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

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):     --   an executive separation agreement expense of $5.9 million, -- unamortized issuance costs recognized due to the redemption of trust preferred securities of $1.9 million, -- a loss on the sale of investment securities of $1.5 million, -- a contribution to the MB Financial Charitable Foundation of $1.5 million, -- a provision for loan losses attributable to the loans purchased from Union Bank, as noted earlier, of $1.3 million, -- a gain on the sale of artwork that was acquired as a result of our acquisition of First Oak Brook Bancshares, Inc. (FOBB), parent of Oak Brook Bank, in the third quarter of 2006, of $733 thousand, -- non-recurring rent expense of $494 thousand, -- a gain on the sale of our brokerage third party marketing business of $447 thousand, -- a Visa litigation expense of $342 thousand. 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 Three Months Ended December 31,   September 30,   June 30,   March 31,   December 31, 2007   2007   2007   2007   2006 Core other income: Loan service fees $ 2,080 $ 1,253 $ 1,388 $ 1,537 $ 1,278 Deposit service fees 6,635 6,501 5,624 5,158 5,244 Lease financing, net 4,155 3,952 3,744 3,996 3,895 Brokerage fees 1,399 2,067 2,716 2,452 2,061 Trust and asset management fees 2,101 2,490 2,666 2,281 2,326 Increase in cash surrender value of life insurance 1,225 1,288 1,269 1,221 1,184 Merchant card processing 4,293 4,131 4,045 3,878 3,434 Other operating income 1,282     1,507     1,303     1,449     1,491 Total core other income 23,170     23,189     22,755     21,972     20,913   Non-core other income (1): Gain on sale of third party brokerage business (A) 447 - 500 - - Gain on sale of artwork (D) 733 - 1,634 - - Gain on sale of properties (D) - - 7,439 - - Net gain (loss) on sale of other assets (D) (10 ) 293 (14 ) 22 55 Net gain (loss) on sale of investment securities (1,529 ) (114 ) (2,077 ) (24 ) 82 Gain on sale of land trust business (B) - - - 909 - Increase (decrease) in market value of assets held in trust for deferred compensation (C) 170     (109 )   483     65     316 Total non-core other income (189 )   70     7,965     972     453   Total other income $ 22,981     $ 23,259     $ 30,720     $ 22,944     $ 21,366 (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. Other Expense Three Months Ended December 31,   September 30,   June 30,   March 31,   December 31, 2007   2007   2007   2007   2006 Core other expense: Salaries and employee benefits $ 26,759 $ 27,507 $ 26,130 $ 24,934 $ 26,645 Occupancy and equipment expense 7,239 6,928 7,054 7,200 6,733 Computer services expense 1,949 1,846 1,857 1,817 1,746 Advertising and marketing expense 962 1,214 1,444 1,410 1,049 Professional and legal expense 862 593 656 530 368 Brokerage fee expense 432 918 1,403 1,271 1,087 Telecommunication expense 757 681 689 681 693 Other intangibles amortization expense 871 874 878 881 972 Merchant card processing 3,815 3,487 3,474 3,270 3,045 Other operating expenses 5,156   4,888     4,805   4,747   4,676 Total core other expense 48,802   48,936     48,390   46,741   47,014   Non-core other expense (1): Vision severance payments (E) - - 200 - - Executive separation agreement expense (E) 5,908 - - - - Contribution to MB Financial Charitable Foundation (F) 1,500 - 3,000 - - Unamortized issuance costs related to redemption of trust preferred securities (G) 1,914 - - - - Rent expense (H) 494 - - - - Visa litigation expense (F) 342 - - - - Increase in market value of assets held in trust for deferred compensation (E) 170   (109 )   483   65   316 Total non-core other expense 10,328   (109 )   3,683   65   316   Total other expense $ 59,130   $ 48,827     $ 52,073   $ 46,806   $ 47,330 (1) Letters denote the corresponding line items where the non-core other expense items reside in the consolidated statements of income as follows: E – Salaries and employee benefits, F – Other Operating Expenses, G – Profession and legal expense and H –Occupancy and equipment expense. As noted earlier, the decrease in our core business brokerage fee expense was primarily due to the sale of our third party brokerage business during the second quarter of 2007. As previously reported by the Company, on October 23, 2007, the Company and Richard M. Rieser, Jr., the Company’s Vice Chairman, Executive Vice President and Chief Marketing and Legal Strategist, executed a separation and settlement agreement pursuant to which Mr. Rieser resigned from each of his positions with the Company. As a result of Mr. Rieser’s termination of service and the amounts payable to him pursuant to the agreement, we incurred $5.9 million of additional salary and employee benefits expense in the fourth quarter of 2007. We estimate that we will realize cost savings, net of tax, of approximately $1.1 million or $0.03 per share per year as a result of Mr. Rieser’s termination of service. During the fourth quarter we made a $1.5 million contribution to the MB Financial Charitable Foundation, which is dedicated to strengthening the communities where MB Financial Bank operates. 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 recognized $1.9 million of unamortized issuance costs. We recognized $494 thousand of non-recurring rental expense in the fourth quarter of 2007. Additionally, during the fourth quarter of 2007, we incurred litigation expense due to our proportionate share of Visa litigation charges. This expense pertained to both Visa’s legal settlement with American Express, as well as other pending Visa litigation, including litigation with Discover Card. Like all Visa member banks, MB Financial Bank is obligated to share in certain liabilities associated with Visa’s litigation. The increase in market value of assets held in trust for deferred compensation is recorded in salaries and employee benefit expense, and is offset by the same amount recorded as other income. Income Taxes Income tax expense from continuing operations for the three months ended December 31, 2007, decreased $4.8 million to $1.9 million compared to $6.7 million for the three months ended September 30, 2007. The effective tax rate was 19.2% and 27.9% for the quarters ended December 31, 2007 and September 30, 2007, respectively. The decline in the effective tax rate was primarily due to a higher percentage of pre-tax income generated from tax exempt sources for the three months ended December 31, 2007, compared to the three months ended September 30, 2007. LOAN PORTFOLIO The following table sets forth the composition of the loan portfolio as of the dates indicated (dollars in thousands): December 31,   September 30,   June 30,   March 31,   December 31, 2007   2007   2007   2007   2006 Amount   % of Total   Amount   % of Total   Amount   % of Total   Amount   % of Total   Amount   % of Total           Commercial related credits: Commercial loans 1,323,455 24 % $ 1,261,995 23 % $ 1,161,268 22 % $ 1,106,806 22 % $ 1,020,707 21 % Commercial loans collateralized by assignment of lease payments (lease loans) 553,138 10 % 453,340 8 % 437,581 8 % 375,763 7 % 392,063 8 % Commercial real estate (1) 1,994,312 36 % 1,915,845 36 % 1,819,388 36 % 1,819,098 36 % 1,804,103 36 % Construction real estate 825,216     14 %   849,914     16 %   884,560     17 %   841,065     17 %   851,896     17 % Total commercial related credits 4,696,121     84 %   4,481,094     83 %   4,302,797     83 %   4,142,732     82 %   4,068,769     82 % Other loans: Residential real estate (1) 372,787 6 % 362,963 7 % 354,763 6 % 350,100 8 % 360,183 7 % Indirect vehicle 146,311 3 % 142,827 3 % 131,308 3 % 120,342 2 % 110,573 2 % Home equity 347,676 6 % 344,116 6 % 348,336 7 % 363,967 7 % 381,612 8 % Consumer loans 52,732     1 %   51,532     1 %   52,302     1 %   63,265     1 %   50,357     1 % Total other loans 919,506     16 %   901,438     17 %   886,709     17 %   897,674     18 %   902,725     18 %   Gross loans (2) 5,615,627 100 % 5,382,532 100 % 5,189,506 100 % 5,040,406 100 % 4,971,494 100 % Allowance for loan losses (65,103 ) (61,122 ) (59,058 ) (58,705 ) (58,983 ) Net loans 5,550,524   $ 5,321,410   $ 5,130,448   $ 4,981,701   $ 4,912,511   (1) During the third quarter of 2007, multifamily residential real estate loans were reclassified from residential real estate loans to commercial real estate loans. Prior periods have been reclassified to conform to the current period’s presentation. (2) Gross loan balances at December 31, 2007, September 30, 2007, June 30, 2007, March 31, 2007, and December 31, 2006, are net of unearned income, including net deferred loan fees of $2.8 million, $2.9 million, $2.9 million, $2.8 million, and $3.0 million, respectively. Commercial related credits increased by 19% on an annualized basis from September 30, 2007 to December 31, 2007. Total loans increased by 17% on an annualized basis over the same period. In each case, loan growth was due to organic growth and the purchase of approximately $100 million of loans by MB Financial Bank from Union Bank, prior to the closing of the Union Bank sale, as noted earlier. The composition of the loans purchased from Union bank was approximately 57% lease loans, 32% commercial real estate loans, and 11% commercial loans. Excluding growth attributable to the Union Bank loan purchase, commercial related credits grew by slightly more than 10% on an annualized basis in the fourth quarter of 2007, and 13% for the entire year. Including growth attributable to the Union Bank loan purchase, commercial related credits and total loans increased by 15% and 13%, respectively, from December 31, 2006 to December 31, 2007. Loan growth in both commercial related credits and in total loans, was primarily due to growth in both existing customer and new customer loan demand resulting from the Company’s focus on marketing and new business development. ASSET QUALITY The following table presents a summary of non-performing assets as of the dates indicated (dollar amounts in thousands):   December 31,2007   September 30,2007   June 30,2007   March 31,2007   December 31,2006 Non-performing loans:         Non-accrual loans (1) $ 24,459 $ 23,901 $ 21,799 $ 23,222 $ 21,164 Loans 90 days or more past due, still accruing interest -     -     -     -     304   Total non-performing loans 24,459     23,901     21,799     23,222     21,468   Other real estate owned 1,120 566 111 319 2,844 Repossessed vehicles 179     288     188     61     192   Total non-performing assets $ 25,758     $ 24,755     $ 22,098     $ 23,602     $ 24,504   Total non-performing loans to total loans 0.44 % 0.44 % 0.42 % 0.46 % 0.43 % Allowance for loan losses to non-performing loans 266.17 % 255.73 % 270.92 % 252.80 % 274.75 % Total non-performing assets to total assets 0.33 % 0.31 % 0.28 % 0.30 % 0.31 % (1) There were no restructured loans in any period presented. Below is a reconciliation of the activity in our allowance for loan losses for the periods indicated (dollar amounts in thousands): Three Months Ended                   December 31,2007   September 30,2007   June 30,2007   March 31, 2007   December 31,2006         Balance at beginning of period $ 61,122 $ 59,058 $ 58,705 $ 58,983 $ 58,439 Provision for loan losses 8,000 4,500 3,000 3,813 3,500   Charge-offs (4,512 ) (3,395 ) (4,046 ) (4,354 ) (4,056 ) Recoveries 493     959     1,399     263     1,100   Net charge-offs (4,019 )   (2,436 )   (2,647 )   (4,091 )   (2,956 )   Balance $ 65,103     $ 61,122     $ 59,058     $ 58,705     $ 58,983   Total loans $ 5,615,627 $ 5,382,532 $ 5,189,506 $ 5,040,406 $ 4,971,494 Average loans $ 5,459,430 $ 5,275,376 $ 5,099,822 $ 4,989,817 $ 4,873,821 Ratio of allowance for loan losses to total loans 1.16 % 1.14 % 1.14 % 1.16 % 1.19 % Net loan charge-offs to average loans (annualized) 0.29 % 0.18 % 0.21 % 0.33 % 0.24 % The increase in our provision from the third quarter of 2007 to the fourth quarter of 2007 was primarily due to our organic loan growth during the fourth quarter, our purchase of loans from Union Bank, as noted earlier, an increase in potential problem loans, and our concern that economic conditions are worsening at a national level. 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. We define potential problem loans as performing loans rated substandard or doubtful, that do not meet the definition of a non-performing loan (See "Asset Quality” section above for non-performing loans). We do not necessarily expect to realize losses on potential problem loans, but we recognize potential problem loans carry a higher probability of default and require additional attention by management. The aggregate principal amounts of potential problem loans were $87.6 million, or 1.56% of total loans as of December 31, 2007, and approximately $45.6 million, or 0.85% of total loans as of September 30, 2007. A majority of the increase in potential problem loans was due to the addition of certain residential construction loans. The following is a summary of charge-offs and non-performing loans for the prior twenty quarters (in thousands): NetCharge-Offs   AnnualizedNet Charge-Offsto AverageLoans   End ofPeriodNon-PerformingLoans   Non-PerformingLoans to TotalLoans   PotentialProblemLoans to TotalLoans   Total Non-PerformingLoans andPotentialProblem Loans toTotal Loans   2003 – 1st Qtr $ 1,219 0.20 % $ 22,384 0.86 % 1.56 % 2.42 % 2003 – 2nd Qtr 2,872 0.44 % $ 21,503 0.84 % 1.15 % 1.99 % 2003 – 3rd Qtr 4,538 0.69 % $ 25,519 0.98 % 1.04 % 2.02 % 2003 – 4th Qtr 1,524 0.23 % $ 21,073 0.79 % 0.89 % 1.68 % 2003 – Full Year $ 10,153 0.39 %   2004 – 1st Qtr $ 1,317 0.20 % $ 25,922 0.96 % 1.45 % 2.40 % 2004 – 2nd Qtr 1,962 0.28 % $ 28,789 0.95 % 1.34 % 2.29 % 2004 – 3rd Qtr 1,632 0.21 % $ 25,228 0.84 % 1.45 % 2.28 % 2004 – 4th Qtr 2,416 0.31 % $ 22,571 0.71 % 1.28 % 1.99 % 2004 – Full Year $ 7,327 0.25 %   2005 – 1st Qtr $ 2,890 0.36 % $ 25,623 0.79 % 0.81 % 1.60 % 2005 – 2nd Qtr 2,074 0.25 % $ 22,883 0.67 % 0.59 % 1.26 % 2005 – 3rd Qtr 1,805 0.21 % $ 18,212 0.53 % 0.67 % 1.20 % 2005 – 4th Qtr 1,346 0.16 % $ 20,171 0.58 % 0.61 % 1.19 % 2005 – Full Year $ 8,115 0.24 %   2006 – 1st Qtr $ 1,036 0.12 % $ 19,685 0.55 % 0.66 % 1.21 % 2006 – 2nd Qtr 866 0.10 % $ 15,887 0.43 % 0.88 % 1.31 % 2006 – 3rd Qtr 4,975 0.46 % $ 19,912 0.41 % 0.45 % 0.86 % 2006 – 4th Qtr 2,956 0.24 % $ 21,468 0.43 % 0.48 % 0.91 % 2006 – Full Year $ 9,833 0.24 %   2007 – 1st Qtr $ 4,091 0.33 % $ 23,222 0.46 % 0.63 % 1.09 % 2007 – 2nd Qtr 2,647 0.21 % $ 21,799 0.42 % 0.41 % 0.83 % 2007 – 3rd Qtr 2,436 0.18 % $ 23,901 0.44 % 0.85 % 1.29 % 2007 – 4th Qtr 4,019 0.29 % $ 24,459 0.44 % 1.56 % 2.00 % 2007 – Full Year $ 13,193 0.25 % INVESTMENT SECURITIES AVAILABLE FOR SALE The following table sets forth the fair value, amortized cost, and total unrealized gain (loss) of our investment securities available for sale, by type (in thousands):   At December 31,2007   At September 30,2007   At June 30,2007   At March 31,2007   At December 31,2006 Fair value         U.S. Treasury securities $ - $ - $ 1,274 $ 7,280 $ 11,248 Government sponsored agencies and enterprises 310,538 328,040 414,620 540,141 665,435 States and political subdivisions 412,302 397,807 386,040 366,865 370,036 Mortgage-backed securities 438,056 487,747 489,345 468,092 495,215 Corporate bonds 13,057 22,006 27,643 30,215 27,316 Equity securities 67,131 73,526 69,856 58,089 58,551 Debt securities issued by foreign governments 301   298     298     547     547   Total fair value 1,241,385   1,309,424     1,389,076     1,471,229     1,628,348     Amortized cost U.S. Treasury securities - - 1,290 7,302 11,287 Government sponsored agencies and enterprises 305,768 326,504 417,647 538,836 666,854 States and political subdivisions 407,973 396,896 392,378 365,600 369,204 Mortgage-backed securities 435,743 489,219 496,675 475,335 505,241 Corporate bonds 12,797 22,120 28,024 30,327 27,477 Equity securities 67,117 73,584 70,068 58,148 58,627 Debt securities issued by foreign governments 299   298     298     547     547   Total amortized cost 1,229,697   1,308,621     1,406,380     1,476,095     1,639,237     Unrealized gain (loss) U.S. Treasury securities - - (16 ) (22 ) (39 ) Government sponsored agencies and enterprises 4,770 1,536 (3,027 ) 1,305 (1,419 ) States and political subdivisions 4,329 911 (6,338 ) 1,265 832 Mortgage-backed securities 2,313 (1,472 ) (7,330 ) (7,243 ) (10,026 ) Corporate bonds 260 (114 ) (381 ) (112 ) (161 ) Equity securities 14 (58 ) (212 ) (59 ) (76 ) Debt securities issued by foreign governments 2   -     -     -     -   Total unrealized gain (loss) 11,688   $ 803     $ (17,304 )   $ (4,866 )   $ (10,889 ) Our investment security portfolio continued to decrease, as a majority of securities that have been sold or matured have not been replaced due to the lack of attractive investment opportunities. We do not have any meaningful direct or indirect holdings of subprime residential mortgages in our investment portfolio. The equity securities in our investment portfolio consist primarily of Federal Home Loan Bank of Chicago common stock and Federal Reserve Bank stock. FUNDING MIX The following table shows the composition of our core and wholesale funding resources as of the dates indicated (dollars in thousands):   December 31,   September 30,   June 30,   March 31,   December 31, 2007   2007   2007   2007   2006 Amount   % of Total   Amount   % of Total   Amount   % of Total   Amount   % of Total   Amount   % of Total           Core funding: Non-interest bearing deposits $ 875,491 13 % $ 846,699 13 % $ 879,338 13 % $ 856,106 13 % $ 924,371 14 % Money market and NOW accounts 1,263,021 18 % 1,336,162 20 % 1,221,893 18 % 1,162,047 18 % 1,040,818 16 % Savings accounts 390,980 6 % 407,608 6 % 429,625 7 % 447,697 7 % 473,727 7 % Certificates of deposit 2,193,793 32 % 2,236,197 33 % 2,270,184 34 % 2,325,655 35 % 2,332,571 35 % Customer repurchase agreements 367,702   5 %   341,893   5 %   326,194   5 %   293,785   4 %   314,441   4 % Total core funding 5,090,987   74 %   5,168,559   77 %   5,127,234   77 %   5,085,290   77 %   5,085,928   76 % Wholesale funding: Public funds deposits 312,032 5 % 314,826 5 % 327,560 5 % 285,621 4 % 239,492 4 % Brokered deposit accounts 478,466 7 % 408,796 6 % 394,644 6 % 425,683 6 % 569,574 9 % Other short-term borrowings 610,019 9 % 468,042 6 % 456,959 7 % 428,631 7 % 374,063 5 % Long-term borrowings 158,865 2 % 162,577 3 % 161,322 3 % 165,006 3 % 245,880 4 % Subordinated debt 50,000 1 % 25,000 0 % 25,000 0 % 10,000 0 % 10,000 0 % Junior subordinated notes issued to capital trusts   159,016   2 %   197,537   3 %   166,657   2 %   179,096   3 %   179,162   2 % Total wholesale funding 1,768,398   26 %   1,576,778   23 %   1,532,142   23 %   1,494,037   23 %   1,608,171   24 %   Total funding 6,859,385   100 %   $ 6,745,337   100 %   $ 6,659,376   100 %   $ 6,579,327   100 %   $ 6,694,099   100 % Other short-term borrowings increased from September 30, 2007 to December 31, 2007 primarily due to an increase in federal funds purchased. During the fourth quarter of 2007, in addition to issuing $22.5 million of trust preferred securities (following the issuance of $30.0 million of trust preferred securities in the third quarter of 2007) we redeemed $61.7 million of trust preferred securities originally issued in the third quarter of 2002. CAPITAL MANAGEMENT On November 28, 2007, we announced our intent to expand our existing stock repurchase program from 2,000,000 to 3,000,000 shares. As of December 31, 2007, we had repurchased 2,333,270 of our outstanding shares under this program. The 666,730 shares remaining under our expanded authorization may be repurchased from time to time over a twelve-month period, depending upon market conditions and other factors, in open market or privately negotiated transactions. At December 31, 2007, our total risk-based capital ratio was 11.71%, Tier 1 capital to risk-weighted assets ratio was 9.86% and Tier 1 capital to average asset ratio was 8.18%, compared to 11.83%, 10.31% and 8.61%, respectively, at September 30, 2007. The decrease in our risk-based capital ratios from the third quarter of 2007 to the fourth quarter of 2007 was primarily due to the redemption of $61.7 million of trust preferred securities during the fourth quarter of 2007, partially offset by the issuance of $22.5 million of trust preferred securities (following the issuance of $30.0 million of trust preferred securities in the third quarter of 2007) and earnings in the quarter. MB Financial Bank, N.A. was categorized as "Well-Capitalized” under Federal Deposit Insurance Corporation regulations at December 31, 2007. Our tangible equity to assets ratio (see selected financial data section below for definition) increased from 6.03% at September 30, 2007 to 6.28% at December 31, 2007. Additionally, our tangible book value per share (see selected financial data section below for definition) increased from $12.89 to $13.48 over the same time period. FORWARD-LOOKING STATEMENTS When used in this press release and in filings with the Securities and Exchange Commission, in other press releases or other public shareholder 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) the possibility that the loss of future income from Union Bank will have a greater impact on our overall earnings per share than we currently anticipate, whether due to our realizing less income than we expect to realize from the loans we repurchased from Union Bank prior to closing and on our investments of the Union Bank sale proceeds, or due to unfavorable market conditions or other factors impeding our planned stock repurchase activity; (2) expected cost savings and synergies from our merger and acquisition activities might not be realized within the expected time frames; (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; (4) competitive pressures among depository institutions; (5) interest rate movements and their impact on customer behavior and net interest margin; (6) the impact of repricing and competitors' pricing initiatives on loan and deposit products; (7) the ability to adapt successfully to technological changes to meet customers' needs and developments in the market place; (8) our ability to realize the residual values of our direct finance, leveraged, and operating leases; (9) our ability to access cost-effective funding; (10) changes in financial markets; (11) changes in economic conditions in general and in the Chicago metropolitan area in particular; (12) the costs, effects and outcomes of litigation; (13) new legislation or regulatory changes, including but not limited to changes in federal and/or state tax laws or interpretations thereof by taxing authorities; (14) changes in accounting principles, policies or guidelines; (15) our future acquisitions of other depository institutions or lines of business; (16) our deposit growth and deposit mix resulting from our new deposit gathering strategy may be less favorable than expected; and (17) the impact of the guidance prepared by the Office of the Comptroller of the Currency regarding concentrations in real estate lending. 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 December 31, 2007, September 30, 2007, June 30, 2007, March 31, 2007, and December 31, 2006 (Amounts in thousands, except common share data) (Unaudited)         December 31, September 30, June 30, March 31, December 31, 2007   2007   2007   2007   2006   ASSETS Cash and due from banks $ 141,248 $ 119,961 $ 153,496 $ 96,541 $ 142,207 Interest bearing deposits with banks 9,093 7,582 3,622 4,576 5,086 Federal funds sold - - - 45,000 - Investment securities available for sale 1,241,385 1,309,424 1,389,076 1,471,229 1,628,348 Loans (net of allowance for loan losses of $65,103 at December 31, 2007, $61,122 at September 30, 2007, $59,058 at June 30, 2007, $58,705 at March 31, 2007, and $58,983 at December 31, 2006) 5,550,524 5,321,410 5,130,448 4,981,701 4,912,511 Assets held for sale - 353,028 375,149 410,840 393,608 Lease investments, net 97,321 90,670 80,353 71,308 80,258 Premises and equipment, net 183,722 183,506 184,090 196,525 194,618 Cash surrender value of life insurance 116,690 117,900 116,624 115,354 114,134 Goodwill, net 379,047 379,047 379,047 379,047 379,047 Other intangibles, net 25,352 26,223 27,097 27,975 28,856 Other assets 90,321     91,745     82,306     87,691     99,625     Total assets $ 7,834,703     $ 8,000,496     $ 7,921,308     $ 7,887,787     $ 7,978,298     LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Deposits: Noninterest bearing $ 875,491 $ 846,699 $ 879,338 $ 856,106 $ 924,371 Interest bearing 4,638,292     4,703,589     4,643,906     4,646,703     4,656,182   Total deposits 5,513,783 5,550,288 5,523,244 5,502,809 5,580,553 Short-term borrowings 977,721 809,935 783,153 722,416 688,504 Long-term borrowings 208,865 187,577 186,322 175,006 245,880 Junior subordinated notes issued to capital trusts 159,016 197,537 166,657 179,096 179,162 Liabilities held for sale - 321,144 344,643 379,294 361,008 Accrued expenses and other liabilities 112,949     79,112     74,972     72,464     76,239   Total liabilities 6,972,334     7,145,593     7,078,991     7,031,085     7,131,346     Stockholders' Equity Common stock, ($0.01 par value; authorized 43,000,000 shares at December 31, 2007, and September 30, 2007, and 40,000,000 at June, 30, 2007, March 31, 2007, and December 31, 2006; issued 37,401,023 , 37,404,087, 37,345,661, 37,342,031 and 37,332,328 shares at December 31, 2007, September 30, 2007, June 30, 2007, March 31, 2007, and December 31, 2006, respectively) 374 374 373 373 373 Additional paid-in capital 441,201 440,655 439,450 439,164 439,502 Retained earnings 505,260 475,208 463,359 448,855 437,353 Accumulated other comprehensive income (loss) 7,597 120 (12,028 ) (3,690 ) (7,602 ) Less: 2,785,573, 1,809,035, 1,442,588, 818,372 and 666,120 shares of treasury stock, at cost, at December 31, 2007, September 30, 2007, June 30, 2007, March 31, 2007 and December 31, 2006, respectively (92,063 )   (61,454 )   (48,837 )   (28,000 )   (22,674 ) Total stockholders' equity 862,369     854,903     842,317     856,702     846,952     Total liabilities and stockholders' equity $ 7,834,703     $ 8,000,496     $ 7,921,308     $ 7,887,787     $ 7,978,298   MB FINANCIAL, INC. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Amounts in thousands, except common share data) (Unaudited)     Three months ended   Year Ended December, 31,   September 30,   June 30,   March, 31   December, 31, December, 31,   December, 31, 2007   2007   2007   2007   2006   2007   2006 Interest income: Loans $ 100,802 $ 101,488 $ 96,793 $ 93,933 $ 94,175 $ 393,016 $ 310,194 Investment securities available for sale: Taxable 10,181 11,983 13,163 14,348 15,904 49,675 51,836 Nontaxable 3,649 3,586 3,325 3,302 3,191 13,862 11,255 Federal funds sold 95 52 67 235 528 449 774 Other interest bearing accounts 102     63     49     50     68   264     312   Total interest income 114,829     117,172     113,397     111,868     113,866   457,266     374,371   Interest expense: Deposits 45,917 47,942 46,337 45,453 47,269 185,649 141,108 Short-term borrowings 9,729 9,617 9,390 8,618 6,438 37,354 27,944 Long-term borrowings and junior subordinated notes 5,211     5,530     5,316     5,900     6,223   21,957     17,140   Total interest expense 60,857     63,089     61,043     59,971     59,930   244,960     186,192   Net interest income 53,972 54,083 52,354 51,897 53,936 212,306 188,179 Provision for loan losses 8,000     4,500     3,000     3,813     3,500   19,313     10,100   Net interest income after provision for loan losses 45,972     49,583     49,354     48,084     50,436   192,993     178,079   Other income: Loan service fees 2,080 1,253 1,388 1,537 1,278 6,258 5,400 Deposit service fees 6,635 6,501 5,624 5,158 5,244 23,918 19,445 Lease financing, net 4,155 3,952 3,744 3,996 3,895 15,847 13,369 Brokerage fees 1,846 2,067 3,216 2,452 2,061 9,581 9,318 Trust and asset management fees 2,101 2,490 2,666 3,190 2,326 10,447 6,916 Net (loss) gain on sale of investment securities (1,529 ) (114 ) (2,077 ) (24 ) 82 (3,744 ) (445 ) Increase in cash surrender value of life insurance 1,225 1,288 1,269 1,221 1,184 5,003 3,964 Net gain (loss) on sale of other assets 723 293 9,059 22 55 10,097 860 Merchant card processing 4,293 4,131 4,045 3,878 3,434 16,347 6,848 Other operating income 1,452     1,398     1,786     1,514     1,807   6,150     5,646   22,981     23,259     30,720     22,944     21,366   99,904     71,321   Other expense: Salaries and employee benefits 32,837 27,398 26,813 24,999 26,961 112,047 88,907 Occupancy and equipment expense 7,733 6,928 7,054 7,200 6,733 28,915 24,462 Computer services expense 1,949 1,846 1,857 1,817 1,746 7,469 6,281 Advertising and marketing expense 962 1,214 1,444 1,410 1,049 5,030 4,597 Professional and legal expense 2,776 593 656 530 368 4,555 2,027 Brokerage fee expense 432 918 1,403 1,271 1,087 4,024 4,986 Telecommunication expense 757 681 689 681 693 2,808 2,617 Other intangibles amortization expense 871 874 878 881 972 3,504 1,971 Merchant card processing 3,815 3,487 3,474 3,270 3,045 14,046 6,210 Other operating expenses 6,998     4,888     7,805     4,747     4,676   24,438     17,017   59,130     48,827     52,073     46,806     47,330   206,836     159,075   Income before income taxes 9,823 24,015 28,001 24,222 24,472 86,061 90,325 Income taxes 1,890     6,709     8,394     7,043     7,331   24,036     27,269   Income from continuing operations $ 7,933     $ 17,306     $ 19,607     17,179     $ 17,141   $ 62,025     $ 63,056   Discontinued operations Income (loss) from discontinued operations before income taxes (741 ) 1,499 1,803 1,429 1,442 3,990 6,213 Gain on disposal of discontinued operations before income taxes 46,485     -     -     -     -   46,485     -   Income before income taxes 45,744 1,499 1,803 1,429 1,442 50,475 6,213 Income taxes 17,281     500     369     487     495   18,637     2,155   Income from discontinued operations 28,463     999     1,434     942     947   31,838     4,058   Net income $ 36,396     $ 18,305     $ 21,041     $ 18,121     $ 18,088   $ 93,863     $ 67,114   Three months ended   Year Ended December, 31,   September 30,   June 30,   March, 31   December, 31,   December, 31,   December, 31, 2007   2007   2007   2007   2006   2007   2006 Common share data: Basic earnings per common share from continuing operations $ 0.23 $ 0.48 $ 0.54 $ 0.47 $ 0.47 $ 1.73 $ 2.02 Basic earnings per common share from discontinued operations $ 0.81 $ 0.03 $ 0.04 $ 0.02 $ 0.02 $ 0.88 $ 0.13 Basic earnings per common share $ 1.04 $ 0.51 $ 0.58 $ 0.49 $ 0.49 $ 2.61 $ 2.15 Diluted earnings per common share from continuing operations $ 0.22 $ 0.48 $ 0.53 $ 0.46 $ 0.46 $ 1.70 $ 1.99 Diluted earnings per common share from discontinued operations $ 0.80 $ 0.03 $ 0.04 $ 0.03 $ 0.03 $ 0.88 $ 0.13 Diluted earnings per common share $ 1.02 $ 0.51 $ 0.57 $ 0.49 $ 0.49 $ 2.58 $ 2.12 Weighted average common shares outstanding 35,095,301 35,733,165 36,239,731 36,630,323 36,583,607 35,919,900 31,156,887 Diluted weighted average common shares outstanding 35,536,449 36,213,532 36,744,473 37,180,928 37,156,887 36,439,561 31,687,220 MB FINANCIAL, INC. & SUBSIDIARIES SELECTED FINANCIAL DATA (Amounts in thousands, except common share data) (Unaudited) Three months ended   Year Ended December, 31,   September 30,   June 30,   March, 31   December, 31,   December, 31,   December, 31, 2007   2007   2007   2007   2006   2007   2006   Performance Ratios (continuing operations): Annualized return on average assets 0.40 % 0.86 % 1.00 % 0.88 % 0.86 % 0.78 % 0.96 % Annualized return on average equity 3.68 8.10 9.25 8.18 8.08 7.29 10.06 Annualized return on average tangible equity (1) 7.32 15.72 17.87 15.85 15.94 14.14 16.03 Net interest rate spread 2.76 2.81 2.79 2.80 2.85 2.79 3.03 Efficiency ratio (2) 73.46 61.47 59.86 60.98 61.47 63.90 59.77   Net interest margin 3.16 3.22 3.20 3.21 3.26 3.20 3.40 Tax equivalent effect 0.12 0.12 0.11 0.12 0.11 0.12 0.11 Net interest margin – fully tax equivalent basis (3) 3.28 3.34 3.31 3.33 3.37 3.32 3.51   Performance Ratios (total): Annualized return on average assets 1.82 % 0.91 % 1.07 % 0.93 % 0.91 % 1.19 % 1.02 % Annualized return on average equity 16.86 8.57 9.93 8.63 8.53 11.03 10.70 Annualized return on average tangible equity (1) 31.83 16.60 19.14 16.69 16.79 21.14 17.04 Net interest rate spread 2.76 2.81 2.80 2.82 2.85 2.80 3.03 Efficiency ratio (2) 47.60 61.29 59.44 60.71 61.33 55.90 59.61   Net interest margin 3.17 3.24 3.22 3.24 3.26 3.22 3.41 Tax equivalent effect 0.12 0.12 0.12 0.11 0.11 0.11 0.11 Net interest margin – fully tax equivalent basis (3) 3.29 3.36 3.34 3.35 3.37 3.33 3.52   Asset Quality Ratios: Non-performing loans to total loans 0.44 % 0.44 % 0.42 % 0.46 % 0.43 % 0.44 % 0.43 % Non-performing assets to total assets 0.33 0.31 0.28 0.30 0.31 0.33 0.31 Allowance for loan losses to total loans 1.16 1.14 1.14 1.16 1.19 1.16 1.19 Allowance for loan losses to non-performing loans 266.17 255.73 270.92 252.80 274.75 266.17 274.75 Net loan charge-offs to average loans (annualized) 0.29 0.18 0.21 0.33 0.24 0.25 0.24   Capital Ratios: Tangible equity to assets (4) 6.28 % 6.03 % 5.92 % 6.13 % 5.93 % 6.28 % 5.93 % Equity to total assets 11.01 10.69 10.63 10.86 10.62 11.01 10.62 Book value per share (5) 24.91 24.02 23.46 23.46 23.10 24.91 23.10 Less: goodwill and other intangible assets, net of tax benefit, per common share 11.43 11.13 11.05 10.88 10.85 11.43 10.85 Tangible book value per share (6) 13.48 12.89 12.41 12.58 12.25 13.48 12.25   Total capital (to risk–weighted assets) 11.71 % 11.83 % 11.62 % 11.89 % 11.80 % 11.71 % 11.80 % Tier 1 capital (to risk-weighted assets) 9.86 10.31 10.09 10.58 10.49 9.86 10.49 Tier 1 capital (to average assets) 8.18 8.61 8.25 8.50 8.39 8.18 8.39 (1) Net cash flow available to stockholders (net income or net income on continuing operations, as appropriate, plus other intangibles amortization expense, net of tax benefit) / Average tangible equity (average equity less average goodwill and average other intangibles, net of tax benefit) (2) Equals total other expense divided by the sum of net interest income on a fully tax equivalent basis and total other income less net gains (losses) on securities available for sale. (3) Represents net interest income, on a fully tax equivalent basis assuming a 35% tax rate, as a percentage of average interest earning assets. (4) 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. (5) Equals total ending stockholders’ equity divided by common shares outstanding. (6) 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 net income and fully diluted earnings per share excluding certain items, net interest income on a fully tax equivalent basis, net interest margin on a fully tax equivalent basis, tangible equity to assets ratio, tangible book value per share, and annualized cash return on average tangible equity. Our management uses these non-GAAP measures in its analysis of our performance. 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. The other measures exclude the ending balances of acquisition-related goodwill and other intangible assets, net of tax benefit, in determining tangible stockholders’ equity. 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 stockholders’ equity (in thousands): December 31,2007   September 30,2007   June 30,2007   March 31,2007   December 31,2006         Stockholders’ equity – as reported $ 862,369 $ 854,903 $ 842,317 $ 856,702 $ 846,952 Less: goodwill 379,047 379,047 379,047 379,047 379,047 Less: other intangible assets, net of tax benefit 16,479   17,045   17,613   18,184   18,756 Tangible equity $ 466,843   $ 458,811   $ 445,657   $ 459,471   $ 449,149 The following table presents a reconciliation of average tangible equity to average stockholders’ equity (in thousands): Three months ended   Year Ended December 31,2007   September 30,2007   June 30,2007   March 31,2007   December 31,2006   December 31,2007   December 31,2006             Average Stockholders’ equity – as reported $ 856,362 $ 847,326 $ 849,816 $ 851,785 $ 841,353 $ 851,324 $ 627,069 Less: average goodwill 379,047 379,047 379,047 379,047 379,957 379,047 213,874 Less: average other intangible assets, net of tax benefit 16,671   17,245   17,805   18,396   19,113   17,524   11,901 Average tangible equity $ 460,644   $ 451,034   $ 452,964   $ 454,342   $ 442,283   $ 454,753   $ 401,294 The following table presents a reconciliation of net cash flow available to stockholders to net income from continuing operations (in thousands): Three months ended   Year Ended December 31,2007   September 30,2007   June 30,2007   March 31,2007   December 31,2006   December 31,2007   December 31,2006             Net income – as reported $ 7,933 $ 17,306 $ 19,607 $ 17,179 $ 17,141 $ 62,025 $ 63,056 Add: other intangible amortization expense, net of tax benefit 566   568   571   573   632   2,278   1,281 Net cash flow available to stockholders $ 8,499   $ 17,874   $ 20,178   $ 17,752   $ 17,773   $ 64,303   $ 64,337 The following table presents a reconciliation of net cash flow available to stockholders to net income (in thousands): Three months ended   Year Ended December 31,2007   September 30,2007   June 30,2007   March 31,2007   December 31,2006   December 31,2007   December 31,2006             Net income – as reported $ 36,396 $ 18,305 $ 21,041 $ 18,121 $ 18,088 $ 93,863 $ 67,114 Add: other intangible amortization expense, net of tax benefit 566   568   571   573   632   2,278   1,281 Net cash flow available to stockholders $ 36,962   $ 18,873   $ 21,612   $ 18,694   $ 18,720   $ 96,141   $ 68,395 Reconciliations of net interest income on a fully tax equivalent basis to net interest income and net interest margin on a fully tax equivalent basis to net interest margin are contained in the tables under "Net Interest Margin.” A reconciliation of tangible book value per share to book value per 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 December 31,   Three Months Ended September 30, 2007   2006   2007 AverageBalance   Interest   Yield/Rate   AverageBalance   Interest   Yield/Rate   AverageBalance   Interest   Yield/Rate                 Interest Earning Assets: Loans (1) (2): Commercial related credits Commercial $ 1,270,259 $ 24,523 7.55 % $ 979,732 $ 20,085 8.02 % $ 1,177,597 $ 23,528 7.82 % Commercial – nontaxable (3) 7,237 136 7.35 9,038 185 8.01 7,362 140 7.44 Commercial loans collateralized by assignment of lease payments 482,851 8,214 6.80 370,574 6,312 6.81 435,777 7,577 6.95 Real estate commercial (6) 1,954,755 35,022 7.01 1,798,900 33,361 7.26 1,893,883 34,924 7.22 Real estate construction 837,266   17,367 8.12 817,253   18,112 8.67 867,641   18,793 8.48 Total commercial related credits 4,552,368   85,262 7.33 3,975,497   78,055 7.68 4,382,260   84,962 7.59 Other loans Real estate residential (6) 365,441 5,553 6.08 357,817 5,449 6.09 357,839 5,430 6.07 Home equity 345,278 6,105 7.01 381,767 7,408 7.70 345,887 6,604 7.57 Indirect 144,939 3,016 8.26 107,668 2,360 8.70 136,911 3,541 10.26 Consumer loans 51,404   914 7.05 51,071   967 7.51 52,479   999 7.55 Total other loans 907,062   15,588 6.82 898,323   16,184 7.15 893,116   16,574 7.36   Total loans 5,459,430   100,850 7.33 4,873,820   94,239 7.67 5,275,376   101,536 7.64 Taxable investment securities 896,613 10,181 4.54 1,305,800 15,904 4.87 983,795 11,983 4.87 Investments securities exempt from federal income taxes (3) 391,272 5,614 5.61 340,547 4,910 5.64 385,582 5,517 5.60 Federal funds sold 8,253 95 4.50 39,686 528 5.21 4,214 52 4.83 Other interest bearing deposits 11,075   102 3.65 7,241   68 3.73 4,848   63 5.16 Total interest earning assets 6,766,643 116,842 6.85 6,567,094 115,649 6.99 6,653,815 119,151 7.10 Assets held for sale 220,281 397,875 360,785 Non-interest earning assets 931,324 938,117 940,049 Total assets $ 7,918,248 $ 7,903,086 $ 7,954,649   Interest Bearing Liabilities: Core funding: Money market and NOW accounts 1,299,002 9,615 2.94 1,048,702 7,387 2.79 1,297,887 10,930 3.34 Savings accounts 398,589 611 0.61 480,083 963 0.80 417,341 763 0.73 Certificates of deposit 2,194,238 25,953 4.69 2,351,866 27,991 4.72 2,243,190 27,106 4.79 Customer repos 361,524   2,932 3.22 289,820   2,663 3.65 316,275   3,051 3.83 Total core funding 4,253,353   39,111 3.65 4,170,471   39,004 3.71 4,274,693   41,850 3.88   Wholesale funding: Public funds 302,206 3,834 5.03 242,335 3,121 5.11 298,215 3,952 5.26 Brokered accounts (includes fee expense) 458,278 5,904 5.11 629,271 7,807 4.92 400,479 5,191 5.14 Other short-term borrowings 532,206 6,797 5.07 280,258 3,775 5.34 500,383 6,566 5.21 Long-term borrowings 354,309   5,211 5.76 427,667   6,223 5.69 356,130   5,530 6.08 Total wholesale funding 1,646,999   21,746 5.24 1,579,531   20,926 5.26 1,555,207   21,239 5.42 Total interest bearing liabilities $ 5,900,352 60,857 4.09 $ 5,750,002 59,930 4.14 $ 5,829,900 63,089 4.29 Non-interest bearing deposits 870,300 873,934 864,165 Liabilities held for sale 200,462 365,797 329,540 Other non-interest bearing liabilities 90,772 72,000 83,718 Stockholders’ equity 856,362 841,353 847,326 Total liabilities and stockholders’ equity $ 7,918,248 $ 7,903,086 $ 7,954,649 Net interest income/interest rate spread (4) $ 55,985   2.76 % $ 55,719   2.85 % $ 56,062   2.81 % Taxable equivalent adjustment 2,013 1,783 1,979 Net interest income, as reported $ 53,972 $ 53,936 $ 54,083 Net interest margin (5) 3.16 % 3.26 % 3.22 % Tax equivalent effect 0.12 % 0.11 % 0.12 % Net interest margin on a fully tax equivalent basis (5) 3.28 % 3.37 % 3.34 % (1) Non-accrual loans are included in average loans. (2) Interest income includes amortization of deferred loan origination fees of $1.7 million, $2.0 million and $1.7 million for the three months ended December 31, 2007, December 31, 2006, and September 30, 2007, 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. (6) During the third quarter of 2007, multifamily residential real estate loans were reclassified from residential real estate loans to real estate commercial loans. Prior periods have been reclassified to conform to the current period’s presentation. 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): Year Ended December 31, 2007   2006 AverageBalance   Interest   Yield/Rate   AverageBalance   Interest   Yield/Rate           Interest Earning Assets: Loans (1) (2): Commercial related credits Commercial $ 1,155,714 $ 91,092 7.77 % $ 879,234 $ 70,603 7.92 % Commercial – nontaxable (3) 9,338 754 7.96 5,027 373 7.32 Commercial loans collateralized by assignment of lease payments 427,215 29,388 6.88 312,869 20,945 6.69 Real estate commercial (6) 1,867,809 136,049 7.18 1,576,061 114,361 7.16 Real estate construction 853,000   72,772 8.41 666,649   58,504 8.66 Total commercial related credits 4,313,076   330,055 7.55 3,439,840   264,786 7.59 Other loans Real estate residential (6) 356,489 21,607 6.06 267,884 16,371 6.11 Home equity 354,426 26,536 7.49 277,543 21,561 7.77 Indirect 130,605 11,144 8.53 70,436 5,446 7.73 Consumer loans 52,991   3,938 7.43 32,244   2,160 6.70 Total other loans 894,511   63,225 7.07 648,107   45,538 7.03 Total loans 5,207,587   393,280 7.55 4,087,947   310,324 7.59 Taxable investment securities 1,037,129 49,675 4.79 1,115,585 51,836 4.65 Investments securities exempt from federal income taxes (3) 374,025 21,326 5.62 305,930 17,316 5.58 Federal funds sold 8,853 449 5.00 15,148 774 5.04 Other interest bearing deposits 7,193   264 3.67 7,952   312 3.92 Total interest earning assets 6,634,787 464,994 7.01 5,532,562 380,562 6.88 Assets held for sale 341,734 393,003 Non-interest bearing assets 934,089 676,505 Total assets $ 7,910,610 $ 6,602,070   Interest Bearing Liabilities: Core funding: Money market and NOW accounts 1,213,001 37,569 3.10 778,795 18,475 2.37 Savings accounts 428,087 3,051 0.71 457,723 3,334 0.73 Certificates of deposit 2,264,361 108,228 4.78 1,774,939 76,741 4.32 Customer repos 321,423   11,744 3.65 195,686   6,091 3.11 Total core funding 4,226,872   160,592 3.80 3,207,143   104,641 3.26   Wholesale funding: Public funds 287,874 14,926 5.18 186,357 8,934 4.79 Brokered accounts (includes fee expense) 434,729 21,875 5.03 713,596 33,624 4.71 Other short-term borrowings 491,258 25,610 5.21 436,205 21,853 5.01 Long-term borrowings 364,441   21,957 5.94 293,310   17,140 5.76 Total wholesale funding 1,578,302   84,368 5.35 1,629,468   81,551 5.00   Total interest bearing liabilities $ 5,805,174 244,960 4.22 $ 4,836,611 186,192 3.85 Non-interest bearing deposits 860,557 708,100 Liabilities held for sale 313,414 365,380 Other non-interest bearing liabilities 80,141 64,910 Stockholders’ equity 851,324 627,069 Total liabilities and stockholders’ equity $ 7,910,610 $ 6,602,070 Net interest income/interest rate spread (4) $ 220,034   2.79 % $ 194,370   3.03 % Taxable equivalent adjustment 7,728 6,191 Net interest income, as reported $ 212,306 $ 188,179 Net interest margin (5) 3.20 % 3.40 % Tax equivalent effect 0.12 % 0.11 % Net interest margin on a fully tax equivalent basis (5) 3.32 % 3.51 % (1) Non-accrual loans are included in average loans. (2) Interest income includes amortization of deferred loan origination fees of $6.7 million and $6.9 million for the year ended December 31, 2007, and December 31, 2006, 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 percentage of average interest earning assets. (6) During the third quarter of 2007, multifamily residential real estate loans were reclassified from residential real estate loans to real estate commercial loans. Prior periods have been reclassified to conform to the current period’s presentation.