MB Financial, Inc. Reports Record Fourth Quarter and Annual Earnings

Business Wire, Jan 25, 2008

CHICAGO -- MB Financial, Inc. (NASDAQ: MBFI), the holding company for MB Financial Bank, N.A., announced today fourth 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 $36.4 million for the fourth quarter of 2007 compared to $18.1 million for the fourth quarter of 2006, an increase of 101.2%, and $18.3 million for the third quarter of 2007, an increase of 98.8%. Fully diluted earnings per share for the fourth quarter of 2007 were $1.02 per share as compared to $0.49 per share for the fourth quarter of 2006, and $0.51 per share for the third quarter of 2007. The Company had net income of $93.9 million for the year ended December 31, 2007 compared to $67.1 million for the year ended December 31, 2006, an increase of 39.9%.

On November 28, 2007, we completed the sale of our Oklahoma City-based subsidiary bank, Union Bank, N.A., for $76.1 million, resulting in an after-tax gain of $28.8 million, or $0.81 per diluted share for the fourth quarter of 2007. Prior to closing, Union Bank sold 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.

Other significant items for the quarter were as follows:

* Strong commercial loan growth continued in the fourth quarter. Annualized commercial related loan growth was approximately 19%, with approximately one-half of the increase due to organic growth and the balance due to the purchase of loans by MB Financial Bank from Union Bank, previously reported as assets held for sale, prior to the closing of the Union Bank sale, as noted earlier.

* Non-performing loans as a percentage of total loans remained stable at 0.44%, while our fourth quarter annualized net loan charge-offs to average loans of 0.29% was slightly higher than our average of 0.25% for the year ended December 31, 2007. Our provision for loan losses increased to $8.0 million for the fourth quarter, reflecting loan growth, an increase in potential problem loans, and general uncertainty in the current economic environment.

* Our net interest margin in the fourth quarter, expressed on a fully tax equivalent basis, was 3.28%, within the expected range of 3.26% to 3.34% we previously communicated.

* There were a number of non-core business transactions from continuing operations during the fourth quarter of 2007 including (pre-tax):

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As a whole, these non-core transactions decreased our fourth quarter earnings from continuing operations by $7.7 million, net of tax assuming a 35% tax rate, or $0.22 per diluted share. There were no significant non-core items in the third quarter of 2007 or in the fourth quarter of 2006.

RESULTS OF OPERATIONS

Fourth Quarter Results

Net Interest Income

Net interest income on a tax equivalent basis remained stable from the third quarter of 2007 to the fourth quarter of 2007. The increase in average interest earning assets was offset by a six basis point decrease in the net interest margin. The decline in the net interest margin was primarily due to our interest bearing assets adjusting to the decrease in interest rates in the fourth quarter more rapidly than our interest bearing liabilities. Fierce competition for deposits continued during the fourth quarter. As a result, although general interest rates declined during the fourth quarter, the yields on our certificates of deposits remained historically high relative to other interest rates.

See the supplemental net interest margin table for further detail.

Other Income

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(1) Letters denote the corresponding line items where these non-core other income items reside in the consolidated statements of income as follows: A - Brokerage fees, B - Trust and asset management fees, C - Other Operating Income, and D - Net gain (loss) on sale of other assets.

Our core business loan service fees increased from the third quarter of 2007 to the fourth quarter of 2007, primarily due to an increase in loan pre-payment fees, and partially due to an increase in loan syndication fees recognized during the fourth quarter compared to the third quarter. The decrease in our core business brokerage fee income was primarily due to the sale of our third party brokerage business during the second quarter of 2007, and conversion of customer accounts to the purchaser's platform in third quarter. The decrease in our core business brokerage fee income was offset by significant corresponding reductions in brokerage expense as a result of selling our third party brokerage business.

During the second quarter of 2007 we sold our third party brokerage business for initial cash consideration of $500 thousand. In the fourth quarter of 2007, we received additional cash consideration of $447 thousand that was based on subsequent customer retention by the buyer. Additionally, we realized a gain of $733 thousand in the fourth quarter of 2007 on the sale of artwork that was acquired as a result of our acquisition of FOBB. We do not anticipate generating any additional gains on the sale of artwork. Also, during the fourth quarter of 2007, we sold approximately $95.0 million in investment securities that resulted in a net loss of $1.5 million. The proceeds were redeployed to fund loan growth, paydowns on wholesale funding, and new investment purchases. The increase in market value of assets held in trust for deferred compensation is recorded in other income and is offset by the same amount recorded as other expense.