MB Financial, Inc. Reports Second Quarter Net Income for 2007

MB Financial, Inc. (NASDAQ: MBFI), the holding company for MB Financial Bank, N.A. and Union Bank, N.A., announced today second 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 $21.0 million for the second quarter of 2007 compared to $18.1 million for the first quarter of 2007, an increase of 16.1%. Fully diluted earnings per share for the second quarter of 2007 were $0.57 per share as compared to $0.49 per share for the first quarter of 2007. On June 29, 2007, we entered into an agreement to sell our Oklahoma City-based subsidiary bank, Union Bank, N.A., to Olney Bancshares of Texas, Inc. for approximately $76.9 million which is based on Union Bank’s book value at closing plus a premium of $46.9 million. The transaction, which is subject to customary closing conditions and regulatory approval, is expected to be completed within 120 days of the agreement date. Prior to closing, Union Bank will sell to our lead subsidiary bank, Chicago-based MB Financial Bank, N.A., approximately $130 million in performing loans previously purchased from and originated by MB Financial Bank ("Sale Loans”). The sale of Union Bank, N.A., is intended to allow us to concentrate our resources on growth and expansion in the Chicago metropolitan market. In accordance with FASB Statement No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets,” the financial position of Union Bank, is reflected on the Company’s balance sheets as "assets held for sale” and "liabilities held for sale”, and the results of operations of Union Bank are reflected in the Company’s statements of income as "discontinued operations.” We estimate the post-closing impact of the Union Bank sale on our overall earnings per share will be minimal, as we anticipate that the lost income from Union Bank will largely be offset by additional income attributable to the loans that we will repurchase from Union Bank prior to closing and additional investment earnings on the sale proceeds. Highlights for the quarter were as follows: We enjoyed robust commercial loan growth in the second quarter. Annualized commercial related loan growth was approximately 17%, driven by substantial growth in our commercial and lease loan categories. Our credit quality improved during the second quarter. Potential problem loans decreased from $32.0 million, or 0.63% of total loans, at March 31, 2007, to $21.3 million, or 0.41% of total loans, at June 30, 2007. Non-performing loans decreased from $23.2 million, or 0.46% of total loans, at March 31, 2007, to $21.8 million, or 0.42% of total loans, at June 30, 2007. Core funding increased by $41.9 million compared to the first quarter of 2007. Additionally, our core funding has increased from 74% of total funding to 77% of total funding from September 30, 2006 to June 30, 2007. See "Funding Mix" section below for further analysis. The decline in our net interest margin has slowed. Our net interest margin in the second quarter, expressed on a fully tax equivalent basis, was 3.31%, which was two basis points less than the first quarter of 2007 and was within the range of 3.30% to 3.38% previously communicated. The originally communicated range included Union Bank, N.A. Including Union Bank, our second quarter margin was 3.34% on a fully tax equivalent basis. Non-core business transactions during the second quarter of 2007 included: -- a pre-tax gain on the sale of artwork of $1.6 million 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, -- a pre-tax loss of $2.1 million on the sale of investment securities, -- a pre-tax gain of $7.4 million on the sales of two properties (the former FOBB headquarters building and vacant land located near our Chicago West Loop office), -- a $3 million contribution to the MB Financial Charitable Foundation, -- a pre-tax gain of $300 thousand (net of severance payments) on the sale of our brokerage third party marketing business. Non-core transactions increased our second quarter earnings by $2.8 million, net of tax. Excluding these non-core items, our second quarter earnings were $0.50 per diluted share. Non-core transactions increased our first quarter earnings by $590 thousand, net of tax. Excluding these non-core transactions, our first quarter earnings were $0.47 per diluted share. RESULTS OF OPERATIONS Second Quarter Results Net Interest Income Net interest income on a tax equivalent basis increased $401 thousand from the first quarter of 2007 to the second quarter of 2007. The increase in net interest income was primarily due to an increase in average earning assets and one additional day during the second quarter, partially offset by a two basis point decline in the net interest margin. We have $61.7 million of junior subordinated notes issued to capital trusts with a fixed coupon rate of 8.6% outstanding that become callable at par in September 2007. Given the current interest rates available on this type of debt, we anticipate calling these notes. Based on the number of fully diluted shares outstanding as of June 30, 2007, we estimate that we would incur approximately $2 million, or $0.03 to $0.04 per diluted share, of additional interest expense in the third quarter of 2007 if these notes are called. Assuming no significant changes in interest rates or balance sheet leverage, we estimate our net interest margin on a fully tax equivalent basis and excluding the impact of the call on junior subordinated notes, will range from 3.26% to 3.34% in the third quarter of 2007. The estimated third quarter range declined from the estimated second quarter range primarily as a result of the exclusion of Union Bank, N.A., and assumes that the sale of Union Bank has not closed and the "Sale Loans” have not been transferred to MB Financial Bank. See the supplemental net interest margin table for further detail. Other Income Three months ended June 30, March 31, December 31, September 30, 2007 2007 2006 2006 Core other income: Loan service fees $ 1,388 $ 1,537 $ 1,278 $ 1,101 Deposit service fees 5,624 5,158 5,244 4,963 Lease financing, net 3,744 3,996 3,895 2,832 Brokerage fees 2,716 2,452 2,061 2,559 Trust and asset management fees 2,666 2,281 2,326 1,736 Increase in cash surrender value of life insurance 1,269 1,221 1,184 1,012 Merchant card processing 4,045 3,878 3,434 1,820 Other operating income 1,303 1,449 1,491 1,201 Total core other income 22,755 21,972 20,913 17,224   Non-core other income (1): Gain on sale of third party brokeragebusiness (A) 500 - - - Gain on sale of artwork (D) 1,634 - - - Gain on sale of properties (D) 7,439 - - - Net gain (loss) on sale of other assets (D) (14) 22 55 (296) Net gain (loss) on sale of investment securities (2,077) (24) 82 (121) Gain on sale of land trust business (B) - 909 - - Gain on sale of indirect auto loans (C) - - - 338 Increase in market value of assets held in trust for deferred compensation (C)   483 65 316 91 Total non-core other income 7,965 972 453 12   Total other income $ 30,720 $ 22,944 $ 21,366 $ 17,236 (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. Deposit service fees increased from the first quarter of 2007 to the second quarter of 2007, primarily due to enhancements made to our courtesy overdraft program and a fee increase that was implemented during the second quarter of 2007. The increase in our core business brokerage fee income was primarily due to an increase in investment representative production during the second quarter of 2007 compared to the first quarter of 2007. The increase in our core business trust and asset management fees was primarily due to an increase in fees generated during the second quarter from new customers and expansion of our existing customer relationships. During the second quarter of 2007 we sold our third party brokerage business for initial cash consideration of $500 thousand. Additional cash consideration of up to $500 thousand may be realized in the fourth quarter of 2007 contingent on customer retention by the buyer. During the second quarter of 2007 we recorded approximately $2.0 million of brokerage fee revenue related to our third party brokerage business. We expect a significant decrease in our brokerage fee revenue in the third quarter of 2007, offset by significant corresponding reductions in salaries and employee benefits and brokerage expense as a result of selling our third party brokerage business. During the second quarter we realized a gain of $1.6 million on the sale of artwork that was acquired as a result of our acquisition of FOBB. The total sale price of the artwork was $4.6 million. During the second quarter of 2007 we sold two properties for a total gain of $7.4 million. One property sold was the former headquarters building of FOBB. The total sale price of the building and land was $14.65 million. As part of the transaction, MB Financial Bank agreed to lease back a portion of the building to serve our local retail and commercial customers. We estimate that this sale will save us approximately $600 thousand in occupancy expense during the 2008 year, plus provide us the opportunity for additional earnings on the proceeds from the sale. The other property sold consisted of vacant land located near our Chicago West Loop office. The sale price was $10.5 million, and the operating expenses and cost savings from selling this property are minimal. During the second quarter of 2007, we sold approximately $108.7 million in investment securities that resulted in a net loss of $2.1 million. The securities sale will reduce our exposure to securities that we believed were economically inferior from an interest rate risk standpoint, and improve our portfolio performance in certain interest rate environments. 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 June 30, March 31, December 31, September 30, 2007 2007 2006 2006 Core other expense: Salaries and employee benefits 26,130 24,934 26,645 22,980 Occupancy and equipment expense 7,054 7,200 6,733 6,267 Computer services expense 1,857 1,817 1,746 1,627 Advertising and marketing expense 1,444 1,410 1,049 1,265 Professional and legal expense 656 530 368 713 Brokerage fee expense 1,403 1,271 1,087 1,405 Telecommunication expense 689 681 693 659 Other intangibles amortization expense 878 881 972 523 Merchant card processing 3,474 3,270 3,045 1,689 Other operating expenses 4,805 4,747 4,676 4,178 Total core other expense 48,390 46,741 47,014 41,306   Non-core other expense (1): Vision severance payments (E) 200 - - - Merger related severance and other salary and employee benefit expense (E) - - - 364 Increase in market value of assets held in trust for deferred compensation (E) 483 65 316 91 Other merger related expenses (F) - - - 139 Contribution to MB Financial Charitable Foundation (F)   3,000 - - - Total non-core other expense 3,683 65 316 594   Total other expense 52,073 46,806 47,330 41,900 (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, and F – Other Operating Expenses Core salaries and employee benefits increased from the first quarter of 2007 to the second quarter of 2007, primarily due to an increase in employee bonus expense of approximately $540 thousand as a result of lower bonus payouts in the first quarter of 2007, an increase in healthcare expense of approximately $315 thousand, and one additional day in the second quarter compared to the first quarter. Merchant card processing expense and brokerage fee expense are highly correlated to merchant card processing income and brokerage fees and the increases are due to higher revenues in the second quarter. Severance payments recorded in the second quarter of 2007 were related to the sale of our third party brokerage business. 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. During the second quarter we made a contribution to the MB Financial Charitable Foundation, which is dedicated to strengthening the communities where MB Financial Bank operates. Income Taxes Income tax expense from continuing operations for the three months ended June 30, 2007 increased $1.4 million to $8.4 million compared to $7.0 million for the three months ended March 31, 2007. The effective tax rate was 30.0% and 29.1% for the quarters ended June 30, 2007 and March 31, 2007, respectively. LOAN PORTFOLIO The following table sets forth the composition of the loan portfolio as of the dates indicated (dollars in thousands): June 30, March 31, December 31, September 30, 2007 2007 2006 2006 (2) Amount % ofTotal Amount % ofTotal Amount % ofTotal Amount % ofTotal   Commercial related credits: Commercial loans $ 1,161,267 22% $ 1,106,806 22% $ 1,020,708 21% $ 995,231 21% Commercial loans collateralized by assignment of lease payments (lease loans) 437,581 9% 375,763 7% 392,063 8% 364,696 8% Commercial real estate 1,601,329 31% 1,590,767 31% 1,573,144 32% 1,618,532 33% Construction real estate 884,560 17% 841,065 18% 851,896 16% 812,477 16% Total commercial related credits 4,084,737 79% 3,914,401 78% 3,837,811 77% 3,790,936 78% Other loans: Residential real estate 572,823 11% 578,431 12% 591,141 12% 528,358 11% Indirect vehicle 131,308 2% 120,342 2% 110,573 2% 99,788 2% Home equity 348,336 7% 363,967 7% 381,612 8% 385,922 8% Consumer loans 52,302 1% 63,265 1% 50,357 1% 48,311 1% Total other loans 1,104,769 21% 1,126,005 22% 1,133,683 23% 1,062,379 22%   Gross loans (1) 5,189,506 100% 5,040,406 100% 4,971,494 100% 4,853,315 100% Allowance for loan losses (59,058) (58,705) (58,983) (58,439) Net loans $ 5,130,448 $ 4,981,701 $ 4,912,511 $ 4,794,876 (1) Gross loan balances at June 30, 2007, March 31, 2007, December 31, 2006, and September 30, 2006 are net of unearned income, including net deferred loan fees of $2.9 million, $2.8 million, $3.0 million, and $3.6 million, respectively. (2) At September 30, 2006, there were approximately $70 million of Oak Brook Bank loans classified as commercial real estate loans. As a result of the merger between MB Financial Bank and Oak Brook Bank in the fourth quarter of 2006, these loans were reclassified as residential real estate loans. Commercial related credits increased by 17% on an annualized basis from March 31, 2007 to June 30, 2007. ASSET QUALITY The following table presents a summary of non-performing assets as of the dates indicated (dollar amounts in thousands): June 30, 2007 March 31, 2007 December 31, 2006 September 30,2006 Non-performing loans: Non-accrual loans (1) $ 21,799 $ 23,222 $ 21,164 $ 19,477 Loans 90 days or more past due, still accruing interest - - 304 435 Total non-performing loans 21,799 23,222 21,468 19,912 Other real estate owned 111 319 2,844 36 Repossessed vehicles 188 61 192 260 Total non-performing assets $ 22,098 $ 23,602 $ 24,504 $ 20,208 Total non-performing loans to total loans 0.42% 0.46% 0.43% 0.41% Allowance for loan losses to non-performing loans 270.92% 252.80% 274.75% 293.49% Total non-performing assets to total assets 0.28% 0.30% 0.31% 0.25% (1) There were no restructured loans at June 30, 2007, March 31, 2007, December 31, 2006 and September 30, 2006. 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, 2007 March 31, 2007 December 31, 2006 September 30, 2006   Balance at beginning of period $ 58,705 $ 58,983 $ 58,439 $ 42,988 Additions from acquisition - - - 16,426 Provision for loan losses 3,000 3,813 3,500 4,000 Charge-offs (4,046) (4,354) (4,056) (6,352) Recoveries 1,399 263 1,100 1,377 Balance $ 59,058 $ 58,705 $ 58,983 $ 58,439 Total loans $5,189,506   $ 5,040,406 $ 4,971,494 $ 4,853,315 Average loans $ 5,099,822 $ 4,989,817 $ 4,873,821 $ 4,296,754 Ratio of allowance for loan losses to total loans 1.14% 1.16% 1.19% 1.20% Net loan charge-offs to average loans (annualized) 0.21% 0.33% 0.24% 0.46% The decrease in our provision and ratio of allowance for loan losses to total loans from the first quarter of 2007 to the second quarter of 2007 was primarily due to lower net charge-offs and improved credit quality in the second quarter compared to the first quarter. 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 loans rated substandard or doubtful which are included on the watch list presented to our bank subsidiaries’ boards of directors that do not meet the definition of a non-performing loan (See "Asset Quality” section above for non-performing loans), but where known information about possible credit problems of borrowers causes management to have serious doubts as to the ability of such borrowers to comply with present loan repayment terms. Our decision to include performing loans in potential problem loans does not necessarily mean that we expect losses to occur, but that we recognize potential problem loans carry a higher probability of default. The aggregate principal amounts of potential problem loans were $21.3 million, or 0.41% of total loans as of June 30, 2007, and approximately $32.0 million, or 0.63% of total loans as of March 31, 2007. The following is a summary of charge-offs and non-performing loans for the prior eighteen quarters (in thousands): NetCharge-Offs Annualized Net Charge-Offsto AverageLoans   End of Period Non-PerformingLoans Non-PerformingLoans to TotalLoans PotentialProblemLoans toTotal Loans 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 – YTD 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% INVESTMENT SECURITIES AVAILABLE FOR SALE The following table sets forth the fair value of our investment securities available for sale, by type of security as indicated (in thousands): At June 30, 2007 At March 31, 2007 At December 31, 2006 At September 30, 2006   U.S. Treasury securities (1) $ 1,274 $ 7,280 $ 11,248 $ 12,232 Government sponsored agencies and enterprises 414,620 540,141 665,435 696,968 States and political subdivisions 386,040 366,865 370,036 343,321 Mortgage-backed securities 489,345 468,092 495,215 512,249 Corporate bonds 27,643 30,215 27,316 46,417 Equity securities 69,856 58,089 58,551 67,029 Debt securities issued by foreign governments 298 547 547 546 Total   $1,389,076 $ 1,471,229 $ 1,628,348 $ 1,678,762 (1) Includes trading securities of $899 thousand at September 30, 2006 Our investment security portfolio continued to decrease, as a majority of Government sponsored agencies and enterprise securities that have been sold or matured have not been replaced due to the lack of attractive investment opportunities. We had no securities classified as held-to-maturity or trading as of June 30, 2007. FUNDING MIX 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, 2007 2007 2006 2006 Amount % ofTotal Amount % ofTotal Amount % ofTotal Amount % ofTotal   Core funding: Non-interest bearing deposits $ 879,338 13% $ 856,106 13% $ 924,371 14% $ 856,508 13% Money market and NOW accounts 1,221,893 18% 1,162,047 18% 1,040,818 16% 1,044,863 16% Savings accounts 429,625 7% 447,697 7% 473,727 7% 487,133 7% Certificates of deposit 2,270,184 34% 2,325,655 35% 2,332,571 35% 2,368,118 35% Customer repurchase agreements 326,194 5% 293,785 4% 314,441 4% 192,038 3% Total core funding 5,127,234 77% 5,085,290 77% 5,085,928 76% 4,948,660 74%   Wholesale funding: Public funds deposits 327,560 5% 285,621 4% 239,492 4% 316,817 5% Brokered deposit accounts 394,644 6% 425,683 6% 569,574 9% 672,263 10% Other short-term borrowings 456,959 7% 428,631 7% 374,063 5% 280,885 4% Long-term borrowings 186,322 3% 175,006 3% 245,880 4% 285,995 4% Junior subordinated notes issued to capital trusts 166,657 2% 179,096 3% 179,162 2% 179,230 3% Total wholesale funding 1,532,142 23% 1,494,037 23% 1,608,171 24% 1,735,190 26%   Total funding $ 6,659,376 100% $ 6,579,327 100% $ 6,694,099 100% $ 6,683,850 100% We experienced a net increase in our lower cost core funding sources (non-interest bearing deposits, money market and NOW accounts, and savings accounts), and a net decrease in our higher cost core funding sources (certificates of deposit and customer repurchase agreements) from the first quarter of 2007 to the second quarter of 2007. Additionally, our percentage of core funding to total funding has increased from September 30, 2006 to June 30, 2007. On June 26, 2007, we called at par $12 million of junior subordinated notes issued to capital trusts with a floating coupon rate of 3 month LIBOR plus 3.45% that was acquired during the acquisition of FOBB. We did not incur any significant expenses as a result of this transaction. CAPITAL MANAGEMENT On July 2, 2007, we announced our intention to expand our existing stock repurchase program from 1,000,000 to 2,000,000 of our outstanding shares in the open market or in privately negotiated transactions. As of June 30, 2007, we had repurchased 884,600 of our outstanding shares under this program. The 115,400 shares remaining under our initial repurchase authorization and the additional 1,000,000 shares under our expanded authorization may be repurchased from time to time over a twelve-month period depending upon market conditions. At June 30, 2007, our total risk-based capital ratio was 11.62%; Tier 1 capital to risk-weighted assets ratio was 10.09% and Tier 1 capital to average asset ratio was 8.25%, compared to 11.89%, 10.58% and 8.50%, respectively, at March 31, 2007. The decrease in our risk-based capital ratios from the first quarter of 2007 to the second quarter of 2007 was primarily due to the increase in treasury stock. MB Financial Bank, N.A. and Union Bank, N.A. were each categorized as "Well-Capitalized” under Federal Deposit Insurance Corporation regulations at June 30, 2007. ASSET LIABILITY MANAGEMENT Based on simulation modeling which assumes immediate changes in interest rates at June 30, 2007 and December 31, 2006, we believe that our net interest income would change over a one-year period due to changes in interest rates as follows (dollars in thousands): ImmediateChanges inLevels ofInterest Rates Change in Net Interest Income Over One Year Horizon At June 30, 2007 At December 31, 2006 Dollar Percentage Dollar Percentage Change Change Change Change + 2.00% $4,128 1.90% $2,237 1.00% + 1.00 2,342 1.08 1,752 0.78 (1.00) (9,091) (4.19) (2,574) (1.15) (2.00) (13,154) (6.06) (8,683) (3.89) In addition to the simulation assuming an immediate change in interest rates above, we model many other scenarios including those with gradual changes in interest rates over a one-year period to evaluate our interest rate sensitivity. Based on simulation modeling which assumes gradual changes in interest rates, we believe that our net interest income would change over a one-year period due to changes in interest rates as follows (dollars in thousands): GradualChanges inLevels ofInterest Rates Change in Net Interest Income Over One Year Horizon At June 30, 2007 At December 31, 2006 Dollar Percentage Dollar Percentage Change Change Change Change + 2.00% $2,094 0.96% $1,589 0.71% + 1.00 1,215 0.56 1,245 0.56 (1.00) (2,051) (0.94) (1,878) (0.84) (2.00) (3,414) (1.57) (3,352) (1.50) In both the immediate and gradual interest rate sensitivity tables above, changes in net interest income between June 30, 2007 and December 31, 2006 reflect changes in the composition of interest earning assets and interest bearing liabilities, related interest rates, repricing frequencies, and the fixed or variable characteristics of the interest earning assets and interest bearing liabilities. We also review our interest rate sensitivity under certain scenarios in which the general shape of the yield curve changes. One such scenario is a gradual reversion to a normal yield curve, based on the mean value for the appropriate periods on the yield curve. Gradual reversion to a normal yield curve assumes a gradual decrease in interest rates for 3 months and 1 year to 3.96% and 4.03% from 5.32% and 5.36%, respectively, and a gradual rise in long-term interest rates for 15 year and 30 year to 5.78% and 5.91% from 5.76% and 5.82%, respectively. Under this scenario, our net interest income is projected to increase by $6.5 million or 2.97% over a one year period. The assumptions used in our interest rate sensitivity simulations discussed above are inherently uncertain and, as a result, the simulations cannot precisely measure net interest income or precisely predict the impact of changes in interest rates on net interest income. Actual results will differ from simulated results due to timing, magnitude and frequency of interest rate changes as well as changes in market conditions and management strategies. 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 sale of Union Bank will not be completed within the expected time frame, whether due to delays in receipt of regulatory approval for the transaction or the purchaser's inability to obtain all of the financing it needs to enable it to pay the purchase price; (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 June 30, 2007, March 31, 2007, December 31, 2006, September 30, 2006, and June 30, 2006 (Amounts in thousands, except common share data) (Unaudited)   June 30, March 31, December September June 30, 2007   2007   31, 2006   30, 2006   2006   ASSETS Cash and due from banks $ 153,496 $ 96,541 $ 142,207 $ 130,174 $ 95,193 Interest bearing deposits with banks 3,622 4,576 5,086 5,727 6,090 Federal funds sold - 45,000 - 36,000 6,200 Investment securities available for sale 1,389,076 1,471,229 1,628,348 1,677,863 1,243,507 Trading securities - - - 899 - Loans held for sale - - - 4,850 591 Loans (net of allowance for loan losses of $59,058 at June 30, 2007, $58,705 at March 31, 2007, $58,983 at December 31, 2006, $58,439 at September 30, 2006, and $42,988 at June 30, 2006)   5,130,448 4,981,701 4,912,511 4,794,876 3,658,983 Assets held for sale 375,149 410,840 393,608 404,067 396,987 Lease investments, net 80,353 71,308 80,258 65,646 66,331 Premises and equipment, net 184,090 196,525 194,618 192,039 144,078 Cash surrender value of life insurance 116,624 115,354 114,134 112,950 85,431 Goodwill, net 379,047 379,047 379,047 379,867 125,358 Other intangibles, net 27,097 27,975 28,856 29,828 12,118 Other assets 82,306   87,691   99,625   126,338   68,016   Total assets $ 7,921,308   $ 7,887,787   $ 7,978,298   $ 7,961,124   $ 5,908,883   LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Deposits: Noninterest bearing $ 879,338 $ 856,106 $ 924,371 $ 856,508 $ 635,679 Interest bearing 4,643,906   4,646,703   4,656,182   4,889,194   3,502,345 Total deposits 5,523,244 5,502,809 5,580,553 5,745,702 4,138,024 Short-term borrowings 783,153 722,416 688,504 472,923 610,912 Long-term borrowings 186,322 175,006 245,880 285,995 96,516 Junior subordinated notes issued to capital trusts 166,657 179,096 179,162 179,230 123,526 Liabilities held for sale 344,643 379,294 361,008 372,469 367,453 Accrued expenses and other liabilities 74,972   72,464   76,239   73,338   61,175 Total liabilities 7,078,991   7,031,085   7,131,346   7,129,657   5,397,606   Stockholders' Equity Common stock, ($0.01 par value; authorized 40,000,000 shares; issued 37,345,661, 37,342,031, 37,332,328, 37,330,205 and 28,916,945 shares at June 30, 2007, March 31, 2007, December 31, 2006, September 30, 2006, and June 30, 2006, respectively)     373 373 373 373 289 Additional paid-in capital 439,450 439,164 439,502 439,906 142,489 Retained earnings 463,359 448,855 437,353 425,867 416,214 Accumulated other comprehensive income (12,028) (3,690) (7,602) (8,699) (20,108) Less: 1,442,588, 818,372, 666,120, 747,612 and 785,241 shares of treasury stock, at cost, at June 30, 2007, March 31, 2007, December 31, 2006, September 30, 2006 and June 30, 2006, respectively     (48,837)   (28,000)   (22,674)   (25,980)   (27,607) Total stockholders' equity 842,317   856,702   846,952   831,467   511,277   Total liabilities and stockholders' equity $ 7,921,308   $ 7,887,787   $ 7,978,298   $ 7,961,124   $ 5,908,883 MB FINANCIAL, INC. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Amounts in thousands, except common share data) (Unaudited)     Three months ended   Six months ended June 30, March 31, December 31, September 30, June 30, June 30, June 30, 2007   2007   2006   2006   2006   2007   2006 Interest income: Loans $ 96,793 $ 93,933 $ 94,175 $ 82,777 $ 69,127 $ 190,726 $ 133,242 Investment securities available for sale: Taxable 13,163 14,348 15,904 13,327 11,172 27,511 22,605 Nontaxable 3,325 3,302 3,191 2,911 2,637 6,627 5,153 Federal funds sold 67 235 528 41 85 302 205 Other interest bearing accounts 49   50   68   70   75   99   174 Total interest income 113,397   111,868   113,866   99,126   83,096   225,265   161,379 Interest expense: Deposits 46,337 45,453 47,269 38,704 29,585 91,790 55,135 Short-term borrowings 9,390 8,618 6,438 7,580 6,564 18,008 13,926 Long-term borrowings and junior subordinated notes 5,316   5,900   6,223   4,402   3,410   11,216   6,515 Total interest expense 61,043   59,971   59,930   50,686   39,559   121,014   75,576 Net interest income 52,354 51,897 53,936 48,440 43,537 104,251 85,803 Provision for loan losses 3,000   3,813   3,500   4,000   1,500   6,813   2,600 Net interest income after provision for loan losses 49,354   48,084   50,436   44,440   42,037   97,438   83,203 Other income: Loan service fees 1,388 1,537 1,278 1,101 1,282 2,925 3,021 Deposit service fees 5,624 5,158 5,244 4,963 4,675 10,782 9,238 Lease financing, net 3,744 3,996 3,895 2,832 3,398 7,740 6,642 Brokerage fees 3,216 2,452 2,061 2,559 2,418 5,668 4,698 Trust and asset management fees 2,666 3,190 2,326 1,736 1,449 5,856 2,854 Net (loss) gain on sale of investment securities (2,077) (24) 82 (121) (25) (2,101) (406) Increase in cash surrender value of life insurance 1,269 1,221 1,184 1,012 869 2,490 1,768 Net gain (loss) on sale of other assets 9,059 22 55 (296) 4 9,081 1,101 Merchant card processing 4,045 3,878 3,434 1,820 870 7,923 1,594 Other operating income 1,786   1,514   1,807   1,630   987   3,300   2,208 30,720   22,944   21,366   17,236   15,927   53,664   32,718 Other expense: Salaries and employee benefits 26,813 24,999 26,961 23,435 19,411 51,812 38,511 Occupancy and equipment expense 7,054 7,200 6,733 6,267 5,783 14,254 11,462 Computer services expense 1,857 1,817 1,746 1,627 1,470 3,674 2,908 Advertising and marketing expense 1,444 1,410 1,049 1,265 1,130 2,854 2,283 Professional and legal expense 656 530 368 713 447 1,186 946 Brokerage fee expense 1,403 1,271 1,087 1,405 1,301 2,674 2,494 Telecommunication expense 689 681 693 659 558 1,370 1,265 Other intangibles amortization expense 878 881 972 523 236 1,759 476 Merchant card processing 3,474 3,270 3,045 1,689 800 6,744 1,476 Other operating expenses 7,805   4,747   4,676   4,317   3,984   12,552   8,023 52,073   46,806   47,330   41,900   35,120   98,879   69,844 Income before income taxes 28,001 24,222 24,472 19,776 22,844 52,223 46,077 Income taxes 8,394   7,043   7,331   6,058   6,756   15,437   13,880 Income from continuing operations $ 19,607   17,179   $ 17,141   $ 13,718   $ 16,088   $ 36,786   $ 32,197 Discontinued operations Income from discontinued operations before income taxes 1,803 1,429 1,442 1,567 1,626 3,232 3,204 Income taxes 369   487   495   544   568   856   1,116 Income from discontinued operations 1,434   942   947   1,023   1,058   2,376   2,088 Net income $ 21,041   $ 18,121   $ 18,088   $ 14,741   $ 17,146   $ 39,162   $ 34,285 Common share data: Basic earnings per common share from continuing operations $ 0.54 $ 0.47 $ 0.47 $ 0.44 $ 0.57 $ 1.01 $ 1.14 Basic earnings per common share from discontinued operations $ 0.04 $ 0.02 $ 0.02 $ 0.03 $ 0.04 $ 0.06 $ 0.08 Basic earnings per common share $ 0.58 $ 0.49 $ 0.49 $ 0.47 $ 0.61 $ 1.07 $ 1.22 Diluted earnings per common share from continuing operations $ 0.53 $ 0.46 $ 0.46 $ 0.43 $ 0.56 $ 1.00 $ 1.12 Diluted earnings per common share from discontinued operations $ 0.04 $ 0.03 $ 0.03 $ 0.03 $ 0.04 $ 0.06 $ 0.07 Diluted earnings per common share $ 0.57 $ 0.49 $ 0.49 $ 0.46 $ 0.60 $ 1.06 $ 1.19 Weighted average common shares outstanding 36,239,731 36,630,323 36,583,607 31,529,245 28,130,670 36,433,948 28,209,289 Diluted weighted average common shares outstanding 36,744,473 37,180,928 37,156,887 32,055,721 28,636,728 36,958,570 28,718,808 MB FINANCIAL, INC. & SUBSIDIARIES SELECTED FINANCIAL DATA (Amounts in thousands, except common share data) (Unaudited)   Three months ended   Six months ended June 30, March 31, December 31, September 30, June 30, June 30, June 30, 2007   2007   2006   2006   2006   2007   2006   Performance Ratios (continuing operations): Annualized return on average assets 1.00% 0.88% 0.86% 0.79% 1.10% 0.94% 1.12% Annualized return on average equity 9.25 8.18 8.08 8.47 12.66 8.72 12.73 Annualized return on average tangible equity (1) 17.87 15.85 15.94 13.67 17.31 16.86 17.38 Net interest rate spread 2.79 2.80 2.85 2.96 3.20 2.79 3.20 Efficiency ratio (2) 59.86 60.98 61.47 62.18 57.64 60.38 57.37   Net interest margin 3.20 3.21 3.26 3.34 3.55 3.21 3.54 Tax equivalent effect 0.11   0.12   0.11   0.11   0.11   0.11   0.11 Net interest margin – fully tax equivalent basis (3) 3.31   3.33   3.37   3.45   3.66   3.32   3.65   Performance Ratios (total): Annualized return on average assets 1.07% 0.93% 0.91% 0.85% 1.17% 1.00% 1.19% Annualized return on average equity 9.93 8.63 8.53 9.10 13.50 9.28 13.55 Annualized return on average tangible equity (1) 19.14 16.69 16.79 14.67 18.43 17.92 18.50 Net interest rate spread 2.80 2.82 2.85 2.97 3.18 2.81 3.19 Efficiency ratio (2) 59.44 60.71 61.33 61.87 57.56 60.03 57.31   Net interest margin 3.22 3.24 3.26 3.35 3.54 3.23 3.54 Tax equivalent effect 0.12   0.11   0.11   0.10   0.12   0.11   0.12 Net interest margin – fully tax equivalent basis (3) 3.34   3.35   3.37   3.45   3.66   3.34   3.66   Asset Quality Ratios: Non-performing loans to total loans 0.42% 0.46% 0.43% 0.41% 0.43% 0.42% 0.43% Non-performing assets to total assets 0.28 0.30 0.31 0.25 0.29 0.28 0.29 Allowance for loan losses to total loans 1.14 1.16 1.19 1.20 1.16 1.14 1.16 Allowance for loan losses to non-performing loans 270.92 252.80 274.75 293.49 270.59 270.92 270.59 Net loan charge-offs to average loans (annualized) 0.21 0.33 0.24 0.46 0.10 0.27 0.11   Capital Ratios: Tangible equity to assets (4) 5.92% 6.13% 5.93% 5.72% 6.55% 5.92% 6.55% Equity to total assets 10.63 10.86 10.62 10.44 8.65 10.63 8.65 Book value per share (5) 23.46 23.46 23.10 22.73 18.17 23.46 18.17 Less: goodwill and other intangible assets, net of tax benefit, per common share 11.05   10.88   10.85   10.91   4.74   11.05   4.74 Tangible book value per share (6) 12.41   12.58   12.25   11.82   13.43   12.41   13.43   Total capital (to risk–weighted assets) 11.62% 11.89% 11.80% 11.72% 12.44% 11.62% 12.44% Tier 1 capital (to risk-weighted assets) 10.09 10.58 10.49 10.39 11.29 10.09 11.29 Tier 1 capital (to average assets) 8.25 8.50 8.39 9.51 8.99 8.25 8.99 (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): June 30,2007 March 31,2007 December 31,2006 September 30,2006 June 30,2006   Stockholders’ equity – as reported $842,317 $ 856,702 $ 846,952 $ 831,467 $ 511,277 Less: goodwill 379,047 379,047 379,047 379,867 125,358 Less: other intangible assets, net of tax benefit 17,613 18,184 18,756 19,388 7,877 Tangible equity $ 445,657 $ 459,471 $ 449,149 $ 432,212 $ 378,042 The following table presents a reconciliation of average tangible equity to average stockholders’ equity (in thousands): Three months ended Six months ended June 30,2007 March 31,2007 December 31,2006 September 30,2006 June 30,2006 June 30,2007 June 30,2006   Average Stockholders’ equity – as reported $849,816 $ 851,785 $ 841,353 $ 642,651 $ 509,566 $ 850,795 $ 510,231 Less: average goodwill 379,047 379,047 379,957 222,448 125,184 379,047 125,097 Less: average other intangible assets, net of tax benefit 17,805 18,396 19,113 12,310 7,951 18,099 8,028 Average Tangible equity $ 452,964 $ 454,342 $ 442,283 $ 407,893 $ 376,431 $ 453,649 $ 377,106 The following table presents a reconciliation of net cash flow available to stockholders to net income from continuing operations (in thousands): Three months ended Six months ended June 30,2007 March 31,2007 December 31,2006 September 30,2006 June 30,2006 June 30,2007 June 30,2006   Net income – as reported $19,607 $ 17,179 $ 17,141 $ 13,718 $ 16,088 $ 36,786 $ 32,197 Add: other intangible amortization expense, net of tax benefit 571 573 632 340 153 1,143 309 Net cash flow available to stockholders $ 20,178 $ 17,752 $ 17,773 $ 14,058 $ 16,241 $ 37,929 $ 32,506 The following table presents a reconciliation of net cash flow available to stockholders to net income (in thousands): Three months ended Six months ended June 30,2007 March 31,2007 December 31,2006 September 30,2006 June 30,2006 June 30,2007 June 30,2006   Net income – as reported $21,041 $ 18,121 $ 18,088 $ 14,741 $ 17,146 $ 39,162 $ 34,285 Add: other intangible amortization expense, net of tax benefit 571 573 632 340 153 1,143 309 Net cash flow available to stockholders $ 21,612 $ 18,694 $ 18,720 $ 15,081 $ 17,299 $ 40,305 $ 34,594 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 June 30, Three Months EndedMarch 31, 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 $ 1,140,869 $ 22,635 7.85% $ 836,485 $ 16,750 7.92% $ 1,031,079 $ 20,406 7.92% Commercial – nontaxable (3) 7,693 142 7.30 4,075 71 6.89 15,168 336 8.86 Commercial loans collateralized by assignment of lease payments 402,079 6,984 6.95 280,357 4,703 6.71 387,006 6,613 6.84 Real estate commercial 1,587,338 29,261 7.29 1,295,757 23,564 7.19 1,581,988 28,905 7.31 Real estate construction 854,090 18,426 8.53 598,637 13,289 8.78 853,203 18,186 8.53 Total commercial related credits 3,992,069 77,448 7.67 3,015,311 58,377 7.66 3,868,444 74,446 7.70 Other loans Real estate residential 572,515 9,228 6.45 378,072 6,127 6.48 581,409 9,333 6.42 Home equity 356,205 6,783 7.64 220,722 4,315 7.84 370,708 7,044 7.71 Indirect 125,848 2,373 7.56 - - - 114,317 2,214 7.85 Consumer loans 53,185 1,011 7.62 23,425 333 5.70 54,939 1,014 7.49 Total other loans 1,107,753 19,395 7.02 622,219 10,775 6.95 1,121,373 19,605 7.09   Total loans 5,099,822 96,843 7.62 3,637,530 69,152 7.63 4,989,817 94,051 7.64   Taxable investment securities 1,088,104 13,163 4.84 981,334 11,173 4.55 1,183,744 14,348 4.85 Investments securities exempt from federal income taxes (3) 358,761 5,115 5.64 289,695 4,056 5.54 360,015 5,080 5.64 Federal funds sold 5,099 67 5.20 7,005 85 4.80 18,003 235 5.22 Other interest bearing deposits 6,245 49 3.15 7,975 75 3.77 6,579 50 3.08 Total interest earning assets 6,558,031 115,237 7.05 4,923,539 84,541 6.89 6,558,158 113,764 7.04 Assets held for sale 399,584 406,441 387,919 Non-interest earning assets 931,340 537,013 933,684 Total assets $ 7,888,955 $ 5,866,993 $ 7,879,761   Interest Bearing Liabilities: Core funding: Money market and NOW accounts 1,181,417 9,293 3.16 632,131 3,318 2.11 1,070,252 7,730 2.93 Savings accounts 438,093 813 0.74 440,287 752 0.69 459,109 864 0.76 Certificates of deposit 2,295,965 27,588 4.82 1,463,917 14,921 4.09 2,325,728 27,582 4.81 Customer repos 298,323 2,868 3.86 171,206 1,203 2.82 309,051 2,893 3.80 Total core funding 4,213,798 40,562 3.86 2,707,541 20,194 2.99 4,164,140 39,069 3.81   Wholesale funding: Public funds 293,026 3,820 5.23 131,133 1,498 4.58 257,445 3,320 5.23 Brokered accounts (includes fee expense) 391,427 4,823 4.94 785,615 9,096 4.64 489,449 5,957 4.94 Other short-term borrowings 495,660 6,522 5.28 448,771 5,361 4.79 435,620 5,725 5.33 Long-term borrowings 353,081 5,316 5.96 223,309 3,410 6.04 394,780 5,900 5.98 Total wholesale funding 1,533,194 20,481 5.36 1,588,828 19,365 4.89 1,577,294 20,902 5.37 Total interest bearing liabilities $ 5,746,992 61,043 4.26 $ 4,296,369 39,559 3.69 $ 5,741,434 59,971 4.24 Non-interest bearing deposits 848,459 624,356 859,141 Liabilities held for sale 368,892 377,057 356,299 Other non-interest bearing liabilities 74,796 59,645 71,102 Stockholders’ equity 849,816 509,566 851,785 Total liabilities and stockholders’ equity $ 7,888,955 $ 5,866,993 $ 7,879,761 Net interest income/interest rate spread (4) $ 54,194 2.79% $ 44,982 3.20% $ 53,793 2.80% Taxable equivalent adjustment 1,840 1,445 1,896 Net interest income, as reported $ 52,354 $ 43,537 $ 51,897 Net interest margin (5) 3.20% 3.55% 3.21% Tax equivalent effect 0.11% 0.11% 0.12% Net interest margin on a fully tax equivalent basis (5) 3.31% 3.66% 3.33% (1) Non-accrual loans are included in average loans. (2) Interest income includes amortization of deferred loan origination fees of $1.8 million, $1.8 million and $1.7 million for the three months ended June 30, 2007, June 30, 2006, and March 31, 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. 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, 2007 2006 AverageBalance Interest Yield/Rate AverageBalance Interest Yield/Rate   Interest Earning Assets: Loans (1) (2): Commercial related credits Commercial $ 1,086,277 $ 43,041 7.88% $ 808,721 $ 31,759 7.81% Commercial – nontaxable (3) 11,410 478 8.33 3,481 117 6.69 Commercial loans collateralized by assignment of lease payments 394,584 13,597 6.89 276,332 9,183 6.65 Real estate commercial 1,584,678 58,166 7.30 1,298,798 46,282 7.09 Real estate construction 853,649 36,612 8.53 576,158 24,796 8.56 Total commercial related credits 3,930,598 151,894 7.69 2,963,490 112,137 7.53 Other loans Real estate residential 576,938 18,561 6.43 374,903 12,053 6.43 Home equity 363,416 13,827 7.67 221,345 8,467 7.71 Indirect 120,114 4,587 7.70 - - - Consumer loans 54,057 2,025 7.55 22,626 626 5.59 Total other loans 1,114,525 39,000 7.06 618,874 21,146 6.89   Total loans 5,045,123 190,894 7.63 3,582,364 133,283 7.50   Taxable investment securities 1,135,660 27,511 4.84 1,007,861 22,604 4.49 Investments securities exempt from federal income taxes (3) 359,384 10,195 5.64 283,520 7,927 5.56 Federal funds sold 11,515 302 5.22 8,824 205 4.62 Other interest bearing deposits 6,412 99 3.11 9,436 174 3.72 Total interest earning assets 6,558,094 229,001 7.04 4,892,005 164,193 6.77 Assets held for sale 393,784 389,190 Non-interest bearing assets 932,504 534,840 Total assets $ 7,884,382 $ 5,816,035   Interest Bearing Liabilities: Core funding: Money market and NOW accounts 1,126,142 17,023 3.05 626,747 6,042 1.94 Savings accounts 448,543 1,677 0.75 449,284 1,595 0.72 Certificates of deposit 2,310,764 55,170 4.81 1,448,946 28,299 3.94 Customer repos 303,657 5,761 3.83 159,397 2,125 2.69 Total core funding 4,189,106 79,631 3.83 2,684,374 38,061 2.86   Wholesale funding: Public funds 275,334 7,140 5.23 142,768 3,120 4.41 Brokered accounts (includes fee expense) 440,167 10,780 4.94 719,442 16,078 4.51 Other short-term borrowings 465,806 12,247 5.30 505,757 11,800 4.70 Long-term borrowings 373,816 11,216 5.97 214,091 6,515 6.05 Total wholesale funding 1,555,123 41,383 5.37 1,582,058 37,513 4.78   Total interest bearing liabilities $ 5,744,229 121,014 4.25 $ 4,266,432 75,574 3.57 Non-interest bearing deposits 853,771 618,771 Liabilities held for sale 362,630 360,113 Other non-interest bearing liabilities 72,957 60,488 Stockholders’ equity 850,795 510,231 Total liabilities and stockholders’ equity $ 7,884,382 $ 5,816,035 Net interest income/interest rate spread (4) $ 107,987 2.79% $ 88,619 3.20% Taxable equivalent adjustment 3,736 2,816 Net interest income, as reported $ 104,251 $ 85,803 Net interest margin (5) 3.21% 3.54% Tax equivalent effect 0.11% 0.11% Net interest margin on a fully tax equivalent basis (5) 3.32% 3.65% (1) Non-accrual loans are included in average loans. (2) Interest income includes amortization of deferred loan origination fees of $3.5 million and $3.4 million for the six months ended June 30, 2007, and June 30, 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.