MB Financial, Inc. Reports Decrease in Provision and Non-Performing Loans, Strong Core Pre-Tax, Pre-Provision Earnings, Strong Capital Position

MB Financial, Inc. (NASDAQ: MBFI), the holding company for MB Financial Bank, N.A ("the Bank” or "MB Financial Bank”), announced today first quarter results for 2011. The words "MB Financial,” "the Company,” "we,” "our” and "us” refer to MB Financial, Inc. and its consolidated subsidiaries, unless indicated otherwise. We had net income of $6.9 million and net income available to common stockholders of $4.3 million for the first quarter of 2011 compared to net income of $947 thousand and net loss available to common stockholders of $1.6 million for the first quarter of 2010, and net income of $3.2 million and net income available to common stockholders of $595 thousand for the fourth quarter of 2010.

Key items for the quarter were as follows:

Credit Quality – Decreased Provision for Loan Losses, Non-Performing Loans, and Non-Performing Assets:

• Our provision for loan losses was $40.0 million for the first quarter of 2011, while our net charge-offs were $53.8 million. For the fourth quarter of 2010, our provision for loan losses and net charge-offs were $49.0 million and $50.7 million, respectively.
• Our non-performing loans were $318.9 million or 5.01% of total loans as of March 31, 2011, a decrease of $43.5 million from $362.4 million at December 31, 2010. Our allowance for loan losses to non-performing loans was 55.94% as of March 31, 2011 and 53.03% as of December 31, 2010. Including partial charge-offs, our allowance for loan losses to non-performing loans was 70.46% as of March 31, 2011 and 67.66% as of December 31, 2010.
• Our non-performing assets were $399.2 million or 3.96% of total assets as of March 31, 2011, a decrease from $434.0 million or 4.21% of total assets as of December 31, 2010.
• Our allowance for loan losses to total loans was 2.80% as of March 31, 2011, compared to 2.90% as of December 31, 2010.

Core Pre-Tax, Pre-Provision Earnings Remain Strong:

• Core pre-tax, pre-provision earnings to risk-weighted assets ratio was 2.81%, or $45.5 million, for the first quarter of 2011, up from 2.41%, or $42.0 million, for the same period in 2010. Core pre-tax, pre-provision earnings decreased from 3.08%, or $52.5 million, from the fourth quarter of 2010. The decrease from the fourth quarter of 2010 was primarily a result of lower net interest income due to lower loan balances, lower lease income compared to a strong fourth quarter, and lower accretion of FDIC indemnification asset.
• Net interest income on a fully tax equivalent basis increased to $84.8 million, or by 1.7%, compared to $83.4 million for the first quarter of 2010. Net interest income on a fully tax equivalent basis decreased $2.4 million, or 2.8%, compared to the fourth quarter of 2010. Net interest income was negatively impacted by high levels of near cash liquidity. The high liquidity level reflects our cautiousness in reinvesting cash in the current low interest rate environment.
• Net interest margin on a fully tax equivalent basis increased to 3.88% from 3.67% in the first quarter of 2010 and from 3.83% in the fourth quarter of 2010 primarily due to a decrease in cost of funds.
• Core other income increased 26.7% to $29.0 million compared to $22.9 million for the first quarter of 2010. Core other income decreased $2.9 million, or 9.2%, compared to the fourth quarter of 2010.

Strong Capital Position:

• MB Financial Bank significantly exceeds the "Well-Capitalized” threshold established under the regulations of the Office of the Comptroller of the Currency. At March 31, 2011, MB Financial, Inc.’s total risk-based capital ratio was 18.33%, Tier 1 capital to risk-weighted assets ratio was 16.31%, Tier 1 capital to average asset ratio was 11.00% and Tier 1 common capital to risk-weighted assets was 11.01%, compared with 17.75%, 15.75%, 10.66% and 10.61%, respectively, as of December 31, 2010. As of March 31, 2011, total capital was approximately $548.1 million in excess of the "Well-Capitalized” threshold, compared with $524.9 million as of December 31, 2010. Our tangible common equity to tangible assets ratio was 7.73% at March 31, 2011, compared to 7.47% at December 31, 2010. Our tangible common equity to risk-weighted assets ratio was 11.36% at March 31, 2011, compared to 10.94% at December 31, 2010.

RESULTS OF OPERATIONS

First Quarter Results

Net Interest Income

Net interest income on a fully tax equivalent basis increased $1.4 million from the first quarter of 2010 and decreased by $2.4 million from the fourth quarter of 2010 to the first quarter of 2011. Our net interest margin, on a fully tax equivalent basis, was 3.88% for the first quarter of 2011 compared to 3.83% in the fourth quarter of 2010 and 3.67% in the first quarter of 2010. The margin increase from the first and fourth quarters of 2010 was primarily due to a decrease in our average cost of funds as a result of an improved deposit mix, downward repricing of interest-bearing deposits and interest recorded on loans that returned to accrual status during the first quarter of 2011. Net interest income was negatively impacted by high levels of liquidity. The high liquidity level reflects our cautiousness in reinvesting cash in the current low interest rate environment.

Our non-performing loans reduced net interest margin during the first quarter of 2011, the fourth quarter of 2010 and the first quarter of 2010 by approximately 19 basis points, 23 basis points and 18 basis points, respectively.

See the supplemental net interest margin table for further detail.

Other Income (in thousands):

		Three Months Ended
			March 31,			December 31,			September 30,			June 30,			March 31,
			2011			2010			2010			2010			2010
Core other income:
	Loan service fees	$	1,126		$	1,532		$	1,659		$	2,042		$	1,284
	Deposit service fees		10,069			9,920			10,705			9,461			8,848
	Lease financing, net		5,783			7,185			5,022			5,026			4,620
	Brokerage fees		1,419			1,231			1,407			1,129			1,245
	Trust and asset management fees		4,431			4,243			3,923			3,536			3,335
	Increase in cash surrender value of life insurance		968			930			1,209			706			671
	Accretion of FDIC indemnification asset		1,831			3,009			3,602			3,067			-
	Other operating income		3,347			3,857			2,406			2,872			2,869
Total core other income			28,974			31,907			29,933			27,839			22,872
Non-core other income: (1)
	Net gain (loss) on sale of investment securities		(3	)		(4	)		9,482			2,304			6,866
	Net gain(loss) on sale of other assets		357			419			299			(99	)		11
	Net gain (loss) recognized on other real estate owned (A)		(369	)		(1,656	)		(3,608	)		52			(3,299	)
	Net loss recognized on other real estate owned related to FDIC transactions (A)		(3	)		(468	)		(305	)		-			-
	Acquisition related gains		-			-			-			62,649			-
	Increase (decrease) in market value of assets held in trust deferred compensation (A)		187			597			(3	)		(39	)		7
Total non-core other income			169			(1,112	)		5,865			64,867			3,585
Total other income		$	29,143		$	30,795		$	35,798		$	92,706		$	26,457

(1) Letter denotes the corresponding line items where these non-core other income items reside in the consolidated statements of income as follows: A – Other operating income.

Core other income decreased by $2.9 million from the fourth quarter of 2010 to the first quarter of 2011. Net lease financing income decreased mainly as a result of a decrease in the sales of third party equipment maintenance contracts. Lease financing income was strong in the fourth quarter of 2010. Accretion of indemnification asset decreased as expected due to a corresponding decrease in the indemnification asset balance during the first quarter of 2011. The increase in non-core other income was mainly a result of fewer impairments and losses recognized on other real estate owned ("OREO”) in the first quarter of 2011.

Core other income increased by $6.1 million from the first quarter of 2010 to the first quarter of 2011. Core deposit service fees increased primarily due to an increase in treasury fees. Net lease financing increased primarily due to an increase in the sales of third party equipment maintenance contracts. Core trust and asset management fees increased primarily due to an increase in assets under management as a result of organic growth and an increase in the market value of assets under management. The Broadway Bank and New Century Bank FDIC-assisted transactions resulted in increased accretion on the corresponding indemnification asset. Prior year accretion related to the Heritage Bank and Benchmark Bank transactions was not significant. Other income increased primarily due to higher ATM and debit card fees. Non-core other income decreased in the first quarter of 2011 compared to the first quarter of 2010 as a result of lower gains on sales of investment securities, partially offset by fewer impairments and losses on OREO compared to the first quarter of 2010.

Other Expense (in thousands):

		Three Months Ended
			March 31,			December 31,			September 30,			June 30,			March 31,
			2011			2010			2010			2010			2010
Core other expense:
	Salaries and employee benefits	$	37,260		$	35,802		$	37,427		$	37,143		$	33,415
	Occupancy and equipment expense		9,394			7,938			8,800			8,928			9,179
	Computer services expense		2,618			2,445			2,654			3,322			2,528
	Advertising and marketing expense		1,719			1,573			1,620			1,639			1,633
	Professional and legal expense		1,225			1,718			1,637			1,370			1,078
	Brokerage fee expense		328			448			596			420			462
	Telecommunication expense		935			819			975			964			908
	Other intangibles amortization expense		1,425			1,632			1,567			1,505			1,510
	FDIC insurance premiums		3,428			3,930			3,873			3,833			3,964
	Other real estate expense, net		398			858			734			417			685
	Other operating expenses		6,947			6,855			6,598			6,530			6,282
Total core other expense			65,677			64,018			66,481			66,071			61,644
Non-core other expense: (1)
	Branch impairment charges		1,000			-			-			-			-
	Increase (decrease) in market value of assets held in trust for deferred compensation (A)		187			597			(3)			(39)			7
Total non-core other expense			1,187			597			(3)			(39)			7
Total other expense		$	66,864		$	64,615		$	66,478		$	66,032		$	61,651

(1) Letters denote the corresponding line items where these non-core other expense items reside in the consolidated statements of income as follows: A – Salaries and employee benefits.

Core other expense increased by $1.7 million from the fourth quarter of 2010 to the first quarter of 2011. Salaries and employee benefits increased mainly due to an increase in payroll taxes and healthcare expense for the quarter. Occupancy and equipment expense increased as a result of increased property taxes, higher maintenance costs and snow removal expenses. Professional and legal expense decreased during the first quarter of 2011 as a result of lower loan remediation expenses. Other real estate expense decreased as a result of an increase in OREO rental income and lower property maintenance expense. Non-core other expense was primarily impacted by a $1.0 million fixed asset impairment charge incurred in the first quarter of 2011 caused by our decision to close a branch.

Core other expense increased by $4.0 million from the first quarter of 2010. Salaries and employee benefits expense increased due to problem loan remediation staff added throughout the prior year as well as staff added through the FDIC-assisted transactions completed in the second quarter of 2010. FDIC insurance premiums decreased due to lower deposit balances. As noted above, non-core other expense was primarily impacted by a $1.0 million fixed asset impairment charge.

Income Taxes

The Company had an income tax benefit of $2.5 million for the three months ended March 31, 2011. Approximately $2.1 million of the income tax benefit recognized was due to an increase in deferred tax assets as a result of the Illinois corporate income tax rate increase which was enacted in the first quarter of 2011.

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):

		March 31,						December 31,						September 30,						June 30,						March 31,
		2011						2010						2010						2010						2010
			Amount		% of Total				Amount		% of Total				Amount		% of Total				Amount		% of Total				Amount		% of Total
Commercial related credits:
	Commercial loans	$	1,154,451		18	%		$	1,206,984		18	%		$	1,291,115		19	%		$	1,315,899		19	%		$	1,378,873		21	%
	Commercial loans collateralized by assignment of lease payments (lease loans)		1,038,507		16	%			1,053,446		16	%			1,019,083		15	%			992,301		14	%			960,470		15	%
	Commercial real estate		2,084,651		33	%			2,176,584		33	%			2,259,708		33	%			2,378,272		34	%			2,409,078		38	%
	Construction real estate		356,579		6	%			423,339		6	%			445,881		6	%			496,732		7	%			558,615		9	%
Total commercial related credits			4,634,188		73	%			4,860,353		73	%			5,015,787		73	%			5,183,204		74	%			5,307,036		83	%
Other loans:
	Residential real estate		335,423		5	%			328,482		5	%			328,985		5	%			321,665		5	%			302,308		5	%
	Indirect motorcycle		163,301		3	%			161,761		2	%			166,163		2	%			164,269		2	%			158,207		2	%
	Indirect automobile		11,757		0	%			13,903		1	%			15,928		0	%			17,914		0	%			20,437		1	%
	Home equity		371,108		6	%			381,662		6	%			386,866		6	%			389,298		6	%			401,570		6	%
	Consumer loans		74,585		1	%			59,320		1	%			76,219		1	%			73,436		1	%			70,247		1	%
Total other loans			956,174		15	%			945,128		15	%			974,161		14	%			966,582		14	%			952,769		15	%
Gross loans excluding covered loans			5,590,362		88	%			5,805,481		88	%			5,989,948		87	%			6,149,786		88	%			6,259,805		98	%
	Covered loans (1)		777,634		12	%			812,330		12	%			859,038		13	%			879,909		12	%			155,051		2	%
Gross loans			6,367,996		100	%			6,617,811		100	%			6,848,986		100	%			7,029,695		100	%			6,414,856		100	%
	Allowance for loan losses		(178,410	)					(192,217	)					(193,926	)					(195,612	)					(177,787	)
Net loans		$	6,189,586					$	6,425,594					$	6,655,060					$	6,834,083					$	6,237,069

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

The increase in covered loans from March 31, 2010 to June 30, 2010 was due to the Broadway Bank and New Century Bank FDIC-assisted transactions.

ASSET QUALITY

The following table presents a summary of non-performing assets, excluding loans held for sale, credit-impaired loans that were acquired as part of our FDIC-assisted transactions (see definition of "purchased credit-impaired loans” below) and OREO related to FDIC-assisted transactions, as of the dates indicated (dollar amounts in thousands):

				March 31,			December 31,			September 30,			June 30,			March 31,
				2011			2010			2010			2010			2010
Non-performing loans:
	Non-accrual loans(1)		$	318,923		$	362,441		$	392,477		$	343,838		$	323,017
	Loans 90 days or more past due, still accruing interest			-			1			115			-			150
Total non-performing loans				318,923			362,442			392,592			343,838			323,167
OREO				80,107			71,476			59,114			43,988			41,589
Repossessed vehicles				139			82			321			191			250
Total non-performing assets			$	399,169		$	434,000		$	452,027		$	388,017		$	365,006
	Total allowance for loan losses (2)			178,410			192,217			193,926			195,612			177,787
	Partial charge-offs taken on non-performing loans			156,692			163,972			171,549			142,872			95,960
	Allowance for loan losses, including partial charge-offs		$	335,102		$	356,189		$	365,475		$	338,484		$	273,747
Accruing restructured loans(3)			$	22,177		$	22,543		$	12,226		$	10,940		$	-
Total non-performing loans to total loans				5.01	%		5.48	%		5.73	%		4.89	%		5.04	%
Total non-performing assets to total assets				3.96	%		4.21	%		4.26	%		3.64	%		3.58	%
Allowance for loan losses to non-performing loans				55.94	%		53.03	%		49.40	%		56.89	%		55.01	%
Allowance for loan losses to non-performing loans,
	including partial charge-offs taken			70.46	%		67.66	%		64.78	%		69.55	%		65.31	%

(1) Includes $55.3 million of restructured loans on non-accrual status at March 31, 2011.

(2) Includes $12.7 million for credit losses on unfunded commitments at March 31, 2011.

(3) Accruing restructured loans at March 31, 2011 consists primarily of commercial and commercial real estate loans that have been modified and are performing in accordance with those modified terms.

The following table presents a summary of total performing loans greater than 30 days and less than 90 days past due, excluding loans held for sale and credit-impaired loans that were acquired as part of our FDIC-assisted transactions (see definition of "purchased credit-impaired loans” below), as of the dates indicated (dollar amounts in thousands):

				March 31,			December 31,			September 30,			June 30,			March 31,
				2011			2010			2010			2010			2010
30 - 59 Days Past Due			$	23,912		$	9,386		$	19,302		$	26,491		$	17,239
60 - 89 Days Past Due				4,049			5,073			6,011			3,746			1,653
			$	27,961		$	14,459		$	25,313		$	30,237		$	18,892

Approximately $11.0 million of performing loans past due are classified as potential problem loans (defined below) as of March 31, 2011, compared to $1.7 million as of December 31, 2010.

The following table represents a summary of OREO, excluding OREO related to FDIC-assisted transactions (in thousands):

			March 31,				December 31,				September 30,				June 30,				March 31,
			2011				2010				2010				2010				2010
Balance at the beginning of quarter		$	71,476			$	59,114			$	43,988			$	41,589			$	36,711
Transfers in at fair value less estimated costs to sell			25,167				27,170				21,383				4,967				10,438
Fair value adjustments			(1,314	)			(1,562	)			(3,429	)			-				(2,795	)
Net (losses) gains on sales of OREO			945				(94	)			(179	)			52				(504	)
Cash received upon disposition			(16,167	)			(13,152	)			(2,649	)			(2,620	)			(2,261	)
Balance at the end of quarter		$	80,107			$	71,476			$	59,114			$	43,988			$	41,589

The following table presents data related to non-performing loans, by dollar amount and category at March 31, 2011, excluding loans held for sale and credit-impaired loans that were acquired as part of our FDIC-assisted transactions (dollar amounts in thousands):

	Commercial and Lease					Construction Real Estate					Commercial Real Estate						Consumer
	Loans					Loans					Loans						Loans			Total Loans
	Number of					Number of					Number of
	Borrowers			Amount		Borrowers			Amount		Borrowers			Amount			Amount			Amount
$10.0 million or more	-		$	-		2		$	25,195		1		$	17,328		$	-		$	42,523
$5.0 million to $9.9 million	2			16,245		3			16,597		2			18,312			-			51,154
$1.5 million to $4.9 million	3			5,827		13			42,055		19			50,748			1,575			100,205
Under $1.5 million	47			18,210		29			13,998		158			66,366			26,467			125,041
	52		$	40,282		47		$	97,845		180		$	152,754		$	28,042		$	318,923
Percentage of individual loan category				1.84%					27.44%					7.33%			2.93%			5.01%
Specific reserves and partial charge-offs as a percentage of non-performing loans				46%					47%					32%

The following table presents data related to non-performing loans, by dollar amount and category at December 31, 2010 (dollar amounts in thousands):

	Commercial and Lease					Construction Real Estate					Commercial Real Estate					Consumer
	Loans					Loans					Loans					Loans			Total Loans
	Number of					Number of					Number of
	Borrowers		Amount			Borrowers		Amount			Borrowers		Amount			Amount			Amount
$10.0 million or more	-		$	-		2		$	29,695		2		$	34,423		$	-		$	64,118
$5.0 million to $9.9 million	3			23,683		5			29,791		3			20,102			-			73,576
$1.5 million to $4.9 million	6			14,005		13			41,313		15			41,720			3,272			100,310
Under $1.5 million	45			14,880		30			21,278		144			62,619			25,661			124,438
	54		$	52,568		50		$	122,077		164		$	158,864		$	28,933		$	362,442
Percentage of individual loan category				2.33%					28.84%					7.30%			3.06%			5.48%
Specific reserves and partial charge-offs as a percentage of non-performing loans				44%					47%					32%

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 aggregate principal amount of potential problem loans was $307.4 million, or 4.83% of total loans, as of March 31, 2011, compared to $291.7 million, or 4.41% of total loans, as of December 31, 2010. Our potential problem loans would have decreased during the first quarter; however, approximately $29 million in loans were upgraded from nonperforming to potential problem status.

"Purchased credit-impaired loans” refer to certain loans acquired in FDIC-assisted transactions, for which deterioration in credit quality occurred before the Company’s acquisition date. Upon acquisition, these loans were recorded at fair value with interest income to be accreted over the estimated life of the loan when cash flows are reasonably estimable, even if the underlying loans are contractually past due. Acquisition fair value incorporates the Company’s estimate, as of the acquisition date, of credit losses over the remaining life of the portfolio. No allowance for loan losses has been recorded for these loans as of March 31, 2011.

The following table displays information on commercial real estate loans by risk category and type, excluding covered loans, at March 31, 2011 (dollars in thousands):

		Risk Category
								Potential Problem
		Non-Performing						and Other Watch
		Loans (NPLs)						List Loans					Pass Loans						Total
					% of Loan					% of Loan					% of Loan						% of Loan
					Balance					Balance					Balance						Balance
			Amount		Reserved(1)			Amount		Reserved			Amount		Reserved				Amount		Reserved(1)
Church and school		$	3,626		36%		$	3,920		22%		$	59,174		2%			$	66,720		5%
Healthcare			4,181		15%			-		0%			183,519		2%				187,700		3%
Industrial			49,435		29%			77,728		21%			373,631		2%				500,794		8%
Multifamily			26,421		40%			48,026		22%			377,688		2%				452,135		7%
Office			12,514		55%			39,003		22%			149,499		2%				201,016		12%
Other			34,530		18%			24,531		19%			160,217		2%				219,278		6%
Retail			22,047		34%			63,160		18%			371,801		2%				457,008		6%
		$	152,754		32%		$	256,368		20%		$	1,675,529		2%			$	2,084,651		7%

(1) To calculate the percentage of loan balances reserved, partial charge-offs taken on loans with balances outstanding have been added back to both reserves and outstanding balance.

The following table sets forth information on commercial real estate loans by risk category and type, excluding covered loans, at December 31, 2010 (dollars in thousands):

		Risk Category
							Potential Problem
		Non-Performing					and Other Watch
		Loans (NPLs)					List Loans					Pass Loans						Total
					% of Loan					% of Loan					% of Loan						% of Loan
					Balance					Balance					Balance						Balance
			Amount		Reserved(1)			Amount		Reserved			Amount		Reserved				Amount		Reserved(1)
Church and school		$	177		36%		$	7,147		20%		$	58,218		1%			$	65,542		4%
Healthcare			-		-			4,899		15%			199,349		2%				204,248		2%
Industrial			36,426		25%			88,252		17%			398,703		2%				523,381		7%
Multifamily			30,344		40%			47,318		19%			383,116		2%				460,778		7%
Office			9,959		44%			49,035		18%			158,585		4%				217,579		10%
Other			35,101		16%			23,914		18%			171,697		2%				230,712		6%
Retail			46,857		39%			43,264		18%			384,223		2%				474,344		9%
		$	158,864		32%		$	263,829		18%		$	1,753,891		2%			$	2,176,584		7%

(1) To calculate the percentage of loan balances reserved, partial charge-offs taken on loans with balances outstanding have been added back to both reserves and outstanding balance.

The following table sets forth information on commercial real estate loans by risk category and type, excluding covered loans, at September 30, 2010 (dollars in thousands):

			Risk Category
									Potential Problem
			Non-Performing						and Other Watch
			Loans (NPLs)						List Loans						Pass Loans							Total
						% of Loan						% of Loan						% of Loan							% of Loan
						Balance						Balance						Balance							Balance
			Amount			Reserved(1)			Amount			Reserved			Amount			Reserved				Amount			Reserved(1)
	Church and school		$	785		7	%		$	7,204		18	%		$	54,264		1	%			$	62,253		3	%
	Healthcare			-		-				4,915		13	%			194,521		2	%				199,436		2	%
	Industrial			29,242		19	%			86,034		16	%			440,625		2	%				555,901		5	%
	Multifamily			38,669		28	%			66,221		13	%			373,394		1	%				478,284		6	%
	Office			15,933		38	%			41,374		16	%			165,720		1	%				223,027		8	%
	Other			34,504		13	%			33,982		12	%			177,652		1	%				246,138		5	%
	Retail			60,992		32	%			51,004		14	%			382,673		2	%				494,669		8	%
			$	180,125		27	%		$	290,734		14	%		$	1,788,849		2	%			$	2,259,708		6	%

(1) To calculate the percentage of loan balances reserved, partial charge-offs taken on loans with balances outstanding have been added back to both reserves and outstanding balance.

The following table sets forth trend information for construction real estate loans by risk category, excluding covered loans, for the past five quarters (dollars in thousands):

			Risk Category
								Potential Problem
			Non-Performing					and Other Watch
			Loans (NPLs)					List Loans					Pass Loans						Total
						% of Loan					% of Loan					% of Loan						% of Loan
						Balance					Balance					Balance						Balance
				Amount		Reserved(1)			Amount		Reserved			Amount		Reserved				Amount		Reserved(1)
Total construction loans as of March 31, 2011			$	97,845		47%		$	45,026		19%		$	213,708		3%			$	356,579		23%
Total construction loans as of December 31, 2010			$	122,077		47%		$	64,303		14%		$	236,959		3%			$	423,339		22%
Total construction loans as of September 30, 2010			$	130,422		48%		$	95,256		16%		$	220,203		3%			$	445,881		23%
Total construction loans as of June 30, 2010			$	176,531		44%		$	97,162		17%		$	223,039		3%			$	496,732		24%
Total construction loans as of March 31, 2010			$	177,292		39%		$	121,743		17%		$	259,580		4%			$	558,615		20%

(1) To calculate the percentage of loan balances reserved, partial charge-offs taken on loans with balances outstanding have been added back to both reserves and outstanding balance.

Below is a reconciliation of the activity in our allowance for loan losses for the periods indicated (dollar amounts in thousands):

			Three Months Ended
				March 31,			December 31,			September 30,			June 30,			March 31,
				2011			2010			2010			2010			2010
Balance at the beginning of period			$	192,217		$	193,926		$	195,612		$	177,787		$	177,072
Provision for loan losses				40,000			49,000			65,000			85,000			47,200
Charge-offs:
	Commercial loans			(3,151	)		(9,141	)		(11,362	)		(30,211	)		(7,363	)
	Commercial loans collateralized by assignment of lease payments (lease loans)			-			(43	)		(418	)		(917	)		(333	)
	Commercial real estate loans			(29,775	)		(27,360	)		(25,265	)		(15,002	)		(12,201	)
	Construction real estate			(21,094	)		(17,136	)		(29,120	)		(22,992	)		(25,285	)
	Residential real estate			(3,562	)		(1,363	)		(1,500	)		(4	)		(459	)
	Indirect vehicle			(718	)		(968	)		(503	)		(611	)		(1,117	)
	Home equity			(1,907	)		(1,364	)		(1,369	)		(1,271	)		(628	)
	Consumer loans			(544	)		(428	)		(600	)		(202	)		(525	)
	Total charge-offs			(60,751	)		(57,803	)		(70,137	)		(71,210	)		(47,911	)
Recoveries:
	Commercial loans			2,565			3,842			1,900			2,322			724
	Commercial loans collateralized by assignment of lease payments (lease loans)			66			26			62			96			-
	Commercial real estate loans			1,534			800			907			177			186
	Construction real estate			2,026			1,672			330			1,055			113
	Residential real estate			7			127			7			9			41
	Indirect vehicle			325			286			232			344			301
	Home equity			48			250			11			31			59
	Consumer loans			373			91			2			1			2
	Total recoveries			6,944			7,094			3,451			4,035			1,426
Total net charge-offs				(53,807	)		(50,709	)		(66,686	)		(67,175	)		(46,485	)
Balance (1)			$	178,410		$	192,217		$	193,926		$	195,612		$	177,787
Total loans, excluding loans held for sale			$	6,367,996		$	6,617,811		$	6,848,986		$	7,029,695		$	6,414,856
Average loans, excluding loans held for sale			$	6,460,509		$	6,723,840		$	6,939,415		$	6,925,140		$	6,441,625
Ratio of allowance for loan losses to total loans, excluding loans held for sale				2.80	%		2.90	%		2.83	%		2.78	%		2.77	%
Net loan charge-offs to average loans, excluding loans held for sale (annualized)				3.38	%		2.99	%		3.81	%		3.89	%		2.93	%

(1) Includes $12.7 million for credit losses on unfunded commitments at March 31, 2011.

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 as of March 31, 2011 and December 31, 2010 (in thousands):

				March 31,			December 31,
				2011			2010
General loss reserve			$	126,423		$	126,435
Specific reserve				38,054			51,826
Smaller-balance homogenous loans reserve				13,933			13,956
Total allowance for loan losses			$	178,410		$	192,217

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

INVESTMENT SECURITIES

The following table sets forth the fair value, amortized cost, and total unrealized gain of our investment securities, by type (in thousands):

					At March 31,			At December 31,			At September 30,			At June 30,			At March 31,
					2011			2010			2010			2010			2010
Securities available for sale:
Fair value
Government sponsored agencies and enterprises				$	56,971		$	19,434		$	24,698		$	49,142		$	55,716
States and political subdivisions					365,481			364,932			379,675			377,105			375,523
Mortgage-backed securities					1,279,968			1,197,066			898,837			1,326,432			1,708,512
Corporate bonds					6,019			6,140			6,140			6,356			6,356
Equity securities					10,215			10,171			10,315			10,172			4,384
	Total fair value			$	1,718,654		$	1,597,743		$	1,319,665		$	1,769,207		$	2,150,491
Amortized cost
Government sponsored agencies and enterprises				$	56,452		$	18,766		$	23,826		$	48,138		$	54,672
States and political subdivisions					350,851			351,274			355,121			359,556			362,453
Mortgage-backed securities					1,258,171			1,175,021			887,422			1,301,301			1,696,669
Corporate bonds					6,019			6,140			6,140			6,356			6,356
Equity securities					10,169			10,093			10,016			9,949			4,318
	Total amortized cost			$	1,681,662		$	1,561,294		$	1,282,525		$	1,725,300		$	2,124,468
Unrealized gain
Government sponsored agencies and enterprises				$	519		$	668		$	872		$	1,004		$	1,044
States and political subdivisions					14,630			13,658			24,554			17,549			13,070
Mortgage-backed securities					21,797			22,045			11,415			25,131			11,843
Corporate bonds					-			-			-			-			-
Equity securities					46			78			299			223			66
	Total unrealized gain			$	36,992		$	36,449		$	37,140		$	43,907		$	26,023
Securities held to maturity, at cost:
Mortgage-backed securities				$	102,206		$	-		$	-		$	-		$	-

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 99% of our mortgage-backed securities are agency guaranteed.

DEPOSIT MIX

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

				March 31,					December 31,					September 30,					June 30,					March 31,
				2011					2010					2010					2010					2010
						% of					% of					% of					% of					% of
				Amount		Total			Amount		Total			Amount		Total			Amount		Total			Amount		Total
Low cost deposits:
	Noninterest bearing deposits		$	1,666,868		21%		$	1,691,599		21%		$	1,704,142		20%		$	1,604,482		19%		$	1,424,746		18%
	Money market and NOW accounts			2,712,314		34%			2,776,181		34%			2,819,731		34%			2,773,306		33%			2,716,339		34%
	Savings accounts			718,896		10%			697,851		8%			633,975		7%			618,199		7%			589,485		7%
Total low cost deposits				5,098,078		65%			5,165,631		63%			5,157,848		61%			4,995,987		59%			4,730,570		59%
Certificates of deposit:
	Certificates of deposit			2,273,447		28%			2,447,005		30%			2,649,759		31%			2,824,075		34%			2,737,779		34%
	Public funds - certificates of deposit			53,144		1%			72,112		1%			90,754		1%			76,863		1%			94,084		1%
	Brokered deposit accounts			467,337		6%			468,210		6%			498,264		6%			500,342		6%			492,746		6%
Total certificates of deposit				2,793,928		35%			2,987,327		37%			3,238,777		39%			3,401,280		41%			3,324,609		41%
		Total deposits	$	7,892,006		100%		$	8,152,958		100%		$	8,396,625		100%		$	8,397,267		100%		$	8,055,179		100%

Our deposit mix improved in the quarter, with approximately 65% of deposits in low cost sources at March 31, 2011, compared to 63% at December 31, 2010 and 59% at March 31, 2010. Our ratio of certificates of deposit to total deposits was 35% at March 31, 2011 compared to 37% at December 31, 2010 and 41% at March 31, 2010. Our ratio of noninterest bearing deposits to total deposits was 21% at March 31, 2011, consistent with December 31, 2010 and up from 18% at March 31, 2010.

FORWARD-LOOKING STATEMENTS

When used in this press release and in reports filed with or furnished to the Securities and Exchange Commission, in 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 our 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 expected benefits of the FDIC-assisted transactions we previously completed will not be realized; (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, resulting both from loans we originate and loans we acquire from other financial institutions; (4) results of examinations by the Office of Comptroller of Currency 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 and regulations adopted thereunder, changes in federal and/or state tax laws or interpretations thereof by taxing authorities, changes in laws, rules or regulations applicable to companies that have participated in the TARP Capital Purchase Program of the U.S. Department of the Treasury and other governmental initiatives affecting the financial services industry; (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
(Amounts in thousands)
					March 31,			December 31,			September 30,			June 30,			March 31,
					2011			2010			2010			2010			2010
ASSETS
Cash and due from banks				$	123,794		$	106,726		$	131,381		$	115,450		$	113,664
Interest earning deposits with banks					504,765			737,433			857,997			262,828			430,366
		Total cash and cash equivalents			628,559			844,159			989,378			378,278			544,030
Investment securities:
	Securities available for sale, at fair value				1,718,654			1,597,743			1,319,665			1,769,207			2,150,491
	Securities held to maturity, at cost				102,206			-			-			-			-
	Non-marketable securities - FHLB and FRB Stock				80,186			80,186			78,807			78,807			70,361
		Total investment securities			1,901,046			1,677,929			1,398,472			1,848,014			2,220,852
Loans held for sale					11,533			-			-			-			-
Loans:
	Total loans excluding covered loans				5,590,362			5,805,481			5,989,948			6,149,786			6,259,805
	Covered loans				777,634			812,330			859,038			879,909			155,051
	Total loans				6,367,996			6,617,811			6,848,986			7,029,695			6,414,856
	Less allowance for loan loss				178,410			192,217			193,926			195,612			177,787
		Net loans			6,189,586			6,425,594			6,655,060			6,834,083			6,237,069
Lease investments, net					129,182			126,906			131,324			143,143			138,929
Premises and equipment, net					209,257			210,886			185,064			180,714			181,394
Cash surrender value of life insurance					126,014			125,046			124,116			123,324			122,618
Goodwill, net					387,069			387,069			387,069			387,069			387,069
Other intangibles, net					33,734			35,159			36,791			35,199			36,198
Other real estate owned					80,107			71,476			59,114			43,988			41,589
Other real estate owned related to FDIC transactions					61,461			44,745			63,495			75,205			24,927
FDIC indemnification asset					148,314			215,460			380,342			377,060			40,818
Other assets					165,481			155,935			212,755			231,888			209,747
		Total assets		$	10,071,343		$	10,320,364		$	10,622,980		$	10,657,965		$	10,185,240
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits:
	Noninterest bearing			$	1,666,868		$	1,691,599		$	1,704,142		$	1,604,482		$	1,424,746
	Interest bearing				6,225,138			6,461,359			6,692,483			6,792,785			6,630,433
		Total deposits			7,892,006			8,152,958			8,396,625			8,397,267			8,055,179
Short-term borrowings					295,180			268,844			282,364			302,087			263,663
Long-term borrowings					275,327			285,073			294,529			306,569			320,090
Junior subordinated notes issued to capital trusts					158,563			158,571			158,579			158,605			158,641
Accrued expenses and other liabilities					100,031			110,132			154,969			148,524			95,189
		Total liabilities			8,721,107			8,975,578			9,287,066			9,313,052			8,892,762
Stockholders' Equity
Preferred stock					194,255			194,104			193,956			193,809			193,665
Common stock					546			546			540			538			527
Additional paid-in capital					726,604			725,400			716,294			714,882			689,353
Retained earnings					406,594			402,810			402,754			408,991			392,931
Accumulated other comprehensive income					22,566			22,233			22,655			26,783			15,874
Treasury stock					(2,845	)		(2,828	)		(2,806	)		(2,632	)		(2,423	)
		Controlling interest stockholders' equity			1,347,720			1,342,265			1,333,393			1,342,371			1,289,927
Noncontrolling interest					2,516			2,521			2,521			2,542			2,551
		Total stockholders' equity			1,350,236			1,344,786			1,335,914			1,344,913			1,292,478
Total liabilities and stockholders' equity				$	10,071,343		$	10,320,364		$	10,622,980		$	10,657,965		$	10,185,240

MB FINANCIAL, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share data)(Unaudited)
				Three Months Ended
				March 31,				December 31,				September 30,				June 30,				March 31,
				2011				2010				2010				2010				2010
Interest income:
	Loans			$	87,167			$	92,701			$	94,697			$	94,699			$	82,387
	Investment securities available for sale:
		Taxable			7,752				7,001				11,420				12,154				19,966
		Nontaxable			3,345				3,367				3,387				3,403				3,428
	Federal funds sold				-				-				-				-				2
	Other interest bearing accounts				470				504				248				185				91
		Total interest income			98,734				103,573				109,752				110,441				105,874
Interest expense:
	Deposits				13,359				15,598				18,597				20,283				21,372
	Short-term borrowings				217				255				281				264				345
	Long-term borrowings & junior subordinated notes				2,953				3,065				3,256				3,213				3,339
		Total interest expense			16,529				18,918				22,134				23,760				25,056
Net interest income					82,205				84,655				87,618				86,681				80,818
Provision for loan losses					40,000				49,000				65,000				85,000				47,200
Net interest income after provision for loan losses					42,205				35,655				22,618				1,681				33,618
Other income:
	Loan service fees				1,126				1,532				1,659				2,042				1,284
	Deposit service fees				10,069				9,920				10,705				9,461				8,848
	Lease financing, net				5,783				7,185				5,022				5,026				4,620
	Brokerage fees				1,419				1,231				1,407				1,129				1,245
	Trust & asset management fees				4,431				4,243				3,923				3,536				3,335
	Net gain on sale of investment securities				(3	)			(4	)			9,482				2,304				6,866
	Increase in cash surrender value of life insurance				968				930				1,209				706				671
	Net gain (loss) on sale of other assets				357				419				299				(99	)			11
	Acquisition related gains				-				-				-				62,649				-
	Accretion of FDIC indemnification asset				1,831				3,009				3,602				3,067				-
	Other operating income				3,162				2,330				(1,510	)			2,885				(423	)
	Total other income				29,143				30,795				35,798				92,706				26,457
Other expense:
	Salaries & employee benefits				37,447				36,399				37,424				37,104				33,422
	Occupancy & equipment expense				9,394				7,938				8,800				8,928				9,179
	Computer services expense				2,618				2,445				2,654				3,322				2,528
	Advertising & marketing expense				1,719				1,573				1,620				1,639				1,633
	Professional & legal expense				1,225				1,718				1,637				1,370				1,078
	Brokerage fee expense				328				448				596				420				462
	Telecommunication expense				935				819				975				964				908
	Other intangible amortization expense				1,425				1,632				1,567				1,505				1,510
	FDIC insurance premiums				3,428				3,930				3,873				3,833				3,964
	Branch impairment charges				1,000				-				-				-				-
	Other real estate expense, net				398				858				734				417				685
	Other operating expenses				6,947				6,855				6,598				6,530				6,282
	Total other expense				66,864				64,615				66,478				66,032				61,651
Income (loss) before income taxes					4,484				1,835				(8,062	)			28,355				(1,576	)
Income (benefit) tax expense					(2,460	)			(1,358	)			(5,253	)			9,158				(2,523	)
Net income (loss)					6,944				3,193				(2,809	)			19,197				947
Preferred stock dividends and discount accretion					2,601				2,598				2,597				2,594				2,593
		Net income (loss) available to common stockholders		$	4,343			$	595			$	(5,406	)		$	16,603			$	(1,646	)

	Three Months Ended
		March 31,				December 31,				September 30,				June 30,				March 31,
		2011				2010				2010				2010				2010
Common share data:
Net income (loss) per basic common share	$	0.13			$	0.06			$	(0.05	)		$	0.36			$	0.02
Impact of preferred stock dividends on basic earnings (loss) per common share		(0.05	)			(0.05	)			(0.05	)			(0.05	)			(0.05	)
Basic earnings (loss) per common share		0.08				0.01				(0.10	)			0.31				(0.03	)
Net income (loss) per common share		0.13				0.06				(0.05	)			0.36				0.02
Impact of preferred stock dividends on diluted earnings (loss) per common share		(0.05	)			(0.05	)			(0.05	)			(0.05	)			(0.05	)
Diluted earnings (loss) per common share		0.08				0.01				(0.10	)			0.31				(0.03	)
Weighted average common shares outstanding		53,961,176				53,572,157				53,327,219				52,702,779				51,264,727
Diluted weighted average common shares outstanding		54,254,876				53,790,047				53,327,219				53,034,426				51,264,727

		Three Months Ended
			March 31,			December 31,			September 30,				June 30,			March 31,
			2011			2010			2010				2010			2010
Performance Ratios:
Annualized return on average assets			0.28	%		0.12	%		(0.10	)	%		0.73	%		0.04		%
Annualized return on average common equity			1.53			0.21			(1.86	)			5.79			(0.61	)
Annualized cash return on average tangible common equity(1)			2.88			0.89			(2.34	)			9.52			(0.40	)
Net interest rate spread			3.68			3.63			3.71				3.69			3.42
Cost of funds(2)			0.77			0.83			0.96				1.04			1.13
Efficiency ratio(3)			57.71			53.72			55.32				56.39			58.00
Annualized net non-interest expense to average assets(4)			1.46			1.22			1.36				1.45			1.52
Core pre-tax pre-provision earnings to risk-weighted assets(5)			2.81			3.08			2.91				2.71			2.41
Net interest margin			3.76			3.72			3.81				3.79			3.55
Tax equivalent effect			0.12			0.11			0.11				0.12			0.12
Net interest margin - fully tax equivalent basis(6)			3.88			3.83			3.92				3.91			3.67
Asset Quality Ratios:
Non-performing loans(7) to total loans			5.01	%		5.48	%		5.73		%		4.89	%		5.04		%
Non-performing assets(7) to total assets			3.96			4.21			4.26				3.64			3.58
Allowance for loan losses to non-performing loans(7)			55.94			53.03			49.40				56.89			55.01
Allowance for loan losses to non-performing loans,(7) including partial charge-offs taken			70.46			67.66			64.78				69.55			65.31
Allowance for loan losses to total loans			2.80			2.90			2.83				2.78			2.77
Net loan charge-offs to average loans (annualized)			3.38			2.99			3.81				3.89			2.93
Capital Ratios:
Tangible equity to tangible assets(8)			9.74	%		9.43	%		9.06		%		9.12	%		9.02		%
Tangible common equity to risk weighted assets(9)			11.36			10.94			10.46				10.31			9.73
Tangible common equity to tangible assets(10)			7.73			7.47			7.16				7.23			7.04
Book value per common share(11)		$	21.24		$	21.14		$	21.14			$	21.46		$	20.85
Less: goodwill and other intangible assets, net of tax benefit, per common share			7.52			7.53			7.64				0.76			7.79
Tangible book value per common share(12)			13.73			13.60			13.58				13.81			13.06
Total capital (to risk-weighted assets)			18.33	%		17.75	%		17.10		%		16.77	%		16.39		%
Tier 1 capital (to risk-weighted assets)			16.31			15.75			15.12				14.81			14.42
Tier 1 capital (to average assets)			11.00			10.66			10.38				10.48			10.30
Tier 1 common capital (to risk-weighted assets)			11.01			10.61			10.14				9.96			9.51

(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 common equity (average common 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 other expense excluding non-core items divided by the sum of net interest income on a fully tax equivalent basis and total other income less non-core items.
(4)		Equals total other expense excluding non-core items less total other income excluding non-core items divided by average assets.
(5)		Equal net income before taxes excluding loan loss provision expense, non-core other income items, and non-core other expense items divided by risk-weighted assets.
(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 common stockholders’ equity less goodwill and other intangibles, net of tax benefit, divided by total assets less goodwill and other intangibles, net of tax benefit.
(11)		Equals total ending common stockholders’ equity divided by common shares outstanding.
(12)		Equals total ending common 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 pre-tax, pre-provision earnings; core pre-tax, pre-provision earnings; net interest income on a fully tax equivalent basis, net interest margin on a fully tax equivalent basis; efficiency ratio, ratio of annualized net non-interest expense to average assets, and ratio of core pre-tax, pre-provision earnings to risk-weighted assets, with net gains and losses on securities available for sale, net gains and losses on sale of other assets, net gains and losses on other real estate owned, acquisition related gains and increase (decrease) in market value of assets held in trust for deferred compensation excluded from the non-interest income components, impairment charges and increase (decrease) in market value of assets held in trust for deferred compensation excluded from the non-interest expense components of these ratios; ratios of tangible equity to tangible assets, tangible common equity to risk weighted assets, tangible common equity to tangible 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 in its analysis of our performance. Management believes that pre-tax, pre-provision earnings are a useful measure in assessing our core operating performance, particularly during times of economic stress. The tax equivalent adjustment to net interest income 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. Management also believes that by excluding net gains and losses on securities available for sale, net gains and losses on sale of other assets, net gains and losses on other real estate owned, acquisition-related gains and increase (decrease) in market value of assets held in trust for deferred compensation from the non-interest income component and excluding impairment changes and increase (decrease) in market value of assets held in trust for deferred compensation from other non-interest expense of the efficiency ratio, the ratio of annualized net non-interest expense to average assets and the ratio of core pre-tax, pre-provision earnings to risk-weighted assets, these ratios better reflect our core operating performance. 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. These disclosures 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.

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

				March 31,			December 31,			September 30,			June 30,			March 31,
				2011			2010			2010			2010			2010
Stockholders' equity - as reported			$	1,350,236		$	1,344,786		$	1,335,914		$	1,344,913		$	1,292,478
	Less: goodwill			387,069			387,069			387,069			387,069			387,069
	Less: other intangible, net of tax benefit			21,927			22,853			23,914			22,879			23,529
Tangible equity			$	941,240		$	934,864		$	924,931		$	934,965		$	881,880

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

				March 31,			December 31,			September 30,			June 30,			March 31,
				2011			2010			2010			2010			2010
Total assets - as reported			$	10,071,343		$	10,320,364		$	10,622,980		$	10,657,965		$	10,185,240
	Less: goodwill			387,069			387,069			387,069			387,069			387,069
	Less: other intangible, net of tax benefit			21,927			22,853			23,914			22,879			23,529
Tangible assets			$	9,662,347		$	9,910,442		$	10,211,997		$	10,248,017		$	9,774,642

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

				March 31,			December 31,			September 30,			June 30,			March 31,
				2011			2010			2010			2010			2010
Common stockholders' equity - as reported			$	1,155,981		$	1,150,682		$	1,141,958		$	1,151,104		$	1,098,813
	Less: goodwill			387,069			387,069			387,069			387,069			387,069
	Less: other intangible, net of tax benefit			21,927			22,853			23,914			22,879			23,529
Tangible common equity			$	746,985		$	740,760		$	730,975		$	741,156		$	688,215

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

			Three Months Ended
				March 31,			December 31,			September 30,			June 30,			March 31,
				2011			2010			2010			2010			2010
Average common stockholders' equity - as reported			$	1,152,119		$	1,147,581		$	1,152,058		$	1,150,440		$	1,089,859
	Less: average goodwill			387,069			387,069			387,069			387,069			387,069
	Less: average other intangible assets,
	net of tax benefit			22,254			23,236			22,596			22,905			23,892
Average tangible common equity			$	742,796		$	737,276		$	742,393		$	740,466		$	678,898

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

			Three Months Ended
				March 31,			December 31,			September 30,				June 30,			March 31,
				2011			2010			2010				2010			2010
Net income (loss) available to common
stockholders - as reported			$	4,343		$	595		$	(5,406	)		$	16,603		$	(1,646	)
	Add: other intangible amortization expense,
	net of tax benefit			926			1,062			1,018				978			981
Net cash flow available to common stockholders			$	5,269		$	1,657		$	(4,388	)		$	17,581		$	(665	)

Efficiency Ratio Calculation (Dollars in Thousands)

			Three Months Ended
				March 31,			December 31,			September 30,			June 30,			March 31,
				2011			2010			2010			2010			2010
Non-interest expense			$	66,864		$	64,615		$	66,478		$	66,032		$	61,651
Adjustment for impairment charges				1,000			-			-			-			-
Adjustment for increase (decrease) in market value of
assets held in trust for deferred compensation				187			597			(3	)		(39	)		7
	Non-interest expense - as adjusted		$	65,677		$	64,018		$	66,481		$	66,071		$	61,644
Net interest income			$	82,205		$	84,655		$	87,618		$	86,681		$	80,818
Tax equivalent adjustment				2,625			2,609			2,614			2,642			2,593
Net interest income on a fully tax equivalent basis				84,830			87,264			90,232			89,323			83,411
Plus other income				29,143			30,795			35,798			92,706			26,457
Less net (losses) gains on other real estate owned				(372	)		(2,124	)		(3,913	)		52			(3,299	)
Less net (losses) gains on securities available for sale				(3	)		(4	)		9,482			2,304			6,866
Less net gains (losses) on sale of other assets				357			419			299			(99	)		11
Less acquisition related gains				-			-			-			62,649			-
Less increase (decrease) in market value of assets held in
trust for deferred compensation				187			597			(3	)		(39	)		7
Net interest income plus non-interest income -
	as adjusted		$	113,804		$	119,171		$	120,165		$	117,162		$	106,283
Efficiency ratio				57.71	%		53.72	%		55.32	%		56.39	%		58.00	%
Efficiency ratio (without adjustments)				60.05	%		55.97	%		53.86	%		36.81	%		57.47	%

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

			Three Months Ended
				March 31,			December 31,			September 30,			June 30,			March 31,
				2011			2010			2010			2010			2010
Non-interest expense			$	66,864		$	64,615		$	66,478		$	66,032		$	61,651
Adjustment for impairment charges				1,000			-			-			-			-
Adjustment for increase (decrease) in market value of
assets held in trust for deferred compensation				187			597			(3	)		(39	)		7
	Non-interest expense - as adjusted			65,677			64,018			66,481			66,071			61,644
Other income				29,143			30,795			35,798			92,706			26,457
Less net (losses) gains on other real estate owned				(372	)		(2,124	)		(3,913	)		52			(3,299	)
Less net (losses) gains on securities available for sale				(3	)		(4	)		9,482			2,304			6,866
Less net gains (loss) on sale of other assets				357			419			299			(99	)		11
Less acquisition related gains				-			-			-			62,649			-
Less increase (decrease) in market value of assets
held in trust for deferred compensation				187			597			(3	)		(39	)		7
Other income - as adjusted				28,974			31,907			29,933			27,839			22,872
Net non-interest expense			$	36,703		$	32,111		$	36,548		$	38,232		$	38,772
Average assets			$	10,198,626		$	10,452,626		$	10,634,556		$	10,584,722		$	10,349,664
Annualized net non-interest expense to average assets				1.46	%		1.22	%		1.36	%		1.45	%		1.52	%
Annualized net non-interest expense to average assets
	(without adjustments)			1.50	%		1.28	%		1.14	%		-1.01	%		1.38	%

Core Pre-Tax, Pre-Provision Earnings (Dollars in Thousands)

			Three Months Ended
				March 31,			December 31,			September 30,			June 30,			March 31,
				2011			2010			2010			2010			2010
Income (loss) before income taxes			$	4,484		$	1,835		$	(8,062	)	$	28,355		$	(1,576	)
Provision for loan losses				40,000			49,000			65,000			85,000			47,200
	Pre-tax, pre-provision earnings			44,484			50,835			56,938			113,355			45,624
Non-core other income
	Net (losses) gains on other real estate owned			(372	)		(2,124	)		(3,913	)		52			(3,299	)
	Net (losses) gains on securities available for sale			(3	)		(4	)		9,482			2,304			6,866
	Net gain (loss) on sale of other assets			357			419			299			(99	)		11
	Acquisition related gains			-			-			-			62,649			-
	Increase (decrease) in market value of assets held in
	trust for deferred compensation			187			597			(3	)		(39	)		7
Total non-core other income				169			(1,112	)		5,865			64,867			3,585
Non-core other expense
	Impairment charges			1,000			-			-			-			-
	Increase (decrease) in market value of assets held in
	trust for deferred compensation			187			597			(3	)		(39	)		7
Total non-core other expense				1,187			597			(3	)		(39	)		7
Core pre-tax, pre-provision earnings			$	45,502		$	52,544		$	51,070		$	48,449		$	42,046
Risk-weighted assets			$	6,577,477		$	6,772,761		$	6,971,810		$	7,172,094		$	7,074,274
Annualized pre-tax, pre-provision earnings to risk-
	weighted assets			2.81	%		3.08	%		2.91	%		2.71	%		2.41	%
Annualized pre-tax, pre-provision earnings to risk-
	weighted assets (without adjustments)			2.74	%		2.98	%		3.24	%		6.34	%		2.62	%

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.

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):

				Three Months Ended March 31,																	Three Months Ended December 31,
				2011								2010									2010
					Average					Yield/			Average					Yield/				Average					Yield/
					Balance			Interest		Rate			Balance			Interest		Rate				Balance			Interest		Rate
Interest Earning Assets:
Loans (1) (2) (3):
Commercial related credits
	Commercial			$	1,164,698		$	14,331		4.99%		$	1,365,969		$	16,950		5.03%			$	1,243,057		$	15,053		4.80%
	Commercial loans collateralized by assignment
		of lease payments			1,003,872			14,090		5.61			936,150			14,232		6.08				1,018,026			14,662		5.76
	Real estate commercial				2,139,597			28,235		5.28			2,439,104			32,563		5.34				2,235,328			29,853		5.23
	Real estate construction				407,148			3,519		3.46			596,076			4,798		3.22				438,622			3,741		3.34
Total commercial related credits					4,715,315			60,175		5.10			5,337,299			68,543		5.14				4,935,033			63,309		5.02
Other loans
	Real estate residential				332,856			4,467		5.37			296,037			3,886		5.25				326,785			4,523		5.54
	Home equity				376,361			4,003		4.31			403,673			4,332		4.35				385,119			4,234		4.36
	Indirect				174,362			2,940		6.84			178,981			3,052		6.92				178,940			3,583		7.94
	Consumer loans				57,468			600		4.23			59,046			550		3.78				57,709			633		4.35
Total other loans					941,047			12,010		5.18			937,737			11,820		5.11				948,553			12,973		5.43
	Total loans, excluding covered loans				5,656,362			72,185		5.18			6,275,036			80,363		5.19				5,883,586			76,282		5.14
	Covered loans				804,275			15,805		7.97			166,589			2,771		6.75				840,254			17,213		8.13
	Total loans				6,460,637			87,990		5.52			6,441,625			83,134		5.23				6,723,840			93,495		5.52
Taxable investment securities					1,313,061			7,752		2.36			2,300,072			19,966		3.47				1,172,751			7,002		2.39
Investment securities exempt from federal income taxes (3)					348,831			5,146		5.90			360,658			5,274		5.85				351,955			5,181		5.76
Federal funds sold					-			-		0.00			1,428			2		0.56				-			-		0.00
Other interest bearing deposits					747,013			471		0.26			124,301			91		0.30				784,803			504		0.25
	Total interest earning assets			$	8,869,542		$	101,359		4.63		$	9,228,084		$	108,467		4.77			$	9,033,349		$	106,182		4.66
Non-interest earning assets					1,329,084								1,121,580									1,419,277
	Total assets			$	10,198,626							$	10,349,664								$	10,452,626
Interest Bearing Liabilities:
Core funding:
	Money market and NOW accounts			$	2,726,599		$	2,486		0.37%		$	2,708,718		$	3,629		0.54%			$	2,823,619		$	3,410		0.48%
	Savings accounts				710,455			420		0.24			585,628			450		0.31				657,816			505		0.30
	Certificate of deposit				2,362,918			6,418		1.10			2,881,819			12,441		1.75				2,529,865			7,481		1.17
	Customer repurchase agreements				262,578			187		0.29			231,900			245		0.43				277,782			218		0.31
Total core funding					6,062,550			9,511		0.64			6,408,065			16,765		1.06				6,289,082			11,614		0.73
Whole sale funding:
	Public funds				66,362			102		0.62			102,249			187		0.74				81,500			128		0.62
	Brokered accounts (includes fee expense)				467,417			3,933		3.41			495,726			4,665		3.82				473,090			4,074		3.42
	Other short-term borrowings				3,266			30		2.70			21,538			100		1.88				4,106			38		3.67
	Long-term borrowings				436,975			2,953		2.70			483,937			3,339		2.76				448,106			3,064		2.68
Total wholesale funding					974,020			7,018		2.92			1,103,450			8,291		3.05				1,006,802			7,304		2.88
Total interest bearing liabilities				$	7,036,570		$	16,529		0.95		$	7,511,515		$	25,056		1.35			$	7,295,884		$	18,918		1.03
Non-interest bearing deposits					1,672,003								1,454,263									1,694,179
Other non-interest bearing liabilities					143,775								100,454									120,974
Stockholders' equity					1,346,278								1,283,432									1,341,589
		Total liabilities and stockholders' equity		$	10,198,626							$	10,349,664								$	10,452,626
		Net interest income/interest rate spread (4)					$	84,830		3.68%					$	83,411		3.42%						$	87,264		3.63%
		Taxable equivalent adjustment						2,625								2,593									2,609
		Net interest income, as reported					$	82,205							$	80,818								$	84,655
		Net interest margin (5)								3.76%								3.55%									3.72%
		Tax equivalent effect								0.12%								0.12%									0.11%
		Net interest margin on a fully equivalent basis (5)								3.88%								3.67%									3.83%

(1)		Non-accrual loans are included in average loans.
(2)		Interest income includes amortization of deferred loan origination fees of $1.3 million, $1.0 million, and $1.0 million for the three months ended March 31, 2011, December 31, 2010, and March 31, 2010, 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.