MB Financial, Inc. Reports Third Quarter Net Income for 2007

Business Wire, Oct 17, 2007

CHICAGO -- MB Financial, Inc. (NASDAQ:MBFI), the holding company for MB Financial Bank, N.A. and Union Bank, N.A., announced today third quarter results for 2007. The words "MB Financial," "the Company," "we," "our" and "us" refer to MB Financial, Inc. and its wholly owned subsidiaries, unless we indicate otherwise. We had net income of $18.3 million for the third quarter of 2007 compared to $14.7 million for the third quarter of 2006, an increase of 24.2%, and $21.0 million for the second quarter of 2007, a decrease of 13.0%. Fully diluted earnings per share for the third quarter of 2007 were $0.51 per share as compared to $0.46 per share for the third quarter of 2006, and $0.57 per share for the second quarter of 2007. Non-core transactions decreased our earnings for the third quarter of 2006 by $378 thousand, net of tax. Excluding these non-core items, our third quarter earnings for 2006 were $0.47 per diluted share. Non-core transactions increased our earnings for the second quarter of 2007 by $2.8 million, net of tax. Excluding these non-core items, our second quarter earnings for 2007 were $0.50 per diluted share. There were no significant non-core items in the third quarter of 2007.

On June 29, 2007, we entered into an agreement to sell our Oklahoma City-based subsidiary bank, Union Bank, N.A., to Olney Bancshares of Texas, Inc. for approximately $76.9 million which is based on Union Bank's book value at closing plus a premium of $46.9 million. The transaction, subject to customary closing conditions and regulatory approval, is expected to be completed in the fourth quarter of 2007. Prior to closing, Union Bank will sell to our lead subsidiary bank, Chicago-based MB Financial Bank, N.A., approximately $100 million in performing loans previously purchased from and originated by MB Financial Bank. The sale of Union Bank, N.A., will allow us to concentrate our resources in the Chicago metropolitan market.

In accordance with FASB Statement No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," the financial position of Union Bank is reflected on the Company's balance sheets as "assets held for sale" and "liabilities held for sale", and the results of operations of Union Bank are reflected in the Company's statements of income as "discontinued operations."

We estimate the post-closing impact of the Union Bank sale on our overall earnings per share will be minimal, as we anticipate that the lost income from Union Bank will be largely offset by additional income attributable to the loans that we will repurchase from Union Bank prior to closing, investment earnings on the sale proceeds, and the impact of planned stock repurchases, funded by the sale proceeds, which are subject to market conditions and other factors.

Highlights for the quarter were as follows:

* Our net interest margin in the third quarter, expressed on a fully tax equivalent basis, increased 3 basis points to 3.34%, compared to 3.31% in the second quarter of 2007, and was within the range of 3.26% to 3.34% previously communicated.

* We continued to enjoy robust commercial loan growth in the third quarter. Annualized commercial related loan growth was approximately 16%, compared to 15% in the second quarter of 2007, driven by substantial growth in our commercial and commercial real estate categories.

* Core funding increased by $41.3 million compared to the second quarter of 2007. Additionally, our core funding has increased from 74% to 77% of total funding from September 30, 2006 to September 30, 2007. See "Funding Mix" section below for further analysis.

* On September 20, 2007 we issued $30.0 million of trust preferred securities at a floating rate of 3 month LIBOR plus 1.30% with an initial rate of 6.99%, and on October 1, 2007 we issued an additional $22.5 million of trust preferred securities at a floating rate of 3 month LIBOR plus 1.30% with an initial rate of 6.53%. On October 2, 2007, we redeemed $61.7 million of trust preferred securities with a fixed coupon rate of 8.60%. As a result of redeeming these securities, we will incur approximately $2 million of additional other operating expense attributable to unamortized issuance costs in the fourth quarter of 2007, or approximately $0.04 per diluted share based on the number of fully diluted shares outstanding as of September 30, 2007.

RESULTS OF OPERATIONS

Third Quarter Results

Net Interest Income

Net interest income on a tax equivalent basis increased $1.9 million from the second quarter of 2007 to the third quarter of 2007. The increase in net interest income was primarily due to an increase in average interest earning assets, a three basis point increase in the net interest margin, and one additional day during the third quarter.

See the supplemental net interest margin table for further detail.

Assuming no significant changes in the interest rate environment or balance sheet leverage, we estimate our net interest margin on a fully tax equivalent basis, will range from 3.26% to 3.34% in the fourth quarter of 2007.