MB Financial, Inc. Reports Net Income, Strong Capital Position, and Strong Loss Reserve Coverage Ratios

MB Financial, Inc. (NASDAQ: MBFI), the holding company for MB Financial Bank, N.A ("the Bank” or "MB Financial Bank”), announced today second quarter results for 2009. The words "MB Financial,” "the Company,” "we,” "our” and "us” refer to MB Financial, Inc. and its wholly owned subsidiaries, unless indicated otherwise. We had net income of $4.3 million for the second quarter of 2009 compared to net income of $22.0 million in the second quarter of 2008, and a net loss of $28.1 million for the first quarter of 2009.

Key items for the quarter were as follows:

Credit Quality (Excluding Covered Assets and Loans Held for Sale) – Increased Reserves, Non-performing Loans and Assets Stabilized, Strong Loss Reserve Coverage Ratios

• We increased our allowance for loan losses to total loans to 2.86%, as of June 30, 2009, compared to 2.84% as of March 31, 2009.
• Our non-performing loans decreased to $227.7 million, or 3.59% of total loans, as of June 30, 2009, from $229.5 million, or 3.63% of total loans, at March 31, 2009, while our non-performing assets increased to $245.0 million, or 2.92% of total assets, from $232.3 million, or 2.57% of total assets, for the same periods. These changes to non-performing assets reflect a $1.9 million decrease in non-performing loans, a $14.6 million increase in other real estate owned (OREO) combined with a decrease in total assets of $623.1 million.
• Our provision for loan losses was $27.1 million for the second quarter, a decrease of $62.6 million from the first quarter of 2009.
• Net charge-offs for the second quarter were $25.0 million, down from $54.4 million in the first quarter of 2009.

"Covered assets” refer to assets MB Financial Bank acquired during the first quarter of 2009 in a loss-share transaction facilitated by the Federal Deposit Insurance Corporation in which the Bank assumed all of the deposits and acquired approximately $159.2 million in loans, net of a $14.5 million discount, of Glenwood, Illinois-based Heritage Community Bank (Heritage).

Strong Capital Position

• MB Financial Bank continues to significantly exceed the "Well-Capitalized” threshold established under the regulations of the Office of the Comptroller of the Currency. At June 30, 2009, MB Financial, Inc.’s total risk-based capital ratio was 13.89%, Tier 1 capital to risk-weighted assets ratio was 11.88% and Tier 1 capital to average asset ratio was 9.55%. Total capital was approximately $259.3 million in excess of the 10% "Well-Capitalized” threshold.
• Our tangible common equity to assets and tangible common equity to risk weighted assets ratios increased to 5.65% and 6.79%, respectively, at June 30, 2009 compared to 5.07% and 6.49%, respectively, as of March 31, 2009.

Positive Operating Leverage

• Net interest income on a tax equivalent basis increased by $3.3 million, or 5.6% from the first quarter of 2009.
• We have seen significantly better credit spreads on new and renewed loans during the first half of 2009 compared to 2008 as a result of pricing reflective of risk in the current economic environment. Furthermore, "in the money” loan interest rate floors have enhanced our loan yields. As of June 30, 2009 approximately $1.9 billion of loans had interest rate floors, of which $1.7 billion were "in the money”.
• During the second quarter of 2009, we used our short-term liquid assets, generally in the form of deposits held at the Federal Reserve, to decrease non-core funding and total assets.
• We reduced our noncore wholesale funding by $226.0 million during the second quarter, and reduced our overall cost of funds by 29 basis points. The improvement in our cost of funds was primarily due to repricing of our customer and brokered time deposits, and improvement in our deposit mix. Our percentage of core funding to total funding increased from 70% at June 30, 2008 to 80% at June 30, 2009.
• Our ratio of time deposits to total deposits decreased to 50% as of June 30, 2009 from 58% as of June 30, 2008 and 53% as of March 31, 2009.

RESULTS OF OPERATIONS

Second Quarter Results

Net Interest Income

Net interest income on a tax equivalent basis increased $3.3 million from the first quarter of 2009 to the second quarter of 2009. The increase in net interest income was primarily due to a 17 basis point increase in net interest margin on a fully tax equivalent basis. This improvement was driven by the improved loan pricing noted above and 29 basis points of improvement in our cost of funds as a result of approximately $1 billion of time deposits repricing in the second quarter of 2009 at lower rates. Our deposit mix also improved, with non-interest bearing deposits increasing and time deposits and brokered deposits decreasing.

Our non-performing loans negatively impacted our net interest margin during the second quarter of 2009, the first quarter of 2009 and the second quarter of 2008 by approximately 20 basis points, 16 basis points and 8 basis points, respectively.

See the supplemental net interest margin table for further detail.

Other Income (in thousands):

				Three Months Ended												Six Months Ended
				June 30,			March 31,		December 31,			September 30,		June 30,		June 30,
				2009			2009		2008			2008		2008		2009			2008
Other income:
	Loan service fees			$ 1,782			$ 1,843		$ 1,850			$ 2,385		$ 2,475		$ 3,625			$ 4,945
	Deposit service fees			6,978			6,399		7,479			7,330		6,889		13,377			13,419
	Lease financing, net			4,473			4,319		4,604			4,533		3,969		8,792			7,836
	Brokerage fees			1,252			1,078		968			1,177		1,187		2,330			2,172
	Trust and asset management fees			3,262			2,815		2,784			3,276		3,589		6,077			5,809
	Net gain on sale of investment securities			4,093			9,694		24			-		1		13,787			1,106
	Increase in cash surrender value of life insurance			670			456		570			1,995		1,128		1,126			2,734
	Net gain (loss) on sale of other assets			(38	)		1		(874	)		26		50		(37	)		(256	)
	Merchant card processing			4,152			4,279		4,326			4,541		4,644		8,431			9,174
	Other operating income			2,458			1,800		206			1,162		1,635		4,258			3,165
Total other income				$ 29,082			$ 32,684		$ 21,937			$ 26,425		$ 25,567		$ 61,766			$ 50,104

Other income decreased by $3.6 million from the first quarter of 2009, primarily due to reduced gains on sale of investment securities, which totaled approximately $9.7 million during the first quarter of 2009 compared to $4.1 million during the second quarter of 2009. Deposit service fees increased primarily due to increases in NSF and overdraft fees. Trust and asset management fees increased primarily due to the increase in value of assets under management, mostly caused by the overall increase in the stock prices. Other operating income increased primarily due to an increase in market value of assets held in trust for deferred compensation during the second quarter of 2009 compared to the first quarter of 2009.

Other income increased by $11.7 million for the six months ended June 30, 2009 compared to the six months ended June 30, 2008, primarily due to the increase in gain on sale of investment securities. Loan service fees decreased, primarily due to a decrease in letter of credit and prepayment fees. Net lease financing increased, primarily due to higher residual realizations during the six months ended June 30, 2009 compared to the six months ended June 30, 2008. The decrease in cash surrender value of life insurance was primarily due to a decrease in overall interest rates from the six months ended June 30, 2008 to the six months ended June 30, 2009, and a $436 thousand death benefit on a bank owned life insurance policy that we recognized during the six months ended June 30, 2008. Other operating income increased primarily due to an increase in gains recognized on the sale of loans and other real estate owned during the six months ended June 30, 2009.

Other Expense (in thousands):

				Three Months Ended										Six Months Ended
				June 30,		March 31,		December 31,		September 30,		June 30,		June 30,
				2009		2009		2008		2008		2008		2009		2008
Other expense:
	Salaries and employee benefits			$ 29,322		$ 27,016		$ 24,253		$ 29,342		$ 29,163		$ 56,338		$ 55,973
	Occupancy and equipment expense			7,170		7,700		7,310		7,120		6,967		14,870		14,492
	Computer services expense			2,013		2,287		1,973		1,840		1,843		4,300		3,580
	Advertising and marketing expense			892		1,314		904		1,450		1,448		2,206		2,738
	Professional and legal expense			1,120		969		1,117		884		803		2,089		1,109
	Brokerage fee expense			575		393		476		564		470		968		889
	Telecommunication expense			747		751		668		621		774		1,498		1,536
	Other intangibles amortization expense			997		878		913		913		913		1,875		1,728
	Merchant card processing			3,803		3,890		4,045		4,175		4,256		7,693		8,361
	FDIC insurance premiums			6,789		2,668		1,188		292		235		9,457		397
	Other operating expenses			5,038		5,194		5,424		4,965		5,254		10,232		9,547
Total other expense				$ 58,466		$ 53,060		$ 48,271		$ 52,166		$ 52,126		$ 111,526		$ 100,350

Other expense increased $5.4 million from the first quarter of 2009 to the second quarter of 2009. Salaries and employee benefits increased from the first quarter of 2009 to the second quarter of 2009, primarily due to a $1.1 million increase in market value of assets held in trust for deferred compensation during the second quarter of 2009, and a $1.0 million increase in employee bonus expense during the second quarter of 2009 compared to the first quarter of 2009. Occupancy and equipment expense decreased, primarily due to a decline in property taxes in the second quarter of 2009. FDIC insurance premiums increased from the first quarter of 2009 to the second quarter of 2009, as general insurance assessment rates increased and the FDIC imposed a special premium on all insured depository institutions based on assets as of June 30, 2009. The FDIC rule pursuant to which this special premium was assessed provides that up to two additional special premiums may be imposed on all depository institutions based on their assets as of September 30, 2009 and December 31, 2009.

Other expense increased $11.2 million for the six months ended June 30, 2009 compared to the six months ended June 30, 2008, primarily due to a $9.1 million increase in FDIC insurance premiums. This was due to our FDIC credits being fully utilized during the fourth quarter of 2008 combined with the FDIC increasing its assessment rate and imposing a special premium during the six months ended June 30, 2009.

LOAN PORTFOLIO

The following table sets forth the composition of the loan portfolio, excluding covered assets and loans held for sale, as of the dates indicated (dollars in thousands):

				June 30,						March 31,						December 31,						September 30,						June 30,
				2009						2009						2008						2008						2008
							% of						% of						% of						% of						% of
				Amount			Total			Amount			Total			Amount			Total			Amount			Total			Amount			Total
Commercial related credits:
	Commercial loans			$ 1,411,520			23	%		$ 1,507,616			24	%		$ 1,522,380			24	%		$ 1,510,620			25	%		$ 1,450,822			24	%
	Commercial loans collateralized by assign-
	ment of lease payments (lease loans)			853,981			13	%		738,527			12	%		649,918			11	%		609,101			10	%		596,148			10	%
	Commercial real estate			2,420,227			38	%		2,359,868			37	%		2,353,261			38	%		2,275,183			37	%		2,210,789			37	%
	Construction real estate			722,399			11	%		764,876			12	%		757,900			12	%		756,694			12	%		819,565			14	%
Total commercial related credits				5,408,127			85	%		5,370,887			85	%		5,283,459			85	%		5,151,598			84	%		5,077,324			85	%
Other loans:
	Residential real estate			273,196			4	%		287,256			5	%		295,336			5	%		300,223			5	%		311,108			5	%
	Indirect motorcycle			160,364			2	%		157,081			2	%		153,277			2	%		155,045			3	%		144,684			2	%
	Indirect automobile			29,341			1	%		32,731			1	%		35,950			1	%		38,844			1	%		40,399			1	%
	Home equity			409,147			7	%		411,527			6	%		401,029			6	%		383,399			6	%		373,675			6	%
	Consumer loans			61,385			1	%		56,654			1	%		59,512			1	%		66,938			1	%		53,792			1	%
Total other loans				933,433			15	%		945,249			15	%		945,104			15	%		944,449			16	%		923,658			15	%
Gross loans				6,341,560			100	%		6,316,136			100	%		6,228,563			100	%		6,096,047			100	%		6,000,982			100	%
	Allowance for loan losses			(181,356	)					(179,273	)					(144,001	)					(88,863	)					(82,544	)
Net loans				$ 6,160,204						$ 6,136,863						$ 6,084,562						$ 6,007,184						$ 5,918,438

Commercial related credits increased by 3% on an annualized basis from March 31, 2009 to June 30, 2009 and by 7% from June 30, 2008. Total loans, excluding covered assets, grew by 2% on an annualized basis from the first quarter of 2009 to the second quarter of 2009, and 6% from June 30, 2008.

The following table sets forth the composition of construction real estate loans by geographic location, excluding covered assets and loans held for sale, as of June 30, 2009 (dollars in thousands):

				Geographical Location
									Suburban Illinois
				Chicago					and Northwest Indiana					Other States					Total
						% of Total					% of Total					% of Total					% of Total
				Amount		Loans			Amount		Loans			Amount		Loans			Amount		Loans
Residential construction related credits
	Unimproved land			$ -		-			$ 5,524		0.1	%		$ -		-			$ 5,524		0.1	%
	Improved lots and single family construction			44,774		0.7	%		105,819		1.6	%		13,994		0.2	%		164,587		2.5	%
	Condominiums			107,207		1.7	%		55,197		0.9	%		2,958		0.0	%		165,362		2.6	%
	Apartments			23,252		0.4	%		11,772		0.2	%		468		0.0	%		35,492		0.6	%
	Townhomes			7,951		0.1	%		30,883		0.5	%		7,661		0.1	%		46,495		0.7	%
Total residential construction related credits				183,184		2.9	%		209,195		3.3	%		25,081		0.3	%		417,460		6.5	%
Commercial construction related credits
	Unimproved land			$ -		0.0	%		$ 2,399		0.0	%		$ -		-			$ 2,399		0.0	%
	Improved lots and construction			7,772		0.1	%		58,002		0.9	%		-		-			65,774		1.0	%
	Industrial			7,500		0.1	%		16,566		0.3	%		11,466		0.2	%		35,532		0.6	%
	Office, retail and hotel			12,081		0.2	%		97,334		1.6	%		18,115		0.3	%		127,530		2.1	%
	Schools			27,838		0.5	%		19,200		0.3	%		-		-			47,038		0.8	%
	Medical			-		-			15,000		0.00			11,666		0.2	%		26,666		0.4	%
Total commercial construction related credits				55,191		0.9	%		208,501		3.3	%		41,247		0.7	%		304,939		4.9	%
Total construction loans				$ 238,375		3.8	%		$ 417,696		6.6	%		$ 66,328		1.0	%		$ 722,399		11.4	%

The following table sets forth the composition of construction real estate loans by risk category, excluding covered assets and loans held for sale, as of June 30, 2009 (dollars in thousands):

				Risk Category
									Potential Problem and
				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			Amount		Reserved			Amount		Reserved			Amount		Reserved
Residential construction related credits
	Unimproved land			$ -		-			$ 1,600		10	%		$ 3,924		2	%		$ 5,524		4	%
	Improved lots and single family construction			76,181		41	%		41,352		6	%		47,054		2	%		164,587		21	%
	Condos			13,666		31	%		88,807		10	%		62,889		2	%		165,362		9	%
	Apartments			695		10	%		16,332		7	%		18,465		3	%		35,492		5	%
	Townhomes			25,287		35	%		6,868		10	%		14,340		2	%		46,495		21	%
Total residential construction related credits				115,829		38	%		154,959		8	%		146,672		2	%		417,460		15	%
Commercial construction related credits
	Unimproved land			$ -		-			$ 1,493		6	%		$ 906		0	%		$ 2,399		4	%
	Improved lots and construction			26,680		18	%		6,036		10	%		33,058		1	%		65,774		8	%
	Industrial			-		-			8,640		6	%		26,892		2	%		35,532		3	%
	Office and Retail			4,941		70	%		30,694		8	%		91,895		1	%		127,530		5	%
	Schools			-		-			-		-			47,038		2	%		47,038		2	%
	Medical			-		-			-		-			26,666		5	%		26,666		5	%
Total commercial construction related credits				31,621		26	%		46,863		8	%		226,455		2	%		304,939		5	%
Total construction loans				$ 147,450		36	%		$ 201,822		8	%		$ 373,127		2	%		$ 722,399		11	%

After factoring in partial charge-offs taken on non-performing residential construction loans, the percentage of loan balance reserved increases from 38% to 45%. Factoring in partial charge-offs taken on non-performing construction loans in total, the percentage of loan balance reserved increases from 36% to 41%.

ASSET QUALITY

The following table presents a summary of total performing loans, excluding covered assets and loans held for sale, greater than 30 days and less than 90 days past due as of the dates indicated (dollars in thousands):

		June 30,		March 31,		December 31,		September 30,		June 30,
		2009		2009		2008		2008		2008
30 - 59 Days Past Due		$ 15,574		$ 21,600		$ 14,372		$ 22,583		$ 21,117
60 - 89 Days Past Due		4,838		4,809		8,575		14,043		7,188
		$ 20,412		$ 26,409		$ 22,947		$ 36,626		$ 28,305

Approximately $5.1 million of performing loans past due are classified as potential problem loans (defined below).

The following table presents a summary of non-performing assets, excluding covered assets and loans held for sale, as of the dates indicated (dollar amounts in thousands):

			June 30,			March 31,			December 31,			September 30,			June 30,
			2009			2009			2008			2008			2008
Non-performing loans:
	Non-accrual loans		$ 227,681			$ 229,537			$ 145,936			$ 115,716			$ 91,972
	Loans 90 days or more past due, still accruing interest		-			-			-			1,490			1,627
Total non-performing loans			227,681			229,537			145,936			117,206			93,599
Other real estate owned			17,111			2,500			4,366			3,821			1,499
Repossessed vehicles			203			245			356			108			81
Total non-performing assets			$ 244,995			$ 232,282			$ 150,658			$ 121,135			$ 95,179
Specific allowance on non-performing loans			$ 77,186			$ 81,540			$ 52,112			$ 30,357			$ 22,089
Partial charge-offs taken on non-performing loans			30,995			23,706			17,429			13,477			3,525
Total specific allowance and partial charge-offs taken
	on non-performing loans		$ 108,181			$ 105,246			$ 69,541			$ 43,834			$ 25,614
Specific allowance and partial charge-offs taken as a
	percentage of non-performing loans plus partial
	charge-offs taken		41.82	%		41.56	%		42.57	%		33.54	%		26.37	%
Total non-performing loans to total loans			3.59	%		3.63	%		2.34	%		1.92	%		1.56	%
Total non-performing assets to total assets			2.92	%		2.57	%		1.71	%		1.45	%		1.13	%
Allowance for loan losses to non-performing loans			79.65	%		78.10	%		98.67	%		75.82	%		88.19	%
Allowance for loan losses to non-performing loans,
	including partial charge-offs taken		82.09	%		80.15	%		98.82	%		78.31	%		88.62	%

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.

At June 30, 2009, the composition of other real estate owned was primarily improved lots and single family construction projects.

The following table presents data related to non-performing loans, excluding covered assets and loans held for sale, by Dollar amount and category at June 30, 2009 (dollar amounts in thousands):

		Commercial and Lease					Construction Real Estate					Commercial Real Estate					Consumer			Total
		Loans					Loans					Loans					Loans			Loans
		Number of					Number of					Number of
		Borrowers		Amount			Borrowers		Amount			Borrowers		Amount			Amount			Amount
$10.0 million or more		-		$ -			2		$ 32,456			1		$ 13,627			$ -			$ 46,083
$5.0 million to $9.9 million		1		7,530			8		60,824			-		-			-			68,354
$1.5 million to $4.9 million		6		18,571			12		42,950			2		6,103			1,875			69,499
Under $1.5 million		29		10,086			15		11,220			33		10,558			11,881			43,745
		36		$ 36,187			37		$ 147,450			36		$ 30,288			$ 13,756			$ 227,681
Percentage of individual loan category				1.60	%				20.41	%				1.25	%		1.47	%		3.59	%

The following table presents data related to non-performing loans, excluding covered assets and loans held for sale, by dollar amount and category at March 31, 2009 (dollar amounts in thousands):

		Commercial and Lease					Construction Real Estate					Commercial Real Estate					Consumer			Total
		Loans					Loans					Loans					Loans			Loans
		Number of					Number of					Number of
		Borrowers		Amount			Borrowers		Amount			Borrowers		Amount			Amount			Amount
$10.0 million or more		-		$ -			3		$ 45,807			1		$ 13,625			$ -			$ 59,432
$5.0 million to $9.9 million		5		31,846			9		60,064			-		-			-			91,910
$1.5 million to $4.9 million		5		13,178			8		31,583			2		6,103			-			50,864
Under $1.5 million		15		4,955			9		7,002			15		3,870			11,504			27,331
		25		$ 49,979			29		$ 144,456			18		$ 23,598			$ 11,504			$ 229,537
Percentage of individual loan category				2.23	%				18.89	%				1.00	%		1.22	%		3.63	%

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). 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 amount of potential problem loans excluding covered assets was $261.0 million, or 4.12% of total loans, excluding covered assets and loans held for sale, as of June 30, 2009, compared to $215.4 million, or 3.41% of total loans, excluding covered assets and loans held for sale, as of March 31, 2009. This increase was primarily a result of the continued weak economy.

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

				Three Months Ended
				June 30,			March 31,			December 31,			September 30,			June 30,
				2009			2009			2008			2008			2008
Balance at the beginning of period				$ 179,273			$ 144,001			$ 88,863			$ 82,544			$ 78,764
Provision for loan losses				27,100			89,700			72,581			18,400			12,200
Charge-offs:
	Commercial loans			(6,636	)		(10,548	)		(1,914	)		(6,231	)		(1,342	)
	Commercial loans collateralized by assignment
		of lease payments (lease loans)		(1,385	)		(3,420	)		(440	)		(482	)		(154	)
	Commercial real estate loans			(817	)		(24,189	)		(7,076	)		(2,292	)		(1,854	)
	Construction real estate			(14,743	)		(14,697	)		(7,144	)		(2,110	)		(4,551	)
	Residential real estate			(358	)		(178	)		(117	)		(315	)		(92	)
	Indirect vehicle			(759	)		(1,065	)		(615	)		(499	)		(366	)
	Home equity			(953	)		(604	)		(503	)		(628	)		(488	)
	Consumer loans			(132	)		(155	)		(216	)		(167	)		(144	)
		Total charge-offs		(25,783	)		(54,856	)		(18,025	)		(12,724	)		(8,991	)
Recoveries:
	Commercial loans			45			31			354			132			214
	Commercial loans collateralized by assignment
		of lease payments (lease loans)		-			-			67			-			-
	Commercial real estate loans			5			18			-			257			6
	Construction real estate			511			250			-			40			161
	Residential real estate			28			3			17			1			5
	Indirect vehicle			151			111			116			152			163
	Home equity			20			11			17			48			15
	Consumer loans			6			5			11			13			7
		Total recoveries		766			429			582			643			571
Net charge-offs, excluding covered assets				(25,017	)		(54,427	)		(17,443	)		(12,081	)		(8,420	)
Net charge-offs on covered assets				-			(1	)		-			-			-
Total net charge-offs				(25,017	)		(54,428	)		(17,443	)		(12,081	)		(8,420	)
Balance				$ 181,356			$ 179,273			$ 144,001			$ 88,863			$ 82,544
Total loans, excluding covered assets and loans held for sale				$ 6,341,560			$ 6,316,136			$ 6,228,563			$ 6,096,047			$ 6,000,982
Average loans, excluding covered assets and loans held for sale				$ 6,348,411			$ 6,275,711			$ 6,166,152			$ 6,026,179			$ 5,927,236
Ratio of allowance for loan losses to total loans, excluding covered assets
	and loans held for sale			2.86	%		2.84	%		2.31	%		1.46	%		1.38	%
Net loan charge-offs to average loans, excluding covered assets and loans
	held for sale (annualized)			1.58	%		3.52	%		1.13	%		0.80	%		0.57	%

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 June 30,		At March 31,			At December 31,		At September 30,			At June 30,
			2009		2009			2008		2008			2008
Fair Value
U.S. Treasury securities			$ -		$ 11,545			$ -		$ -			$ -
Government sponsored agencies and enterprises			51,088		108,227			179,373		209,350			269,947
States and political subdivisions			394,343		424,541			427,986		430,120			431,882
Mortgage-backed securities			428,962		539,953			690,298		569,947			608,737
Corporate bonds			6,370		30,726			34,565		6,990			8,000
Equity securities			3,707		3,681			3,607		3,524			3,480
Debt securities issued by foreign governments			250		302			301		298			295
	Total fair value		$ 884,720		$ 1,118,975			$ 1,336,130		$ 1,220,229			$ 1,322,341
Amortized cost
U.S. Treasury securities			$ -		$ 11,546			$ -		$ -			$ -
Government sponsored agencies and enterprises			49,753		105,354			171,385		206,429			266,418
States and political subdivisions			389,041		416,329			417,595		428,610			432,780
Mortgage-backed securities			421,172		531,547			682,692		568,054			606,150
Corporate bonds			6,370		31,487			34,546		7,764			7,765
Equity securities			3,668		3,631			3,595		3,557			3,520
Debt securities issued by foreign governments			250		302			301		301			301
	Total amortized cost		$ 870,254		$ 1,100,196			$ 1,310,114		$ 1,214,715			$ 1,316,934
Unrealized gain (loss)
U.S. Treasury securities			$ -		$ (1	)		$ -		$ -			$ -
Government sponsored agencies and enterprises			1,335		2,873			7,988		2,921			3,529
States and political subdivisions			5,302		8,212			10,391		1,510			(898	)
Mortgage-backed securities			7,790		8,406			7,606		1,893			2,587
Corporate bonds			-		(761	)		19		(774	)		235
Equity securities			39		50			12		(33	)		(40	)
Debt securities issued by foreign governments			-		-			-		(3	)		(6	)
	Total unrealized gain		$ 14,466		$ 18,779			$ 26,016		$ 5,514			$ 5,407

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 portfolio. Additionally, more than 99% of our mortgage-backed securities are agency guaranteed.

We have maintained our disciplined investment management philosophy and have avoided the types of problem securities that have caused many financial institutions to incur large losses. The total return on our investment portfolio, defined as interest income plus unrealized and realized gains and losses, was 4.14% on an annualized basis in the quarter ended June 30, 2009.

GOODWILL

The excess of the cost of an acquisition over the fair value of the net assets acquired consist of goodwill, and core deposit and client relationship intangibles. Under the provisions of Statement of Financial Accounting Standard (SFAS) No. 142, Goodwill and Other Intangible Assets, goodwill is subject to at least annual assessments for impairment by applying a fair value based test. The Company reviews goodwill and other intangible assets to determine potential impairment annually, or more frequently if events and circumstances indicate that the asset might be impaired, by comparing the carrying value of the asset with the anticipated future cash flows.

The Company’s stock price has historically traded above its book value. However, as of June 30, 2009, our market capitalization was less than our stockholders’ common equity. Should this situation continue to exist for an extended period of time, the Company will consider this and other factors, including the Company’s anticipated future cash flows, to determine whether goodwill is impaired. No assurance can be given that the Company will not record an impairment loss on goodwill in the future. In the event the Company’s stock price trades below its book value for an extended period of time, the Company may determine that an interim assessment should be prepared and the Company would perform an evaluation of the carrying value of goodwill, as of that date.

The Company’s annual assessment date is as of December 31. No impairment losses were recognized during the six months ended June 30, 2009 or 2008. Goodwill is tested for impairment at the reporting unit level. A reporting unit is a majority owned subsidiary of the Company for which discrete financial information is available and regularly reviewed by management. MB Financial Bank is currently the Company’s only applicable reporting unit for purposes of testing goodwill impairment.

FUNDING MIX AND LIQUIDITY

The following table shows the composition of our core and wholesale funding resources as of the dates indicated (dollars in thousands):

		June 30,					March 31,					December 31,					September 30,					June 30,
		2009					2009					2008					2008					2008
				% of					% of					% of					% of					% of
		Amount		Total			Amount		Total			Amount		Total			Amount		Total			Amount		Total
Core funding:
Non-interest bearing deposits		$ 1,152,274		16	%		$ 1,018,849		13	%		$ 960,117		13	%		$ 935,153		13	%		$ 898,954		12	%
Money market and NOW accounts		1,531,149		21	%		1,762,340		22	%		1,465,436		19	%		1,326,474		18	%		1,257,852		17	%
Savings accounts		447,670		6	%		440,326		6	%		367,684		5	%		375,567		5	%		390,145		5	%
Certificates of deposit		2,383,717		33	%		2,690,087		33	%		2,604,565		34	%		2,523,198		34	%		2,379,894		32	%
Customer repurchase agreements		248,494		4	%		273,718		4	%		282,831		4	%		260,087		3	%		312,170		4	%
Total core funding		5,763,304		80	%		6,185,320		78	%		5,680,633		75	%		5,420,479		73	%		5,239,015		70	%
Wholesale funding:
Public funds deposits		107,752		1	%		166,501		2	%		232,994		3	%		211,250		3	%		252,693		3	%
Brokered deposit accounts		610,963		8	%		818,604		10	%		864,775		11	%		997,767		13	%		858,135		12	%
Other short-term borrowings		251,773		4	%		200,780		3	%		205,787		2	%		125,000		2	%		452,002		6	%
Long-term borrowings		301,691		4	%		312,246		4	%		421,466		6	%		429,548		6	%		433,625		6	%
Subordinated debt		50,000		1	%		50,000		1	%		50,000		1	%		50,000		1	%		50,000		1	%
Junior subordinated notes issued
to capital trusts		158,748		2	%		158,784		2	%		158,824		2	%		158,872		2	%		158,920		2	%
Total wholesale funding		1,480,927		20	%		1,706,915		22	%		1,933,846		25	%		1,972,437		27	%		2,205,375		30	%
Total funding		$ 7,244,231		100	%		$ 7,892,235		100	%		$ 7,614,479		100	%		$ 7,392,916		100	%		$ 7,444,390		100	%

Wholesale funding decreased $226.0 million from the first quarter of 2009 to the second quarter of 2009, primarily due to a $207.6 million decrease in brokered deposits. Core funding decreased $422.0 million compared to the first quarter of 2009 primarily due to a $306.4 million decrease in core certificates of deposit. During the quarter, we focused our time deposit retention efforts on those customers that have multiple relationships with us and were less rate sensitive. The changes in non-interest bearing deposits and money market and NOW accounts were primarily due to cyclical deposits and withdrawals related to tax revenues associated with our municipal customers.

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) expected 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 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; (3) 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; (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) fluctuations in real estate values; (8) the ability to adapt successfully to technological changes to meet customers' needs and developments in the market place; (9) our ability to realize the residual values of our direct finance, leveraged, and operating leases; (10) our ability to access cost-effective funding; (11) changes in financial markets; (12) changes in economic conditions in general and in the Chicago metropolitan area in particular; (13) the costs, effects and outcomes of litigation; (14) new legislation or regulatory changes, including but not limited to changes in federal and/or state tax laws or interpretations thereof by taxing authorities and other governmental initiatives affecting the financial services industry; (15) changes in accounting principles, policies or guidelines; (16) our future acquisitions of other depository institutions or lines of business; and (17) 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
As of the dates indicated
(Amounts in thousands, except per share data)
(Unaudited)
			June 30,			March 31,			December 31,			September 30,			June 30,
			2009			2009			2008			2008			2008
ASSETS
Cash and due from banks			$ 103,276			$ 108,416			$ 79,824			$ 118,191			$ 164,996
Interest bearing deposits with banks			13,440			416,404			261,834			6,043			6,487
		Total cash and cash equivalents	116,716			524,820			341,658			124,234			171,483
Investment securities:
	Securities available for sale, at fair value		884,720			1,118,975			1,336,130			1,220,229			1,322,341
	Non-marketable securities - FHLB and FRB Stock		66,994			65,752			64,246			63,913			63,913
		Total investment securities	951,714			1,184,727			1,400,376			1,284,142			1,386,254
Loans held for sale			4,008			18,406			-			-			-
Loans:
	Total loans		6,341,560			6,316,136			6,228,563			6,096,047			6,000,982
	Less allowance for loan loss		181,356			179,273			144,001			88,863			82,544
		Net loans	6,160,204			6,136,863			6,084,562			6,007,184			5,918,438
Covered assets			141,682			158,348			-			-			-
Lease investments, net			114,570			117,648			125,034			117,474			113,101
Premises and equipment, net			184,129			185,941			186,474			185,556			185,411
Cash surrender value of life insurance			120,614			119,943			119,526			120,481			119,423
Goodwill, net			387,069			387,069			387,069			387,069			387,069
Other intangibles, net			25,996			26,993			25,776			26,689			27,602
Other real estate owned			17,111			2,500			4,366			3,821			1,499
Other assets			178,252			161,874			144,922			101,959			96,312
		Total assets	$ 8,402,065			$ 9,025,132			$ 8,819,763			$ 8,358,609			$ 8,406,592
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits:
	Noninterest bearing		$ 1,152,274			$ 1,018,849			$ 960,117			$ 935,153			$ 898,954
	Interest bearing		5,081,251			5,877,859			5,535,454			5,434,256			5,138,719
		Total deposits	6,233,525			6,896,708			6,495,571			6,369,409			6,037,673
Short-term borrowings			500,267			474,498			488,619			385,087			764,172
Long-term borrowings			351,691			362,246			471,466			479,548			483,625
Junior subordinated notes issued to capital trusts			158,748			158,784			158,824			158,872			158,920
Accrued expenses and other liabilities			108,451			98,314			136,459			76,172			81,321
		Total liabilities	7,352,682			7,990,550			7,750,939			7,469,088			7,525,711
Stockholders' Equity
Preferred stock, ($0.01 par value, authorized 1,000,000 shares at June 30, 2009
	March 31, 2009 and December 31, 2008; series A, 5% cumulative perpetual,
	196,000 issued and outstanding at June 30, 2009, March 31, 2009,
	and December 31, 2008, $1,000.00 liquidation value)		193,242			193,105			193,025			-			-
Common stock, ($0.01 par value; authorized 50,000,000 shares at June 30, 2009,
	March 31, 2009 and December 31, 2008, and 43,000,000 at September 30,
	2008, and June 30, 2008; issued 37,539,191, 37,541,869, 37,542,968,
	37,539,615 and 37,525,940 shares at June 30, 2009, March 31, 2009,
	December 31, 2008, September 30, 2008, and June 30, 2008, respectively)		375			375			375			375			375
Additional paid-in capital			447,770			446,909			445,692			443,380			441,914
Retained earnings			419,373			450,983			495,505			527,453			520,595
Accumulated other comprehensive income			8,824			11,456			16,910			3,584			3,515
Less: 790,698, 2,213,554, 2,612,143, 2,674,240 and 2,676,592 shares of
	Treasury stock at cost, at June 30, 2009, March 31, 2009,
	December 31, 2008, September 30, 2008, and June 30, 2008, respectively		(22,795	)		(70,831	)		(85,312	)		(87,866	)		(88,082	)
		Controlling interest stockholders' equity	1,046,789			1,031,997			1,066,195			886,926			878,317
Noncontrolling interest			2,594			2,585			2,629			2,595			2,564
		Total stockholders' equity	1,049,383			1,034,582			1,068,824			889,521			880,881
Total liabilities and stockholders' equity			$ 8,402,065			$ 9,025,132			$ 8,819,763			$ 8,358,609			$ 8,406,592

MB FINANCIAL, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share data)
(Unaudited)
			Three months ended										Six months ended
			June 30,		March 31,		December 31,		September 30,		June 30,		June 30,		June 30,
			2009		2009		2008		2008		2008		2009		2008
Interest income:
	Loans		$ 82,941		$ 81,494		$ 87,474		$ 88,266		$ 87,458		$ 164,435		$ 181,335
	Investment securities available for sale:
		Taxable	6,978		10,316		9,927		10,569		10,001		17,294		19,972
		Nontaxable	3,796		3,875		3,944		3,977		3,828		7,671		7,581
	Federal funds sold		-		-		2		165		14		-		109
	Other interest bearing accounts		149		130		188		84		89		279		195
		Total interest income	93,864		95,815		101,535		103,061		101,390		189,679		209,192
Interest expense:
	Deposits		28,977		33,579		38,996		37,216		34,309		62,556		75,158
	Short-term borrowings		1,256		1,546		1,406		2,966		5,351		2,802		13,218
	Long-term borrowings & junior subordinated notes		4,242		4,662		6,387		6,273		5,657		8,904		11,280
		Total interest expense	34,475		39,787		46,789		46,455		45,317		74,262		99,656
Net interest income			59,389		56,028		54,746		56,606		56,073		115,417		109,536
Provision for loan losses			27,100		89,700		72,581		18,400		12,200		116,800		34,740
Net interest income (loss) after provision for loan losses			32,289		(33,672)		(17,835)		38,206		43,873		(1,383)		74,796
Other income:
	Loan service fees		1,782		1,843		1,850		2,385		2,475		3,625		4,945
	Deposit service fees		6,978		6,399		7,479		7,330		6,889		13,377		13,419
	Lease financing, net		4,473		4,319		4,604		4,533		3,969		8,792		7,836
	Brokerage fees		1,252		1,078		968		1,177		1,187		2,330		2,172
	Trust & asset management fees		3,262		2,815		2,784		3,276		3,589		6,077		5,809
	Net gain on sale of investment securities		4,093		9,694		24		-		1		13,787		1,106
	Increase in cash surrender value of life insurance		670		456		570		1,995		1,128		1,126		2,734
	Net gain (loss) on sale of other assets		(38)		1		(874)		26		50		(37)		(256)
	Merchant card processing income		4,152		4,279		4,326		4,541		4,644		8,431		9,174
	Other operating income		2,458		1,800		206		1,162		1,635		4,258		3,165
	Total other income		29,082		32,684		21,937		26,425		25,567		61,766		50,104
Other expense:
	Salaries & employee benefits		29,322		27,016		24,253		29,342		29,163		56,338		55,973
	Occupancy & equipment expense		7,170		7,700		7,310		7,120		6,967		14,870		14,492
	Computer services expense		2,013		2,287		1,973		1,840		1,843		4,300		3,580
	Advertising & marketing expense		892		1,314		904		1,450		1,448		2,206		2,738
	Professional & legal expense		1,120		969		1,117		884		803		2,089		1,109
	Brokerage fee expense		575		393		476		564		470		968		889
	Telecommunication expense		747		751		668		621		774		1,498		1,536
	Other intangible amortization expense		997		878		913		913		913		1,875		1,728
	Merchant card processing expense		3,803		3,890		4,045		4,175		4,256		7,693		8,361
	FDIC insurance premiums		6,789		2,668		1,188		292		235		9,457		397
	Other operating expenses		5,038		5,194		5,424		4,965		5,254		10,232		9,547
	Total other expense		58,466		53,060		48,271		52,166		52,126		111,526		100,350
Income (loss) before income taxes			2,905		(54,048)		(44,169)		12,465		17,314		(51,143)		24,550
Income tax (benefit) expense			(1,410)		(25,943)		(19,348)		(689)		(4,693)		(27,353)		(3,281)
Income (loss)			4,315		(28,105)		(24,821)		13,154		22,007		(23,790)		27,831
Preferred stock dividends and discount accretion			2,587		2,531		789		-		-		5,118		-
		Net income (loss) available to common shareholders	$ 1,728		$ (30,636)		$ (25,610)		$ 13,154		$ 22,007		$ (28,908)		$ 27,831
Common share data:
Basic earnings (loss) per common share			$ 0.05		$ (0.88)		$ (0.74)		$ 0.38		$ 0.63		$ (0.81)		$ 0.80
Diluted earnings (loss) per common share			$ 0.05		$ (0.88)		$ (0.74)		$ 0.38		$ 0.63		$ (0.81)		$ 0.79
Weighted average common shares outstanding			35,726,879		34,914,012		34,777,651		34,732,633		34,692,571		35,316,289		34,656,503
Diluted weighted average common shares outstanding			35,876,483		35,053,352		35,164,585		35,074,297		35,047,596		35,471,981		35,043,849

			Three months ended															Six months ended
			June 30,			March 31,			December 31,			September 30,			June 30,			June 30,			June 30,
			2009			2009			2008			2008			2008			2009			2008
Performance Ratios:
	Annualized return on average assets		0.20	%		(1.30	%)		(1.15	%)		0.63	%		1.08	%		(0.55	%)		0.70	%
	Annualized return on average common equity		0.81			(14.01	)		(11.38	)		5.91			10.11			(6.70	%)		6.38
	Annualized cash return on average tangible common equity (1)		2.12			(25.25	)		(20.14	)		11.31			19.12			(11.98	)		12.14
	Net interest rate spread		2.82			2.64			2.63			2.82			2.88			2.73			2.82
	Cost of funds (2)		1.83			2.12			2.47			2.50			2.53			1.97			2.84
	Efficiency ratio (3)		62.87			65.05			60.90			60.92			61.96			63.92			61.48
	Annualized net non-interest expense to average assets (4)		1.37			1.39			1.27			1.23			1.31			1.38			1.29
	Net interest margin		3.05			2.88			2.86			3.04			3.11			2.97			3.11
	Tax equivalent effect		0.13			0.13			0.14			0.14			0.14			0.13			0.13
	Net interest margin - fully tax equivalent basis (5)		3.18			3.01			3.00			3.18			3.25			3.10			3.24
Asset Quality Ratios (6):
	Non-performing loans to total loans		3.59	%		3.63	%		2.34	%		1.92	%		1.56	%		3.59	%		1.56	%
	Non-performing assets to total assets		2.92			2.57			1.71			1.45			1.13			2.92			1.13
	Allowance for loan losses to total loans		2.86			2.84			2.31			1.46			1.38			2.86			1.38
	Allowance for loan losses to non-performing loans		79.65			78.10			98.67			75.82			88.19			79.65			88.19
	Net loan charge-offs to average loans (annualized)		1.58			3.52			1.13			0.80			0.57			2.54			0.60
Capital Ratios:
	Tangible equity to assets (7)		8.07	%		7.31	%		7.90	%		6.10	%		5.95	%		8.07	%		5.95	%
	Tangible common equity to risk weighted assets (8)		6.79			6.49			7.10			7.36			7.28			6.79			7.28
	Tangible common equity to assets (9)		5.65			5.07			5.65			6.10			5.95			5.65			5.95
	Book value per common share (10)		$23.30			$23.82			$25.17			$25.51			$25.20			$23.30			$25.20
	Less: goodwill and other intangible assets, net of tax
		benefit, per common share	10.99			11.45			11.56			11.60			11.62			10.99			11.62
	Tangible book value per share (11)		12.30			12.37			13.61			13.91			13.58			12.30			13.58
	Total capital (to risk-weighted assets)		13.89	%		13.48	%		14.07	%		11.65	%		11.59	%		13.89	%		11.59	%
	Tier 1 capital (to risk-weighted assets)		11.88			11.48			12.06			9.64			9.58			11.88			9.58
	Tier 1 capital (to average assets)		9.55			9.25			9.85			8.00			8.08			9.55			8.08
	Tier 1 common capital (to risk-weighted assets)		6.66			6.32			6.85			7.30			7.23			6.66			7.23

(1)		Net cash flow available to common shareholders (net income available to common shareholders or net income, as appropriate, plus other intangibles amortization expense, net of tax benefit) / 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 FDIC special assessment 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.
(4)		Equals total other expense excluding FDIC special assessment less total other income excluding net gains (losses) on securities available for sale divided by average assets.
(5)		Represents net interest income, on a fully tax equivalent basis assuming a 35% tax rate, as a percentage of average interest earning assets.
(6)		Excluded covered assets and loans held for sale.
(7)		Equals total ending equity less goodwill and other intangibles, net of tax benefit, divided by total assets less goodwill and other intangibles, net of tax benefit.
(8)		Equals total ending common shareholders’ equity less goodwill and other intangibles, net of tax benefit, divided by total risk weighted assets.
(9)		Equals total ending common shareholders’ equity less goodwill and other intangibles, net of tax benefit, divided by total assets less goodwill and other intangibles, net of tax benefit.
(10)		Equals total ending common shareholders’ equity divided by common shares outstanding.
(11)		Equals total ending common shareholders’ 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 interest income on a fully tax equivalent basis, net interest margin on a fully tax equivalent basis; efficiency ratio and ratio of annualized net non-interest expense to average assets, with net gains and losses on securities available for sale excluded from the non-interest income components and the FDIC special assessment expense excluded from the non-interest expense components of these ratios; ratios of tangible equity to assets, tangible common equity to risk weighted assets and tangible common equity to assets ratio; 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. 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 from the non-interest income component and excluding the FDIC special assessment expense from other non-interest expense of the efficiency ratio and the ratio of annualized net non-interest expense to average assets, these ratios better reflect our core operating performance. 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 equity (in thousands):

			June 30,		March 31,		December 31,		September 30,		June 30,
			2009		2009		2008		2008		2008
Stockholders' equity - as reported			$ 1,049,383		$ 1,034,582		$ 1,068,824		$ 889,521		$ 880,881
	Less: goodwill		387,069		387,069		387,069		387,069		387,069
	Less: other intangible, net of tax benefit		16,897		17,545		16,754		17,348		17,941
Tangible equity			$ 645,417		$ 629,968		$ 665,001		$ 485,104		$ 475,871

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

			June 30,		March 31,		December 31,		September 30,		June 30,
			2009		2009		2008		2008		2008
Common stockholders' equity - as reported			$ 856,141		$ 841,477		$ 875,799		$ 889,521		$ 880,881
	Less: goodwill		387,069		387,069		387,069		387,069		387,069
	Less: other intangible, net of tax benefit		16,897		17,545		16,754		17,348		17,941
Tangible common equity			$ 452,175		$ 436,863		$ 471,976		$ 485,104		$ 475,871

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

		Three months ended										Six months ended
		June 30,		March 31,		December 31,		September 30,		June 30,		June 30,		June 30,
		2009		2009		2008		2008		2008		2009		2008
Average common stockholders' equity - as reported		$ 853,782		$ 886,740		$ 898,246		$ 888,206		$ 877,450		$ 870,155		$ 878,253
Less: average goodwill		387,069		387,069		387,069		387,069		384,865		387,069		381,956
Less: average other intangible assets,
net of tax benefit		17,186		16,872		16,999		17,582		17,295		17,032		16,802
Average tangible common equity		$ 449,527		$ 482,799		$ 494,178		$ 483,555		$ 475,290		$ 466,054		$ 479,495

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

			Three months ended												Six months ended
			June 30,		March 31,			December 31,			September 30,		June 30,		June 30,			June 30,
			2009		2009			2008			2008		2008		2009			2008
Net (loss) income available to common
		shareholders - as reported	$ 1,728		$ (30,636	)		$ (25,610	)		$ 13,154		$ 22,007		$ (28,908	)		$ 27,831
	Add: other intangible amortization
		expense, net of tax benefit	648		571			593			593		593		1,219			1,123
Net cash flow available to common shareholders			$ 2,376		$ (30,065	)		$ (25,017	)		$ 13,747		$ 22,600		$ (27,689	)		$ 28,954

Efficiency Ratio Calculation (Dollars in Thousands)

			Three months ended															Six months ended
			June 30,			March 31,			December 31,			September 30,			June 30,			June 30,			June 30,
			2009			2009			2008			2008			2008			2009			2008
Non-interest expense			$ 58,466			$ 53,060			$ 48,271			$ 52,166			$ 52,126			$ 111,526			$ 100,350
Adjustment for FDIC special assessment			3,850			-			-			-			-			3,850			-
Non-interest expense - as adjusted			$ 54,616			$ 53,060			$ 48,271			$ 52,166			$ 52,126			$ 107,676			$ 100,350
Net interest income			$ 59,389			$ 56,028			$ 54,746			$ 56,606			$ 56,073			$ 115,417			$ 109,536
Tax equivalent adjustment			2,496			2,551			2,606			2,596			2,483			5,047			4,688
Net interest income on a fully tax equivalent basis			61,885			58,579			57,352			59,202			58,556			120,464			114,224
Plus other income			29,082			32,684			21,937			26,425			25,567			61,766			50,104
Less net gains (losses) on securities available for sale			4,093			9,694			24			-			1			13,787			1,106
Net interest income plus non-interest income -
as adjusted			$ 86,874			$ 81,569			$ 79,265			$ 85,627			$ 84,122			$ 168,443			$ 163,222
Efficiency ratio			62.87	%		65.05	%		60.90	%		60.92	%		61.96	%		63.92	%		61.48	%
Efficiency ratio (without adjustments)			66.08	%		59.81	%		62.95	%		62.83	%		63.85	%		62.94	%		62.86	%

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

			Three months ended															Six months ended
			June 30,			March 31,			December 31,			September 30,			June 30,			June 30,			June 30,
			2009			2009			2008			2008			2008			2009			2008
Non-interest expense			$ 58,466			$ 53,060			$ 48,271			$ 52,166			$ 52,126			$ 111,526			$ 100,350
Adjustment for FDIC special assessment			3,850			-			-			-			-			3,850			-
Non-interest expense - as adjusted			54,616			53,060			48,271			52,166			52,126			107,676			100,350
Other income			29,082			32,684			21,937			26,425			25,567			61,766			50,104
Less net gains (losses) on securities available for sale			4,093			9,694			24			-			1			13,787			1,106
Other income - as adjusted			24,989			22,990			21,913			26,425			25,566			47,979			48,998
Net non-interest expense			$ 29,627			$ 30,070			$ 26,358			$ 25,741			$ 26,560			$ 59,697			$ 51,352
Average assets			8,701,857			8,792,275			8,240,344			8,357,985			8,177,928			8,746,816			8,021,373
Annualized net non-interest expense to average assets			1.37	%		1.39	%		1.27	%		1.23	%		1.31	%		1.38	%		1.29	%
Annualized net non-interest expense to average assets
(without adjustments)			1.35	%		0.94	%		1.27	%		1.23	%		1.31	%		1.15	%		1.26	%

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 June 30,														Three Months Ended March 31,
				2009							2008							2009
				Average				Yield/			Average				Yield/			Average				Yield/
				Balance		Interest		Rate			Balance		Interest		Rate			Balance		Interest		Rate
Interest Earning Assets:
Loans (1) (2):
Commercial related credits
	Commercial			$ 1,375,433		$ 15,867		4.56	%		$ 1,375,537		$ 19,605		5.64	%		$ 1,436,170		$ 16,960		4.72	%
	Commercial - nontaxable (3)			79,166		1,290		6.45			65,880		1,206		7.24			80,464		1,327		6.60
	Commercial loans collateralized by assignment
		of lease payments		812,494		12,660		6.23			577,051		9,524		6.60			679,314		10,876		6.40
	Real estate commercial			2,373,304		32,029		5.34			2,145,371		32,593		6.01			2,362,314		31,958		5.41
	Real estate construction			771,269		7,100		3.64			804,946		11,010		5.41			769,996		7,936		4.12
Total commercial related credits				5,411,666		68,946		5.04			4,968,785		73,938		5.89			5,328,258		69,057		5.18
Other loans
	Real estate residential			279,863		3,938		5.63			378,163		5,565		5.89			292,611		4,122		5.63
	Home equity			410,626		4,509		4.40			352,209		4,273		4.88			405,761		4,416		4.41
	Indirect			190,010		3,210		6.78			174,681		3,395		7.82			188,970		3,127		6.71
	Consumer loans			56,246		576		4.11			53,398		709		5.34			60,111		608		4.10
Total other loans				936,745		12,233		5.24			958,451		13,942		5.85			947,453		12,273		5.25
	Total loans, excluding covered assets			6,348,411		81,179		5.13			5,927,236		87,880		5.96			6,275,711		81,330		5.26
	Covered assets			155,902		2,214		5.70			-		-		-			54,693		628		4.66
	Total loans			6,504,313		83,393		5.14			5,927,236		87,880		5.96			6,330,404		81,958		5.25
Taxable investment securities				695,449		6,978		4.01			886,736		10,001		4.51			944,603		10,316		4.37
Investment securities exempt from federal income taxes (3)				405,748		5,840		5.69			409,389		5,889		5.69			412,251		5,962		5.78
Federal funds sold				-		-		0.00			2,912		14		1.90			-		-		-
Other interest bearing deposits				197,218		149		0.30			18,345		89		1.95			195,104		130		0.27
	Total interest earning assets			$ 7,802,728		96,360		4.95			$ 7,244,618		103,873		5.77			$ 7,882,362		98,366		5.06
Non-interest earning assets				899,129							933,310							909,913
	Total assets			$ 8,701,857							$ 8,177,928							$ 8,792,275
Interest Bearing Liabilities:
Core funding:
	Money market and NOW accounts			$ 1,691,868		$ 3,841		0.91	%		$ 1,226,903		$ 4,762		1.56	%		$ 1,519,499		$ 3,948		1.05	%
	Savings accounts			447,392		461		0.41			391,683		269		0.28			393,667		314		0.32
	Certificate of deposit			2,488,905		17,334		2.79			2,299,976		20,647		3.61			2,647,526		20,435		3.13
	Customer repurchase agreements			277,896		336		0.48			291,208		1,033		1.43			267,440		250		0.38
Total core funding				4,906,061		21,972		1.80			4,209,770		26,711		2.55			4,828,132		24,947		2.10
Whole sale funding:
	Public funds			133,362		513		1.54			245,953		1,956		3.20			199,902		943		1.91
	Brokered accounts (includes fee expense)			728,378		6,828		3.76			735,325		6,675		3.65			833,606		7,939		3.86
	Other short-term borrowings			202,137		920		1.83			533,462		4,318		3.26			265,435		1,296		1.98
	Long-term borrowings			514,810		4,242		3.26			587,940		5,657		3.81			536,189		4,662		3.48
Total wholesale funding				1,578,687		12,503		3.18			2,102,680		18,606		3.56			1,835,132		14,840		3.28
Total interest bearing liabilities				$ 6,484,748		$ 34,475		2.13			$ 6,312,450		$ 45,317		2.89			$ 6,663,264		$ 39,787		2.42
Non-interest bearing deposits				1,074,567							905,201							960,167
Other non-interest bearing liabilities				95,592							82,827							91,222
Stockholders' equity				1,046,950							877,450							1,077,622
		Total liabilities and stockholders' equity		$ 8,701,857							$ 8,177,928							$ 8,792,275
		Net interest income/interest rate spread (4)				$ 61,885		2.82	%				$ 58,556		2.88	%				$ 58,579		2.64	%
		Taxable equivalent adjustment				2,496							2,483							2,551
		Net interest income, as reported				$ 59,389							$ 56,073							$ 56,028
		Net interest margin (5)						3.05	%						3.11	%						2.88	%
		Tax equivalent effect						0.13	%						0.14	%						0.13	%
		Net interest margin on a fully equivalent basis (5)						3.18	%						3.25	%						3.01	%

(1)		Non-accrual loans are included in average loans.
(2)		Interest income includes amortization of deferred loan origination fees of $1.4 million, $1.5 million and $1.3 million for the three months ended June 30, 2009, June 30, 2008, and March 31, 2009, 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.

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):

				Six Months Ended June 30,
				2009							2008
				Average				Yield/			Average				Yield/
				Balance		Interest		Rate			Balance		Interest		Rate
Interest Earning Assets:
Loans (1) (2):
Commercial related credits
	Commercial			$ 1,405,633		$ 32,827		4.64	%		$ 1,360,739		$ 42,126		6.12	%
	Commercial - nontaxable (3)			79,812		2,617		6.56			46,596		1,732		7.35
	Commercial loans collateralized by assignment
		of lease payments		746,272		23,536		6.31			566,064		18,935		6.69
	Real estate commercial			2,367,839		63,987		5.37			2,074,204		65,562		6.25
	Real estate construction			770,636		15,036		3.88			816,083		25,134		6.09
Total commercial related credits				5,370,192		138,003		5.11			4,863,686		153,489		6.24
Other loans
	Real estate residential			286,202		8,060		5.63			376,076		11,152		5.93
	Home equity			408,207		8,925		4.41			350,499		9,355		5.37
	Indirect			189,493		6,337		6.74			163,728		6,423		7.89
	Consumer loans			58,168		1,184		4.10			53,451		1,522		5.73
Total other loans				942,070		24,506		5.25			943,754		28,452		6.06
	Total loans, excluding covered assets			6,312,262		162,509		5.19			5,807,440		181,941		6.30
	Covered assets			105,577		2,842		5.43			-		-		-
	Total loans			6,417,839		165,351		5.20			5,807,440		181,941		6.30
Taxable investment securities				819,338		17,294		4.22			853,290		19,972		4.68
Investment securities exempt from federal income taxes (3)				408,981		11,802		5.74			405,298		11,663		5.69
Federal funds sold				-		-		-			9,066		109		2.38
Other interest bearing deposits				196,167		279		0.29			16,867		195		2.32
	Total interest earning assets			$ 7,842,325		194,726		5.01			$ 7,091,961		213,880		6.06
Non-interest earning assets				904,491							929,412
	Total assets			$ 8,746,816							$ 8,021,373
Interest Bearing Liabilities:
Core funding:
	Money market and NOW accounts			$ 1,606,160		$ 7,789		0.98	%		$ 1,230,934		$ 11,365		1.86	%
	Savings accounts			420,678		775		0.37			390,319		712		0.37
	Certificate of deposit			2,567,778		37,769		2.97			2,259,273		45,545		4.05
	Customer repurchase agreements			272,697		586		0.43			312,836		2,863		1.84
Total core funding				4,867,313		46,919		1.94			4,193,362		60,485		2.90
Whole sale funding:
	Public funds			166,448		1,456		1.76			264,373		4,969		3.78
	Brokered accounts (includes fee expense)			780,701		14,767		3.81			626,083		12,567		4.04
	Other short-term borrowings			233,611		2,216		1.91			569,372		10,355		3.66
	Long-term borrowings			525,440		8,904		3.37			524,497		11,280		4.25
Total wholesale funding				1,706,200		27,343		3.23			1,984,325		39,171		3.97
Total interest bearing liabilities				$ 6,573,513		$ 74,262		2.28			$ 6,177,687		$ 99,656		3.24
Non-interest bearing deposits				1,017,683							872,294
Other non-interest bearing liabilities				93,419							93,139
Stockholders' equity				1,062,201							878,253
		Total liabilities and stockholders' equity		$ 8,746,816							$ 8,021,373
		Net interest income/interest rate spread (4)				$ 120,464		2.73	%				$ 114,224		2.82	%
		Taxable equivalent adjustment				5,047							4,688
		Net interest income, as reported				$ 115,417							$ 109,536
		Net interest margin (5)						2.97	%						3.11	%
		Tax equivalent effect						0.13	%						0.13	%
		Net interest margin on a fully equivalent basis (5)						3.10	%						3.24	%

(1)		Non-accrual loans are included in average loans.
(2)		Interest income includes amortization of deferred loan origination fees of $2.7 million and $3.5 million for the six months ended June 30, 2009, and June 30, 2008, 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.