,385,830

MB FINANCIAL, INC. & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per share data) (Unaudited)



	1Q14		4Q13			3Q13			2Q13			1Q13
Interest income:
Loans	$	56,244	$	58,053		$	60,115		$	59,581		$	60,793
Investment securities:
Taxable	8,146		7,334			6,330			6,280			6,140
Nontaxable	8,067		8,166			8,175			8,163			8,060
Federal funds sold	5		6			7			2			—
Other interest earning accounts	113		270			193			92			135
Total interest income	72,575		73,829			74,820			74,118			75,128
Interest expense:
Deposits	3,769		3,966			4,433			5,132			5,709
Short-term borrowings	100		227			112			116			167
Long-term borrowings and junior subordinated notes	1,378		1,373			1,367			1,390			1,567
Total interest expense	5,247		5,566			5,912			6,638			7,443
Net interest income	67,328		68,263			68,908			67,480			67,685
Provision for credit losses	1,150		(3,000		)	(3,304		)	500			—
Net interest income after provision for credit losses	66,178		71,263			72,212			66,980			67,685
Non-interest income:
Capital markets and international banking service fees	978		841			972			939			808
Commercial deposit and treasury management fees	7,144		6,545			6,327			6,029			5,966
Lease financing, net	13,196		15,808			14,070			15,102			16,263
Trust and asset management fees	5,207		4,975			4,799			4,874			4,494
Card fees	2,701		2,838			2,745			2,735			2,695
Loan service fees	965		1,214			1,427			1,911			1,011
Consumer and other deposit service fees	2,935		3,481			3,648			3,593			3,246
Brokerage fees	1,325		1,227			1,289			1,234			1,157
Net gain (loss) on securities available for sale	317		(15		)	1			14			(1		)
Increase in cash surrender value of life insurance	827		848			851			842			844
Net gain (loss) on sale of other assets	7		(323		)	—			—			—
Accretion of FDIC indemnification asset	31		35			64			100			143
Net gain on sale of loans	59		342			177			506			639
Other operating income	920		1,229			1,337			1,060			1,438
Total non-interest income	36,612		39,045			37,707			38,939			38,703
Non-interest expense:
Salaries and employee benefits	44,377		45,517			44,918			43,909			43,514
Occupancy and equipment expense	9,592		9,269			8,797			9,408			9,404
Computer services and telecommunication expense	5,084		5,509			4,870			4,617			3,887
Advertising and marketing expense	2,081		2,085			1,917			2,167			2,103
Professional and legal expense	1,779		3,057			3,102			1,353			1,295
Other intangible amortization expense	1,240		1,489			1,513			1,538			1,544
Net loss (gain) recognized on other real estate owned	187		(634		)	791			(2,015		)	330
Other real estate expense, net	396		175			240			193			139
Other operating expenses	11,311		10,174			10,117			9,083			9,213
Total non-interest expense	76,047		76,641			76,265			70,253			71,429
Income before income taxes	26,743		33,667			33,654			35,666			34,959
Income tax expense	6,774		9,811			9,254			10,373			10,053
Net income	$	19,969	$	23,856		$	24,400		$	25,293		$	24,906



	1Q14		4Q13		3Q13		2Q13		1Q13
Common share data:
Basic earnings per common share	$	0.37	$	0.44	$	0.45	$	0.46	$	0.46
Diluted earnings per common share	0.36		0.43		0.44		0.46		0.46
Weighted average common shares outstanding for basic earnings per common share	54,639,951		54,622,584		54,565,089		54,436,043		54,411,806
Weighted average common shares outstanding for diluted earnings per common share	55,265,188		55,237,160		55,130,653		54,868,075		54,736,644



Selected Financial Data:
	1Q14			4Q13			3Q13			2Q13			1Q13
Performance Ratios:
Annualized return on average assets	0.86		%	0.99		%	1.05		%	1.09		%	1.07		%
Annualized return on average equity	6.07			7.19			7.46			7.82			7.89
Annualized cash return on average tangible equity⁽¹⁾	9.39			11.23			11.74			12.31			12.53
Net interest rate spread	3.51			3.37			3.52			3.46			3.44
Cost of funds⁽²⁾	0.27			0.27			0.30			0.34			0.38
Efficiency ratio⁽³⁾	66.67			67.12			65.11			64.26			63.10
Annualized net non-interest expense to average assets⁽⁴⁾	1.58			1.52			1.52			1.42			1.37
Core non-interest income to revenues ⁽⁵⁾	33.41			34.68			33.51			35.01			34.56
Net interest margin	3.36			3.23			3.37			3.33			3.32
Tax equivalent effect	0.28			0.27			0.29			0.28			0.27
Net interest margin - fully tax equivalent basis⁽⁶⁾	3.64			3.50			3.66			3.61			3.59
Loans to deposits	74.39			77.39			76.54			76.13			76.59
Asset Quality Ratios:
Non-performing loans⁽⁷⁾ to total loans	2.13		%	1.87		%	1.83		%	2.03		%	2.00		%
Non-performing assets⁽⁷⁾ to total assets	1.49			1.36			1.45			1.59			1.56
Allowance for loan losses to non-performing loans⁽⁷⁾	89.88			104.87			115.21			107.32			106.88
Allowance for loan losses to total loans	1.92			1.96			2.11			2.18			2.13
Net loan charge-offs (recoveries) to average loans (annualized)	0.45			0.23			0.18			(0.02		)	0.25
Capital Ratios:
Tangible equity to tangible assets⁽⁸⁾	10.07		%	9.65		%	9.87		%	9.58		%	9.54		%
Tangible common equity to risk weighted assets⁽⁹⁾	13.82			13.27			13.40			13.23			13.29
Book value per common share⁽¹⁰⁾	$	24.37		$	24.14		$	23.82		$	23.63		$	23.63
Less: goodwill and other intangible assets, net of benefit, per common share	7.94			7.98			7.99			8.03			8.06
Tangible book value per common share⁽¹¹⁾	$	16.43		$	16.16		$	15.83		$	15.60		$	15.57

Total capital (to risk-weighted assets)	17.09		%	16.53		%	16.70		%	16.48		%	16.22		%
Tier 1 capital (to risk-weighted assets)	15.84			15.28			15.44			15.22			14.96
Tier 1 capital (to average assets)	11.65			11.22			11.39			11.19			10.74
Tier 1 common capital (to risk-weighted assets)	13.59			13.07			13.17			12.94			12.66


(1)	Net cash flow available to common stockholders (net income available to common stockholders, plus other intangibles amortization expense, net of tax benefit) divided by average tangible equity (average equity less average goodwill and average other intangibles, net of tax benefit).


(2)	Equals total interest expense divided by the sum of average interest bearing liabilities and noninterest bearing deposits.


(3)	Equals total non-interest expense excluding non-core items divided by the sum of net interest income on a fully tax equivalent basis, total non-interest income less non-core items, and tax equivalent adjustment on the increase in cash surrender value of life insurance.


(4)	Equals total non-interest expense excluding non-core items less total non-interest income excluding non-core items, and including tax equivalent adjustment on the increase in cash surrender value of life insurance divided by average assets.


(5)	Equals total non-interest income excluding non-core items and tax equivalent adjustment on the increase in cash surrender value of life insurance divided by the sum of net interest income on a fully tax equivalent basis, total non-interest income less non-core items, and tax equivalent adjustment on the increase in cash surrender value of life insurance.


(6)	Represents net interest income on a fully tax equivalent basis assuming a 35% tax rate, as a percentage of average interest earning assets.


(7)	Non-performing loans excludes purchased credit-impaired loans and loans held for sale. Non-performing assets excludes purchased credit-impaired loans, loans held for sale, and other real estate owned related to FDIC transactions.


(8)	Equals total ending stockholders’ equity less goodwill and other intangibles, net of tax benefit, divided by total assets less goodwill and other intangibles, net of tax benefit.


(9)	Equals total ending common stockholders’ equity less goodwill and other intangibles, net of tax benefit, divided by total risk-weighted assets.


(10)	Equals total ending stockholders’ equity divided by common shares outstanding.


(11)	Equals total ending stockholders’ equity less goodwill and other intangibles, net of tax benefit, divided by common shares outstanding.

NON-GAAP FINANCIAL INFORMATION

This press release contains certain financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (GAAP). These measures include core non-interest income, core non-interest income to revenues (with non-core items excluded from both core non-interest income and revenues), core non-interest expense, non-core non-interest income and non-core non-interest expense, net interest income on a fully tax equivalent basis, net interest margin on a fully tax equivalent basis, efficiency ratio and the ratio of annualized net non-interest expense to average assets with net gains and losses on investment securities, net gains and losses on sale of other assets, and increase in market value of assets held in trust for deferred compensation excluded from the non-interest income components of these ratios, and net gains and losses on other real estate owned, merger-related expenses, loss on low-income housing investment and increase in market value of assets held in trust for deferred compensation excluded from the non-interest expense components of these ratios, with tax equivalent adjustment for tax-exempt interest income and increase in cash surrender value of life insurance, as applicable; ratios of tangible equity to tangible assets, tangible common equity to risk-weighted assets and Tier 1 common capital to risk-weighted assets; tangible book value per common share; and annualized cash return on average tangible common equity. Our management uses these non-GAAP measures, together with the related GAAP measures, in its analysis of our performance and in making business decisions. Management also uses these measures for peer comparisons.

Management believes that core and non-core non-interest income and non-interest expense are useful in assessing our core operating performance and in understanding the primary drivers of our non-interest income and non-interest expense when comparing periods.

The tax equivalent adjustment to net interest income, net interest margin, tax-exempt interest income and increase in cash surrender value of life insurance recognizes the income tax savings when comparing taxable and tax-exempt assets and assumes a 35% tax rate. Management believes that it is a standard practice in the banking industry to present net interest income and net interest margin on a fully tax equivalent basis, and accordingly believes that providing these measures may be useful for peer comparison purposes. For the same reasons, management believes that the tax equivalent adjustments to tax-exempt interest income and increase in cash surrender value of life insurance are useful.

Management also believes that by excluding net gains and losses on investment securities, net gains and losses on sale of other assets, and increase in market value of assets held in trust for deferred compensation from the non-interest income components, and excluding net gains and losses on other real estate owned, merger-related expenses, loss on low-income housing investment and increase in market value of assets held in trust for deferred compensation from the non-interest expense components, of the efficiency ratio and the ratio of annualized net non-interest expense to average assets, these ratios better reflect our core operating performance, as the excluded items do not pertain to our core business operations and their exclusion makes these ratios more meaningful when comparing our operating results from period to period.

In addition, management believes that presenting the ratio of Tier 1 common equity to risk-weighted assets is useful for assessing our capital strength and for peer comparison purposes. The other measures exclude the acquisition-related goodwill and other intangible assets, net of tax benefit, in determining tangible assets, tangible equity, tangible common equity and average tangible common equity and exclude other intangible amortization expense, net of tax benefit, in determining net cash flow available to common stockholders. Management believes the presentation of these other financial measures, excluding the impact of such items, provides useful supplemental information that is helpful in understanding our financial results, as they provide a method to assess management’s success in utilizing our tangible capital, as well as our capital strength. Management also believes that providing measures that exclude balances of acquisition-related goodwill and other intangible assets, which are subjective components of valuation, facilitates the comparison of our performance with the performance of our peers. In addition, management believes that these are standard financial measures used in the banking industry to evaluate performance.

The non-GAAP disclosures contained herein should not be viewed as substitutes for the results determined to be in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

A reconciliation of net interest margin on a fully tax equivalent basis to net interest margin is contained in the tables under “Net Interest Margin.” A reconciliation of tangible book value per common share to book value per common share is contained in the “Selected Financial Ratios” table. Reconciliations of core and non-core non-interest income and non-interest expense to non-interest income and non-interest expense are contained in the tables under “Results of Operations—First Quarter Results.”

The following table presents a reconciliation of tangible equity to equity (in thousands):



	3/31/2014		12/31/2013		9/30/2013		6/30/2013		3/31/2013
Stockholders' equity - as reported	$	1,343,780	$	1,326,682	$	1,309,468	$	1,296,081	$	1,294,803
Less: goodwill	423,369		423,369		423,369		423,369		423,369
Less: other intangible assets, net of tax benefit	14,422		15,228		16,196		17,180		18,179
Tangible equity	$	905,989	$	888,085	$	869,903	$	855,532	$	853,255

The following table presents a reconciliation of tangible assets to total assets (in thousands):



	3/31/2014		12/31/2013		9/30/2013		6/30/2013		3/31/2013
Total assets - as reported	$	9,437,303	$	9,641,427	$	9,257,618	$	9,369,659	$	9,385,830
Less: goodwill	423,369		423,369		423,369		423,369		423,369
Less: other intangible assets, net of tax benefit	14,422		15,228		16,196		17,180		18,179
Tangible assets	$	8,999,512	$	9,202,830	$	8,818,053	$	8,929,110	$	8,944,282

The following table presents a reconciliation of average tangible equity to average common stockholders’ equity (in thousands):



	1Q14		4Q13		3Q13		2Q13		1Q13
Average common stockholders' equity - as reported	$	1,335,223	$	1,315,804	$	1,297,498	$	1,297,364	$	1,280,921
Less: average goodwill	423,369		423,369		423,369		423,369		423,369
Less: average other intangible assets, net of tax benefit	14,758		15,647		16,620		17,605		18,611
Average tangible common equity	$	897,096	$	876,788	$	857,509	$	856,390	$	838,941

The following table presents a reconciliation of net cash flow available to common stockholders to net income available to common stockholders (in thousands):



	1Q14		4Q13		3Q13		2Q13		1Q13
Net income available to common stockholders - as reported	$	19,969	$	23,856	$	24,400	$	25,293	$	24,906
Add: other intangible amortization expense, net of tax benefit	806		968		983		1,000		1,004
Net cash flow available to common stockholders	$	20,775	$	24,824	$	25,383	$	26,293	$	25,910

The following table presents a reconciliation of Tier 1 common capital to Tier 1 capital (in thousands):



	3/31/2014		12/31/2013		9/30/2013		6/30/2013		3/31/2013
Tier 1 capital - as reported	$	1,038,600	$	1,022,512	$	1,002,883	$	983,997	$	960,803
Less: qualifying trust preferred securities	147,500		147,500		147,500		147,500		147,500
Tier 1 common capital	$	891,100	$	875,012	$	855,383	$	836,497	$	813,303

Efficiency Ratio Calculation (Dollars in Thousands)



	1Q14			4Q13			3Q13			2Q13			1Q13
Non-interest expense	$	76,047		$	76,641		$	76,265		$	70,253		$	71,429
Less net loss (gain) on other real estate owned	187			(634		)	791			(2,015		)	330
Less merger related expenses	680			724			1,759			—			—
Less loss on low-income housing investment	2,028			—			—			—			—
Less increase in market value of assets held in trust for deferred compensation	152			588			459			21			483
Non-interest expense - as adjusted	$	73,000		$	75,963		$	73,256		$	72,247		$	70,616

Net interest income	$	67,328		$	68,263		$	68,908		$	67,480		$	67,685
Tax equivalent adjustment	5,581			5,655			5,905			5,594			5,555
Net interest income on a fully tax equivalent basis	72,909			73,918			74,813			73,074			73,240
Plus non-interest income	36,612			39,045			37,707			38,939			38,703
Plus tax equivalent adjustment on the increase in cash surrender value of life insurance	445			457			458			454			454
Less net gain (loss) on investment securities	317			(15		)	1			14			(1		)
Less net gain (loss) on sale of other assets	7			(323		)	—			—			—
Less increase in market value of assets held in trust for deferred compensation	152			588			459			21			483
Net interest income plus non-interest income - as adjusted	$	109,490		$	113,170		$	112,518		$	112,432		$	111,915

Efficiency ratio	66.67		%	67.12		%	65.11		%	64.26		%	63.10		%
Efficiency ratio (without adjustments)	73.16		%	71.42		%	71.53		%	66.02		%	67.14		%

Annualized Net Non-interest Expense to Average Assets Calculation (Dollars in Thousands)



	1Q14			4Q13			3Q13			2Q13			1Q13
Non-interest expense	$	76,047		$	76,641		$	76,265		$	70,253		$	71,429
Less net loss (gain) on other real estate owned	187			(634		)	791			(2,015		)	330
Less merger related expenses	680			724			1,759			—			—
Less loss on low-income housing investment	2,028			—			—			—			—
Less increase in market value of assets held in trust for deferred compensation	152			588			459			21			483
Non-interest expense - as adjusted	73,000			75,963			73,256			72,247			70,616

Non-interest income	36,612			39,045			37,707			38,939			38,703
Less net gain (loss) on investment securities	317			(15		)	1			14			(1		)
Less net gain (loss) on sale of other assets	7			(323		)	—			—			—
Less increase in market value of assets held in trust for deferred compensation	152			588			459			21			483
Non-interest income - as adjusted	36,136			38,795			37,247			38,904			38,221
Less tax equivalent adjustment on the increase in cash surrender value of life insurance	445			457			458			454			454
Net non-interest expense	$	36,419		$	36,711		$	35,551		$	32,889		$	31,941

Average assets	$	9,367,942		$	9,567,388		$	9,261,291		$	9,289,382		$	9,449,588

Annualized net non-interest expense to average assets	1.58		%	1.52		%	1.52		%	1.42		%	1.37		%

Annualized net non-interest expense to average assets (without adjustments)	1.71		%	1.56		%	1.65		%	1.35		%	1.40		%

Core Non-interest Income to Revenues Ratio Calculation (Dollars in Thousands)



	1Q14			4Q13			3Q13			2Q13			1Q13
Non-interest income	$	36,612		$	39,045		$	37,707		$	38,939		$	38,703
Plus tax equivalent adjustment on the increase in cash surrender value of life insurance	445			457			458			454			454
Less net gain (loss) on investment securities	317			(15		)	1			14			(1		)
Less net gain (loss) on sale of other assets	7			(323		)	—			—			—
Less increase in market value of assets held in trust for deferred compensation	152			588			459			21			483
Non-interest income - as adjusted	$	36,581		$	39,252		$	37,705		$	39,358		$	38,675

Net interest income	$	67,328		$	68,263		$	68,908		$	67,480		$	67,685
Tax equivalent adjustment	5,581			5,655			5,905			5,594			5,555
Net interest income on a fully tax equivalent basis	72,909			73,918			74,813			73,074			73,240
Plus non-interest income	36,612			39,045			37,707			38,939			38,703
Plus tax equivalent adjustment on the increase in cash surrender value of life insurance	445			457			458			454			454
Less net gain (loss) on investment securities	317			(15		)	1			14			(1		)
Less net gain (loss) on sale of other assets	7			(323		)	—			—			—
Less increase in market value of assets held in trust for deferred compensation	152			588			459			21			483
Total revenue - as adjusted and on a fully tax equivalent basis	$	109,490		$	113,170		$	112,518		$	112,432		$	111,915

Total revenue - unadjusted	$	103,940		$	107,308		$	106,615		$	106,419		$	106,388

Core non-interest income to revenues ratio	33.41		%	34.68		%	33.51		%	35.01		%	34.56		%

Core non-interest income to revenues ratio (without adjustments)	35.22		%	36.39		%	35.37		%	36.59		%	36.38		%

NET INTEREST MARGIN

The following table presents, for the periods indicated, the total dollar amount of interest income from average interest earning assets and the resultant yields, as well as the interest expense on average interest bearing liabilities, and the resultant costs, expressed both in dollars and rates (dollars in thousands):



	1Q14						1Q13						4Q13
	Average Balance		Interest		Yield/ Rate		Average Balance		Interest		Yield/ Rate		Average Balance		Interest		Yield/ Rate
Interest Earning Assets:
Loans (1) (2) (3):
Commercial related credits
Commercial	$	1,232,562	$	12,312	4.00	%	$	1,205,903	12,559		4.17	%	$	1,167,924	$	12,080	4.05	%
Commercial loans collateralized by assignment of lease payments	1,479,998		14,319		3.87		1,300,818		12,799		3.94		1,468,257		14,087		3.84
Real estate commercial	1,631,041		17,332		4.25		1,730,051		20,744		4.80		1,629,270		17,908		4.30
Real estate construction	140,920		1,278		3.63		113,573		1,120		3.94		141,041		1,402		3.89
Total commercial related credits	4,484,521		45,241		4.04		4,350,345		47,222		4.34		4,406,492		45,477		4.04
Other loans
Real estate residential	311,760		2,992		3.84		317,779		3,285		4.13		316,573		3,018		3.81
Home equity	263,283		2,712		4.18		298,061		3,190		4.34		271,898		2,925		4.27
Indirect	263,510		3,391		5.22		212,153		3,022		5.78		260,918		3,455		5.25
Consumer loans	62,616		676		4.38		70,364		607		3.50		60,054		629		4.16
Total other loans	901,169		9,771		4.40		898,357		10,104		4.56		909,443		10,027		4.37
Total loans, excluding covered loans	5,385,690		55,012		4.14		5,248,702		57,326		4.43		5,315,935		55,504		4.14
Covered loans	221,481		2,470		4.52		424,688		4,682		4.47		258,094		3,808		5.85
Total loans	5,607,171		57,482		4.16		5,673,390		62,008		4.43		5,574,029		59,312		4.22
Taxable investment securities	1,384,371		8,146		2.35		1,484,300		6,140		1.65		1,421,135		7,335		2.06
Investment securities exempt from federal income taxes (3)	935,863		12,410		5.30		911,742		12,400		5.44		943,298		12,561		5.33
Federal funds sold	5,889		5		0.34		—		—		—		8,251		6		0.28
Other interest earning deposits	187,049		113		0.25		197,057		135		0.28		436,158		270		0.25
Total interest earning assets	$	8,120,343	$	78,156	3.90		$	8,266,489	$	80,683	3.96		$	8,382,871	$	79,484	3.76
Non-interest earning assets	1,247,599						1,183,099						1,184,517
Total assets	$	9,367,942					$	9,449,588					$	9,567,388
Interest Bearing Liabilities:
Core funding:
Money market and NOW accounts	$	2,727,620	$	848	0.13	%	$	2,737,494	$	927	0.14	%	$	2,685,343	$	861	0.13	%
Savings accounts	862,197		109		0.05		822,214		136		0.07		848,734		137		0.06
Certificates of deposit	1,210,189		1,174		0.40		1,512,600		2,397		0.66		1,250,049		1,256		0.40
Customer repurchase agreements	190,466		96		0.20		181,658		98		0.22		216,504		114		0.21
Total core funding	4,990,472		2,227		0.18		5,253,966		3,558		0.27		5,000,630		2,368		0.19
Wholesale funding:
Brokered accounts (includes fee expense)	223,926		1,638		2.97		294,295		2,249		3.10		229,635		1,712		2.96
Other borrowings	231,805		1,382		2.38		259,135		1,636		2.53		466,508		1,486		1.25
Total wholesale funding	455,731		3,020		2.38		553,430		3,885		2.52		696,143		3,198		1.68
Total interest bearing liabilities	$	5,446,203	$	5,247	0.39		$	5,807,396	$	7,443	0.52		$	5,696,773	$	5,566	0.39
Non-interest bearing deposits	2,372,866						2,145,058						2,352,901
Other non-interest bearing liabilities	213,650						216,213						201,910
Stockholders' equity	1,335,223						1,280,921						1,315,804
Total liabilities and stockholders' equity	$	9,367,942					$	9,449,588					$	9,567,388
Net interest income/interest rate spread (4)			$	72,909	3.51	%			$	73,240	3.44	%			$	73,918	3.37	%
Taxable equivalent adjustment			5,581						5,555						5,655
Net interest income, as reported			$	67,328					$	67,685					$	68,263
Net interest margin (5)					3.36	%					3.32	%					3.23	%
Tax equivalent effect					0.28	%					0.27	%					0.27	%
Net interest margin on a fully tax equivalent basis (5)					3.64	%					3.59	%					3.50	%


(1)	Non-accrual loans are included in average loans.


(2)	Interest income includes amortization of deferred loan origination costs of $55 thousand for the three months ended March 31, 2014 and deferred loan origination fees of $981 thousand and $956 thousand for the three months ended March 31, 2013 and December 31, 2013, respectively.


(3)	Non-taxable loan and investment income is presented on a fully tax equivalent basis assuming a 35% tax rate.


(4)	Interest rate spread represents the difference between the average yield on interest earning assets and the average cost of interest bearing liabilities and is presented on a fully tax equivalent basis.


(5)	Net interest margin represents net interest income as a percentage of average interest earning assets.

MB FINANCIAL INC /MD - FORM 8-K - EX-99 - EXHIBIT 99 - April 29, 2014

Attached files

MB FINANCIAL INC /MD Reports