MB Financial, Inc. Reports Second Quarter Net Income of $25.3 Million and Return on Assets of 1.09%

MB Financial, Inc. Reports Second Quarter Net Income of $25.3 Million and Return on Assets of 1.09%

CHICAGO--(BUSINESS WIRE)-- MB Financial, Inc. (NAS: MBFI) , the holding company for MB Financial Bank, N.A., today announced 2013 second quarter net income of $25.3 million.

"Our earnings were strong during the second quarter, driven by fee income and low credit costs," stated Mitchell Feiger, President and Chief Executive Officer of the Company. "Our return on assets increased to 1.09%. Net income available to common shareholders increased for the sixth consecutive quarter, while year to date net income increased 16.1% compared to the first half of 2012. In addition, revenues from our key fee initiatives for the first six months of 2013 increased 47% over the first six months of 2012."

Net income increased in the second quarter of 2013 compared to the first quarter of 2013 and second quarter of 2012. Fully diluted earnings per share were consistent with the first quarter of 2013, and increased from the second quarter of 2012 as follows (note that all linked quarter change percentages presented here and throughout this release are not annualized):

Net income, net income available to common stockholders and fully diluted earnings per share increased in the six months ended June 30, 2013 compared to the six months ended June 30, 2012 as follows:

Key items for the quarter include:

Overall Fee Income Growth Continues:

• Core non-interest income to total revenues ratio was 35.0% in the second quarter compared to 34.6% in the prior quarter and 27.5% in the second quarter of 2012.

• Revenues from key fee initiatives decreased 2% compared to the first quarter of 2013, as leasing revenues were exceptionally strong during the first quarter. Excluding leasing, fee initiatives increased approximately 4% from the prior quarter.

• Revenues from key fee initiatives increased 47% in the first six months of 2013 compared to the first six months of 2012, primarily as a result of a 119% increase in leasing revenues. This increase was driven by the addition of Celtic Leasing Corp. ("Celtic"), a recently acquired leasing subsidiary, which contributed $13 million in leasing revenues during the first six months of 2013. Excluding Celtic, leasing revenues increased 28% in the first six months of 2013 compared to the first six months of 2012.

Net Interest Margin Stable Compared to Prior Quarter:

• Fully taxable equivalent net interest margin was 3.61% for the second quarter of 2013 compared to 3.59% for the prior quarter and 3.83% for the second quarter of 2012. The decrease from the second quarter of 2012 was due to average yields on interest earning assets declining more than average rates paid on interest bearing liabilities.

• Net interest income was relatively stable compared to the prior quarter. Compared to the second quarter of 2012, net interest income declined due to lower average interest earning asset balances (as a result of a decrease in covered loans) as well as a 22 basis point decline in net interest margin.

Small Increase in Non-Performing Loans and Non-Performing Assets During the Quarter; Net Recoveries for the Quarter:

• Provision for credit losses was $500 thousand in the quarter, aided by approximately $6 million in recoveries.

Improvement in Return on Assets During the Quarter and for the First Six Months of 2013:

RESULTS OF OPERATIONS

Second Quarter Results

Net Interest Income

Net interest income on a fully tax equivalent basis decreased $166 thousand from the first quarter of 2013. Our net interest margin, on a fully tax equivalent basis for the second quarter of 2013 increased two basis points compared to the first quarter of 2013.

Net interest income on a fully tax equivalent basis decreased $6.1 million from the second quarter of 2012 due to lower average earning asset balances (as a result of a decrease in covered loans) as well as a decline in net interest margin. Our net interest margin, on a fully tax equivalent basis, declined to 3.61% for the second quarter of 2013 compared to 3.83% for the second quarter of 2012.

Net interest income on a fully tax equivalent basis decreased $14.7 million in the six months ended June 30, 2013 compared to the same period in 2012. The decrease from the six months ended June 30, 2012 was due to lower average earning asset balances (as a result of a decrease in covered loans) as well as a decline in net interest margin. Our net interest margin, on a fully tax equivalent basis, declined to 3.60% for the six months ended June 30, 2013 compared to 3.85% for the same period in 2012.

See the supplemental net interest margin tables for further detail.

Non-interest Income (dollars in thousands):

(1) Letter denotes the corresponding line item where this non-core non-interest income item resides in the consolidated statements of income as follows: A - Net loss recognized on other real estate owned, B - Other operating income.

Core non-interest income for the second quarter of 2013 increased approximately 2% from the first quarter of 2013.

• Net lease financing revenue decreased during the second quarter primarily due to a decrease related to equipment maintenance contracts. As noted in prior quarters, remarketing gains and fees from the sale of equipment maintenance contracts can fluctuate from quarter to quarter.

• Loan service fees increased due to an increase in letter of credit fees during the second quarter of 2013.

Core non-interest income for the first six months of 2013 rose 32% compared to the first six months of 2012.

• Net lease financing income increased as a result of the increase in remarketing gains and fees from the sale of equipment maintenance contracts, as well as the impact of leasing revenues attributable to Celtic.

• Card fee income increased due to fees earned on prepaid, debit and credit cards.

• Capital markets and international banking service fees increased primarily due to an increase in interest rate swap fees.

Non-core non-interest income for the second quarter and first six months of 2013 was primarily impacted by gains recognized on OREO in 2013, compared to losses recognized on OREO during 2012.

Non-interest Expense (dollars in thousands):