Market Overview

MB Financial, Inc. Reports Earnings for the First Quarter of 2016

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CHICAGO, April 18, 2016 (GLOBE NEWSWIRE) -- MB Financial, Inc. (NASDAQ: MBFI), the holding company for MB Financial Bank, N.A., today announced 2016 first quarter net income available to common stockholders of $37.1 million, or $0.50 per diluted common share, compared to $41.6 million, or $0.56 per diluted common share, last quarter and $32.1 million, or $0.43 per diluted common share, in the first quarter a year ago.  

Highlights Include:

Growth in Core Earnings for the Quarter

Core (or operating) earnings increased by $1.3 million, or $0.02 per diluted common share, compared to last quarter and $2.6 million, or $0.04 per diluted common share, compared to the first quarter of last year.

The following table presents a reconciliation of net income to operating earnings (in thousands):

  1Q16 4Q15 1Q15
Net income - as reported $39,114  $43,607  $34,111 
Less non-core items:      
Net loss on investment securities   (3) (460)
Net (loss) gain on sale of other assets (48)   4 
Merger related and repositioning expenses (3,287) 4,186  (8,069)
Prepayment fees on interest bearing liabilities     (85)
Total non-core items (3,335) 4,183  (8,610)
Income tax expense on non-core items (577) 1,140  (3,417)
Non-core items, net of tax (2,758) 3,043  (5,193)
Operating earnings 41,872  40,564  39,304 
Dividends on preferred shares 2,000  2,000  2,000 
Operating earnings available to common stockholders $39,872  $38,564  $37,304 
Diluted operating earnings per common share $0.54  $0.52  $0.50 
Weighted average common shares outstanding for diluted operating earnings per common share  73,966,935   73,953,165   75,164,716 
          
  • Net interest income on a fully tax equivalent basis decreased $2.6 million (-2.0%) to $126.5 million in the first quarter of 2016 compared to the prior quarter due to one less day in the quarter (approximately $1.4 million) and lower accretion income on loans acquired in the Taylor Capital merger ($2.4 million) partially offset by net interest income related to an increase in average interest earning asset balances.
  • Our net interest margin on a fully tax equivalent basis, excluding accretion on loans acquired in the Taylor Capital merger, was stable at 3.55% compared to 3.56% last quarter.  
  • Our core non-interest income was $81.7 million compared to $75.1 million in the prior quarter (8.9% increase). The improvement was largely driven by an increase in fees and promotional revenue (lease financing) from the sale of third-party equipment maintenance contracts as well as trust and asset management fees which increased primarily due to $1.7 million in fees from MSA Holdings, LLC ("MSA"), which we acquired on December 31, 2015. 
  • Our core non-interest expense increased $1.7 million (+1.3%) compared to the prior quarter primarily due to an increase in leasing commission expense (salaries and employee benefits) as a result of higher lease financing revenues.

Growth in Loan Balances During the Quarter 

  • Loan balances, excluding purchased credit-impaired loans, increased $168.3 million (+1.7%, or +7.0% annualized) during the first quarter of 2016. 
      Change from 12/31/2015 to 3/31/2016
(Dollars in thousands) 3/31/2016 12/31/2015 Amount Percent
Commercial-related credits:         
Commercial loans $3,509,604  $3,616,286  $(106,682) (3.0)%
Commercial loans collateralized by assignment of lease payments (lease loans) 1,774,104  1,779,072  (4,968) (0.3)
Commercial real estate 2,831,814  2,695,676  136,138  5.1 
Construction real estate 310,278  252,060  58,218  23.1 
Total commercial-related credits 8,425,800  8,343,094  82,706  1.0 
Other loans:         
Residential real estate 677,791  628,169  49,622  7.9 
Indirect vehicle 432,915  384,095  48,820  12.7 
Home equity 207,079  216,573  (9,494) (4.4)
Consumer loans 77,318  80,661  (3,343) (4.1)
Total other loans 1,395,103  1,309,498  85,605  6.5 
Total loans, excluding purchased credit-impaired 9,820,903  9,652,592  168,311  1.7 
Purchased credit-impaired 140,445  141,406  (961) (0.7)
Total loans $9,961,348  $9,793,998  $167,350  1.7%
                

Stable Deposit Balances During the Quarter

  • Total low cost deposits continued to represent 84% of total deposits at March 31, 2016 and non-interest bearing deposits continued to comprise 40% of total deposits.
      Change from 12/31/2015 to 3/31/2016
(Dollars in thousands) 3/31/2016 12/31/2015 Amount Percent
Low cost deposits:        
Noninterest bearing deposits $4,667,410  $4,627,184  $40,226  0.9%
Money market and NOW 4,048,054  4,144,633  (96,579) (2.3)
Savings 991,300  974,555  16,745  1.7 
Total low cost deposits 9,706,764  9,746,372  (39,608) (0.4)
Certificates of deposit:        
Certificates of deposit 1,255,457  1,244,292  11,165  0.9 
Brokered certificates of deposit 571,605  514,551  57,054  11.1 
Total certificates of deposit 1,827,062  1,758,843  68,219  3.9 
Total deposits $11,533,826  $11,505,215  $28,611  0.2%
                

Credit Quality Metrics

  • Provision for credit losses was $7.6 million in the first quarter of 2016 compared to $6.8 million in the fourth quarter of 2015. 
  • Our net loan charge-offs during the first quarter of 2016 were $1.3 million, or 0.06% of loans (annualized), compared to net loan charge-offs of $3.3 million, or 0.14% of loans (annualized), in the fourth quarter of 2015.
  • Non-performing loans and non-performing assets decreased by $9.9 million and $13.1 million, respectively, from December 31, 2015 primarily due to loans that paid off during the quarter.
  • Potential problem loans decreased by $29.7 million from December 31, 2015 primarily due to loans that paid off during the quarter. 
  • Our allowance for loan and lease losses to total loans ratio was 1.35% at March 31, 2016 compared to 1.31% at December 31, 2015.

American Chartered Bancorp, Inc. Pending Merger Update

  • The transaction was approved by American Chartered shareholders in March 2016.
  • The merger remains subject to regulatory approval and is expected to close around June 30, 2016.

RESULTS OF OPERATIONS

First Quarter Results

Net Interest Income

(Dollars in thousands) 1Q16
  4Q15
 Change from 4Q15 to 1Q16 1Q15
 Change from 1Q15 to 1Q16
 
 
Net interest income - fully tax equivalent $126,499  $129,076  -2.0% $119,473  +5.9%
Net interest income - fully tax equivalent, excluding acquisition accounting discount accretion on Taylor Capital loans $119,146  $119,373  -0.2% $110,897  +7.4%
Net interest margin - fully tax equivalent 3.79% 3.86% -0.07% 3.93% -0.14 
Net interest margin - fully tax equivalent, excluding acquisition accounting discount accretion on Taylor Capital loans 3.55% 3.56% -0.01% 3.62% -0.07 
                

Reconciliations of net interest income - fully tax equivalent to net interest income, as reported, net interest margin - fully tax equivalent to net interest margin and net interest margin - fully tax equivalent, excluding acquisition accounting discount accretion on Taylor Capital loans to net interest margin are set forth in the tables in the "Net Interest Margin" section.

Net interest income on a fully tax equivalent basis decreased in the first quarter of 2016 compared to the prior quarter due to one less day in the quarter (approximately $1.4 million) and lower accretion income on loans acquired in the Taylor Capital merger ($2.4 million) partially offset by net interest income related to an increase in average interest earning asset balances.

Net interest income on a fully tax equivalent basis increased in the first quarter of 2016 compared to the first quarter of 2015 primarily due to an increase in average interest earning assets, partially offset by a decrease in our net interest margin.

Compared to the first quarter of 2015, our net interest margin on a fully tax equivalent basis, excluding accretion of the acquisition accounting discount recorded on loans acquired in the Taylor Capital merger, decreased by seven basis points primarily due to a decrease in average yields earned on loans (excluding accretion) and, to a lesser extent, an increase in cost of funds.

See the supplemental net interest margin tables for further detail.

Non-interest Income (in thousands):

  1Q16 4Q15 3Q15 2Q15 1Q15
Core non-interest income:          
Key fee initiatives:          
Lease financing revenues, net $19,046  $15,937  $20,000  $15,564  $25,080 
Mortgage banking revenue 27,482  26,542  30,692  35,648  24,544 
Commercial deposit and treasury management fees 11,878  11,711  11,472  11,062  11,038 
Trust and asset management fees 7,950  6,077  6,002  5,752  5,714 
Card fees 3,525  3,651  3,335  4,409  3,927 
Capital markets and international banking service fees 3,227  2,355  2,357  1,508  1,928 
Total key fee initiatives 73,108  66,273  73,858  73,943  72,231 
Consumer and other deposit service fees 3,025  3,440  3,499  3,260  3,083 
Brokerage fees 1,158  1,252  1,281  1,543  1,678 
Loan service fees 1,752  1,890  1,531  1,353  1,485 
Increase in cash surrender value of life insurance 854  864  852  836  839 
Other operating income 1,836  1,344  1,730  2,098  2,102 
Total core non-interest income 81,733  75,063  82,751  83,033  81,418 
Non-core non-interest income:          
Net gain (loss) on investment securities   (3) 371  (84) (460)
Net (loss) gain on sale of other assets (48)   1  (7) 4 
(Decrease) increase in market value of assets held in trust for deferred compensation (1) 8  565  (872) 7  306 
Total non-core non-interest income (40) 562  (500) (84) (150)
Total non-interest income $81,693  $75,625  $82,251  $82,949  $81,268 
                     

(1) Resides in other operating income in the consolidated statements of operations.

Core non-interest income for the first quarter of 2016 increased by $6.7 million, or 8.9%, to $81.7 million from the fourth quarter of 2015.

  • Lease financing revenues increased due to an increase in fees and promotional revenue from the sale of third-party equipment maintenance contracts.
  • Trust and asset management fees increased primarily due to the acquisition of MSA.
  • Mortgage banking revenue increased due to higher mortgage servicing fees partly offset by a decrease in mortgage origination fees.  
  • Capital markets and international banking services fees increased due to higher swap fees.

Core non-interest income for the first quarter of 2016 increased by $315 thousand, or 0.4%, to $81.7 million from the first quarter of 2015.

  • Mortgage banking revenue increased due to higher mortgage servicing fees partly offset by lower mortgage origination fees.
  • Trust and asset management fees increased due to the addition of new customers as well as the acquisition of MSA.
  • Capital markets and international banking services fees increased due to higher derivatives fees.
  • Commercial deposit and treasury management fees increased due to new customer activity.
  • Lease financing revenues decreased due to lower fees from the sale of third-party equipment maintenance contracts.
  • Card fees decreased due to the impact of becoming subject to the Durbin amendment of the Dodd-Frank Act starting on July 1, 2015. We estimate the quarterly impact of the Durbin amendment, when comparing the first quarter of 2016 with the first quarter of 2015, was $1.2 million.

Non-interest Expense (in thousands):

  1Q16 4Q15 3Q15 2Q15 1Q15
Core non-interest expense:(1)          
Salaries and employee benefits expense $85,502  $84,356  $88,760  $86,138  $84,447 
Occupancy and equipment expense 13,260  12,935  12,456  12,081  12,763 
Computer services and telecommunication expense 8,750  8,548  8,558  8,407  8,634 
Advertising and marketing expense 2,855  2,549  2,578  2,497  2,446 
Professional and legal expense 2,492  2,715  1,496  1,902  2,480 
Other intangible amortization expense 1,626  1,546  1,542  1,509  1,518 
Net (gain) loss recognized on other real estate owned (A) (637) (256) 520  662  888 
Net loss (gain) recognized on other real estate owned related to FDIC transactions (A) 154  (549) 65  (88) (273)
Other real estate expense, net (A) 137  76  (8) 150  281 
Other operating expenses 18,366  18,932  18,782  18,238  18,276 
Total core non-interest expense 132,505  130,852  134,749  131,496  131,460 
Non-core non-interest expense: (1)          
Merger related and repositioning expenses (B) 3,287  (4,186) 389  1,234  8,069 
Prepayment fees on interest bearing liabilities         85 
Increase (decrease) in market value of assets held in trust for deferred compensation (C) 8  565  (872) 7  306 
Total non-core non-interest expense 3,295  (3,621) (483) 1,241  8,460 
Total non-interest expense $135,800  $127,231  $134,266  $132,737  $139,920 
                     

(1) Letters denote the corresponding line items where these non-core non-interest expense items reside in the consolidated statements of operations as follows: A – Net loss (gain) recognized on other real estate owned and other expense, B – See merger related and repositioning expenses table below, and C – Salaries and employee benefits.

Core non-interest expense increased by $1.7 million, or 1.3%, from the fourth quarter of 2015 to $132.5 million for the first quarter of 2016.

  • Salaries and employee benefits expense was up due to an increase in leasing commission expense as a result of higher lease financing revenues.
  • Occupancy and equipment expense increased due to higher rental operating expenses and real estate taxes offset partly by lower building repair and maintenance expenses.

Core non-interest expense increased by $1.0 million, or 0.8%, from the first quarter of 2015 to $132.5 million for the first quarter of 2016.

  • Salaries and employee benefits expense was up due to annual pay increases as well as an increase in temporary help in our mortgage and IT areas.
  • Occupancy and equipment expense increased due to higher depreciation expense, rental operating expenses and real estate taxes offset partly by lower building repair and maintenance expenses.

The following table presents the detail of the merger related and repositioning expenses (dollars in thousands):

  1Q16 4Q15 3Q15 2Q15 1Q15
Merger related and repositioning expenses:          
Salaries and employee benefits $81  $(212) $3  $  $33 
Occupancy and equipment expense     2  96  177 
Computer services and telecommunication expense 305  (103) 9  130  270 
Advertising and marketing expense 23  2       
Professional and legal expense 97  1,454  305  511  190 
Branch exit and facilities impairment charges 44  616  70  438  7,391 
Contingent consideration expense - Celtic acquisition (1) 2,703         
Other operating expenses 34  (5,943)   59  8 
Total merger related and repositioning expenses $3,287  $(4,186) $389  $1,234  $8,069 
                     

(1)  Resides in other operating expenses in the consolidated statements of operations.

In the first quarter of 2016, merger related and repositioning expenses included contingent consideration for our acquisition of Celtic Leasing Corp. due to strong lease residual performance. In the fourth quarter of 2015, merger related and repositioning expenses were impacted by the reversal of an accrual for a potential contingent loss we assumed in connection with the Taylor Capital merger.

Operating Segments

The Company's operations consist of three reportable operating segments: Banking, Leasing and Mortgage Banking. Our Banking Segment generates revenues primarily from its lending, deposit gathering and fee business activities. Our Leasing Segment generates revenues through lease originations and related services offered through the Company's leasing subsidiaries: LaSalle Systems Leasing, Inc., Celtic Leasing Corp. and MB Equipment Finance, LLC. Our Mortgage Banking Segment originates residential mortgage loans for sale to investors through its retail and third party origination channels as well as residential mortgage loans held in our loan portfolio. The Mortgage Banking Segment also services residential mortgage loans owned by investors and the Company.

The following tables present summary financial information, adjusted for funds transfer pricing and internal allocations of certain expenses, for the reportable segments (in thousands):

 Banking Leasing Mortgage Banking Non-core Items Consolidated
Three months ended March 31, 2016         
Net interest income$109,608  $2,423  $7,273  $  $119,304 
Provision for credit losses7,001  437  125    7,563 
Net interest income after provision for credit losses102,607  1,986  7,148    111,741 
Non-interest income:         
Lease financing revenues, net679  18,367      19,046 
Mortgage origination fees    16,894    16,894 
Mortgage servicing fees    10,588    10,588 
Other non-interest income34,388  828  (3) (48) 35,165 
Total non-interest income35,067  19,195  27,479  (48) 81,693 
Non-interest expense:         
Salaries and employee benefits53,421  9,072  23,017  81  85,591 
Occupancy and equipment expense10,430  895  1,935    13,260 
Computer services and telecommunication expense6,446  363  1,941  305  9,055 
Professional and legal expense1,486  409  597  97  2,589 
Other operating expenses15,570  1,447  5,484  2,804  25,305 
Total non-interest expense87,353  12,186  32,974  3,287  135,800 
Income before income taxes50,321  8,995  1,653  (3,335) 57,634 
Income tax expense14,927  3,509  661  (577) 18,520 
Net income$35,394  $5,486  $992  $(2,758) $39,114 
          


 Banking Leasing Mortgage Banking Non-core Items Consolidated
Three months ended December 31, 2015         
Net interest income$111,691  $2,714  $7,364  $  $121,769 
Provision for credit losses6,654    104    6,758 
Net interest income after provision for credit losses105,037  2,714  7,260    115,011 
Non-interest income:         
Lease financing revenues, net1,180  14,757      15,937 
Mortgage origination fees    17,596    17,596 
Mortgage servicing fees    8,946    8,946 
Other non-interest income32,337  802  10  (3) 33,146 
Total non-interest income33,517  15,559  26,552  (3) 75,625 
Non-interest expense:         
Salaries and employee benefits54,655  7,474  22,792  (212) 84,709 
Occupancy and equipment expense10,344  855  1,736    12,935 
Computer services and telecommunication expense6,200  340  2,008  (103) 8,445 
Professional and legal expense1,709  328  678  1,454  4,169 
Other operating expenses15,757  1,501  5,040  (5,325) 16,973 
Total non-interest expense88,665  10,498  32,254  (4,186) 127,231 
Income before income taxes49,889  7,775  1,558  4,183  63,405 
Income tax expense14,998  3,037  623  1,140  19,798 
Net income$34,891  $4,738  $935  $3,043  $43,607 
                    

Net income from our Banking Segment for the first quarter of 2016 increased compared to the prior quarter. This increase was primarily due to higher fee income coupled with better expense control which offset lower accretion income on loans acquired in the Taylor Capital merger.

Net income from our Leasing Segment for the first quarter of 2016 increased compared to the prior quarter. This increase was primarily due to an increase in lease financing revenues due to an increase in fees and promotional revenue from the sale of third-party equipment maintenance contracts partly offset by an increase in commission expense and higher provision for credit losses.

Net income from our Mortgage Banking Segment for the first quarter of 2016 was stable compared to the prior quarter as an increase in mortgage servicing fees was partly offset by a decrease in mortgage origination fees and higher non-interest expenses.

The following table presents additional information regarding the Mortgage Banking Segment (dollars in thousands):

  1Q16 4Q15 3Q15 2Q15 1Q15
Origination volume: $1,328,804  $1,437,057  $1,880,960  $2,010,175  $1,688,541 
Refinance 49% 42% 34% 43% 61%
Purchase 51  58  66  57  39 
Origination volume by channel:          
Retail 19% 18% 18% 18% 18%
Third party 81  82  82  82  82 
Mortgage servicing book (unpaid principal balance of loans serviced for others) at period end (1) $16,911,325  $16,218,613  $15,582,911  $23,588,345  $22,978,750 
Mortgage servicing rights, recorded at fair value, at period end 145,800  168,162  148,097  261,034  219,254 
Notional value of rate lock commitments, at period end 823,000  622,906  800,162  992,025  1,069,145 
                

(1) 3Q15 does not include the unpaid principal balance of serviced loans sold in July 2015 that continued to be sub-serviced through October 2015.

LOAN PORTFOLIO

The following table sets forth the composition of the loan portfolio (excluding loans held for sale) based on period end balances as of the dates indicated (dollars in thousands):

  3/31/2016 12/31/2015 9/30/2015 6/30/2015 3/31/2015
  Amount % of Total Amount % of Total Amount % of Total Amount % of Total Amount % of Total
Commercial-related credits:                    
Commercial loans $3,509,604  36% $3,616,286  37% $3,440,632  37% $3,354,889  37% $3,258,652  37%
Commercial loans collateralized by assignment of lease payments (lease loans) 1,774,104  18  1,779,072  18  1,693,540  18  1,690,866  18  1,628,031  18 
Commercial real estate 2,831,814  28  2,695,676  27  2,580,009  27  2,539,991  28  2,525,640  28 
Construction real estate 310,278  3  252,060  3  255,620  3  189,599  2  184,105  2 
Total commercial-related credits 8,425,800  85  8,343,094  85  7,969,801  85  7,775,345  85  7,596,428  85 
Other loans:                    
Residential real estate 677,791  7  628,169  6  607,171  6  533,118  6  505,558  5 
Indirect vehicle 432,915  4  384,095  4  345,731  4  303,777  3  273,105  3 
Home equity 207,079  2  216,573  2  223,173  2  230,478  3  241,078  3 
Consumer loans 77,318  1  80,661  1  87,612  1  86,463  1  77,645  1 
Total other loans 1,395,103  14  1,309,498  13  1,263,687  13  1,153,836  13  1,097,386  12 
Total loans, excluding purchased credit-impaired loans 9,820,903  99  9,652,592  98  9,233,488  98  8,929,181  98  8,693,814  97 
Purchased credit-impaired loans 140,445  1  141,406  2  155,693  2  164,775  2  227,514  3 
Total loans $9,961,348  100% $9,793,998  100% $9,389,181  100% $9,093,956  100% $8,921,328  100%
                                    

Our loan balances, excluding purchased credit-impaired loans, increased $168.3 million (+1.7%, or +7.0% annualized) during the first quarter of 2016. Commercial loan balances decreased due to seasonal borrowings of approximately $100 million that were outstanding at December 31, 2015 and repaid in the first quarter of 2016. Residential real estate loan balances have increased over the past year as a result of retaining adjustable rate mortgages originated by our Mortgage Banking Segment in our loan portfolio.

The following table sets forth the composition of the loan portfolio (excluding loans held for sale) based on quarterly average balances for the periods indicated (dollars in thousands):

  1Q16 4Q15 3Q15 2Q15 1Q15
  Amount % of Total Amount % of Total Amount % of Total Amount % of Total Amount % of Total
Commercial-related credits:                    
Commercial loans $3,531,441  36% $3,492,161  37% $3,372,279  37% $3,309,519  37% $3,190,755  36%
Commercial loans collateralized by assignment of lease payments (lease loans) 1,754,558  18  1,708,404  18  1,674,939  18  1,634,583  18  1,647,761  18 
Commercial real estate 2,734,148  28  2,627,004  28  2,568,539  28  2,522,473  28  2,538,995  29 
Construction real estate 276,797  3  274,188  2  210,506  2  191,935  2  191,257  2 
Total commercial-related credits 8,296,944  85  8,101,757  85  7,826,263  85  7,658,510  85  7,568,768  85 
Other loans:                    
Residential real estate 640,231  7  612,275  6  566,115  6  512,766  6  493,366  5 
Indirect vehicle 404,473  4  365,744  4  325,323  4  286,107  3  267,265  3 
Home equity 210,678  2  219,440  2  226,365  2  233,867  3  246,537  3 
Consumer loans 80,569  1  83,869  1  85,044  1  76,189  1  72,374  1 
Total other loans 1,335,951  14  1,281,328  13  1,202,847  13  1,108,929  13  1,079,542  12 
Total loans, excluding purchased credit-impaired loans 9,632,895  99  9,383,085  98  9,029,110  98  8,767,439  98  8,648,310  97 
Purchased credit-impaired loans 139,451  1  154,562  2  156,309  2  202,374  2  240,376  3 
Total loans $9,772,346  100% $9,537,647  100% $9,185,419  100% $8,969,813  100% $8,888,686  100%
                                    

Our average loan balances, excluding purchased credit-impaired loans, increased $249.8 million (+2.7%, or +10.7% annualized) during the first quarter of 2016.

ASSET QUALITY

The following table presents a summary of criticized assets (excluding loans held for sale) as of the dates indicated (dollars in thousands):

  3/31/2016 12/31/2015 9/30/2015 6/30/2015 3/31/2015
Non-performing loans:          
Non-accrual loans (1) $93,602  $98,065  $92,302  $91,943  $81,571 
Loans 90 days or more past due, still accruing interest 1,112  6,596  4,275  6,112  1,707 
Total non-performing loans 94,714  104,661  96,577  98,055  83,278 
Other real estate owned 28,309  31,553  29,587  28,517  21,839 
Repossessed assets 187  81  216  78  160 
Total non-performing assets $123,210  $136,295  $126,380  $126,650  $105,277 
Potential problem loans (2) $110,193  $139,941  $122,966  $116,443  $107,703 
Purchased credit-impaired loans $140,445  $141,406  $155,693  $164,775  $227,514 
Total non-performing, potential problem and purchased credit-impaired loans $345,352  $386,008  $375,236  $379,273  $418,495 
           
Total allowance for loan and lease losses $134,493  $128,140  $124,626  $120,070  $113,412 
Accruing restructured loans (3) 27,269  26,991  20,120  16,875  16,874 
Total non-performing loans to total loans 0.95% 1.07% 1.03% 1.08% 0.93%
Total non-performing assets to total assets 0.79  0.87  0.85  0.84  0.73 
Allowance for loan and lease losses to non-performing loans 142.00  122.43  129.04  122.45  136.18 
                

(1) Includes $24.0 million, $23.6 million, $21.4 million, $24.5 million and $25.5 million of restructured loans on non-accrual status at March 31, 2016, December 31, 2015, September 30, 2015, June 30, 2015 and March 31, 2015, respectively.
(2) We define potential problem loans as loans rated substandard that do not meet the definition of a non-performing loan. Potential problem loans carry a higher probability of default and require additional attention by management.
(3) Accruing restructured loans consist primarily of residential real estate and home equity loans that have been modified and are performing in accordance with those modified terms as of the dates indicated.

The following table presents data related to non-performing loans by category (excluding loans held for sale and purchased credit-impaired loans that were acquired as part of our FDIC-assisted transactions and the Taylor Capital merger) as of the dates indicated (in thousands):

  3/31/2016 12/31/2015 9/30/2015 6/30/2015 3/31/2015
Commercial and lease $28,590  $37,076  $34,465  $31,053  $18,315 
Commercial real estate 27,786  29,073  25,437  32,358  29,645 
Construction real estate       337  337 
Consumer related 38,338  38,512  36,675  34,307  34,981 
Total non-performing loans $94,714  $104,661  $96,577  $98,055  $83,278 
                     

The following table represents a summary of other real estate owned (excluding other real estate owned acquired as part of our FDIC-assisted transactions) as of the dates indicated (in thousands):

  3/31/2016 12/31/2015 9/30/2015 6/30/2015 3/31/2015
Balance at the beginning of quarter $31,553  $29,587  $28,517  $21,839  $19,198 
Transfers in at fair value less estimated costs to sell 1,270  5,964  2,402  8,595  4,615 
Fair value adjustments 45  (721) (565) (920) (922)
Net gains on sales of other real estate owned 592  977  45  258  34 
Cash received upon disposition (5,151) (4,254) (812) (1,255) (1,086)
Balance at the end of quarter $28,309  $31,553  $29,587  $28,517  $21,839 
                     

Below is a reconciliation of the activity in our allowance for credit and loan losses for the periods indicated (dollars in thousands):

  1Q16 4Q15 3Q15 2Q15 1Q15
Allowance for credit losses, balance at the beginning of period $131,508  $128,038  $124,130  $117,189  $114,057 
Provision for credit losses - legacy 6,409  6,758  1,225  (600) (550)
Provision for credit losses - acquired Taylor Capital loan portfolio renewals 1,154    4,133  4,896  5,524 
Charge-offs:          
Commercial loans 713  710  1,657  57  569 
Commercial loans collateralized by assignment of lease payments (lease loans) 574  685  1,980  100   
Commercial real estate 352  1,251  170  108  2,034 
Construction real estate   23  5  3  3 
Residential real estate 368  261  292  318  579 
Home equity 238  407  358  276  444 
Indirect vehicle 931  898  581  627  874 
Consumer loans 412  550  467  500  424 
Total charge-offs 3,588  4,785  5,510  1,989  4,927 
Recoveries:          
Commercial loans 380  235  456  816  242 
Commercial loans collateralized by assignment of lease payments (lease loans) 50  12  11  340  749 
Commercial real estate 594  385  2,402  2,561  1,375 
Construction real estate 27  19  216  35  2 
Residential real estate 24  98  337  8  72 
Home equity 318  132  186  160  101 
Indirect vehicle 463  499  334  545  475 
Consumer loans 393  117  118  169  69 
Total recoveries 2,249  1,497  4,060  4,634  3,085 
Total net charge-offs (recoveries) 1,339  3,288  1,450  (2,645) 1,842 
Allowance for credit losses 137,732  131,508  128,038  124,130  117,189 
Allowance for unfunded credit commitments (3,239) (3,368) (3,412) (4,060) (3,777)
Allowance for loan and lease losses $134,493  $128,140  $124,626  $120,070  $113,412 
Total loans, excluding loans held for sale $9,961,348  $9,793,998  $9,389,181  $9,093,956  $8,921,328 
Average loans, excluding loans held for sale 9,772,346  9,537,647  9,185,419  8,969,813  8,888,686 
Ratio of allowance for loan and lease losses to total loans, excluding loans held for sale 1.35% 1.31% 1.33% 1.32% 1.27%
Net loan charge-offs (recoveries) to average loans, excluding loans held for sale (annualized) 0.06  0.14  0.06  (0.12) 0.08 
                

The following table presents the three elements of the Company's allowance for loan and lease losses as of the dates indicated (in thousands):

  3/31/2016 12/31/2015 9/30/2015 6/30/2015 3/31/2015
Commercial related loans:          
  General reserve $98,001  $94,164  $93,903  $89,642  $88,425 
  Specific reserve 20,995  16,173  13,683  11,303  5,658 
Consumer related reserve 15,497  17,803  17,040  19,125  19,329 
Total allowance for loan and lease losses $134,493  $128,140  $124,626  $120,070  $113,412 
                     

Purchased loans acquired in a business combination are recorded at estimated fair value on their purchase date without a carryover of the related allowance for loan and lease losses. These acquired loans are segregated into three types: pass rated loans with no discount attributable to credit quality, non-impaired loans with a discount attributable at least in part to credit quality and impaired loans with evidence of significant credit deterioration.

  • Pass rated loans (typically performing loans) are accounted for in accordance with ASC 310-20 "Nonrefundable Fees and Other Costs" as these loans do not have evidence of credit deterioration since origination.
  • Non-impaired loans (typically performing substandard loans) are accounted for in accordance with ASC 310-30 if they display at least some level of credit deterioration since origination.
  • Impaired loans (typically substandard loans on non-accrual status) are accounted for in accordance with ASC 310-30 as they display significant credit deterioration since origination.

For pass rated loans (non-purchased credit-impaired loans), the difference between the estimated fair value of the loans (computed on a loan by loan basis) and the principal outstanding is accreted over the remaining life of the loans.

In accordance with ASC 310-30, for both purchased non-impaired loans and purchased credit-impaired loans ("PCI loans"), the difference between contractually required payments at acquisition and the cash flows expected to be collected is referred to as the non-accretable difference. Further, any excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable yield and is recognized into interest income over the remaining life of the loan when there is a reasonable expectation about the amount and timing of such cash flows.

Changes in the purchase accounting discount for loans acquired in the Taylor Capital merger were as follows for the three months ended March 31, 2016 (in thousands):

  Non-Accretable Discount - PCI Loans Accretable Discount - PCI Loans Accretable Discount - Non-PCI Loans Total
Balance at beginning of period $14,661  $12,298  $34,768  $61,727 
Charge-offs (123)     (123)
Accretion   (2,403) (4,950) (7,353)
Transfer (3,584) 3,584     
Balance at end of period $10,954  $13,479  $29,818  $54,251 
                 

Changes in the purchase accounting discount for loans acquired in the Taylor Capital merger were as follows for the three months ended December 31, 2015 (in thousands):

  Non-Accretable Discount - PCI Loans Accretable Discount - PCI Loans Accretable Discount - Non-PCI Loans Total
Balance at beginning of period $19,747  $9,368  $40,961  $70,076 
Recoveries 1,354      1,354 
Accretion   (3,510) (6,193) (9,703)
Transfer (6,440) 6,440     
Balance at end of period $14,661  $12,298  $34,768  $61,727 
                 

The $3.6 million and $6.4 million purchase accounting discount transfer from non-accretable discount on purchased credit-impaired loans to accretable discount for the three months ended March 31, 2016 and December 31, 2015, respectively, was due to better than expected cash flows on several pools of purchased credit-impaired loans.

INVESTMENT SECURITIES

The following table sets forth, by type, the fair value and amortized cost of our investment securities, excluding FHLB and FRB stock, as well as the unrealized gain, net of our investment securities available for sale as of the dates indicated (in thousands):

  3/31/2016 12/31/2015 9/30/2015 6/30/2015 3/31/2015
Securities available for sale:          
Fair value          
Government sponsored agencies and enterprises $64,762  $64,611  $65,461  $65,485  $66,070 
States and political subdivisions 398,024  396,367  399,274  395,912  403,628 
Mortgage-backed securities 834,559  893,656  847,426  902,017  856,933 
Corporate bonds 224,530  219,628  228,251  246,468  252,042 
Equity securities 10,969  10,761  10,826  10,669  10,751 
Total fair value $1,532,844  $1,585,023  $1,551,238  $1,620,551  $1,589,424 
           
Amortized cost          
Government sponsored agencies and enterprises $63,600  $63,805  $64,008  $64,211  $64,411 
States and political subdivisions 371,006  373,285  379,015  380,221  381,704 
Mortgage-backed securities 820,825  888,325  834,791  890,334  841,727 
Corporate bonds 225,657  222,784  228,711  245,506  250,543 
Equity securities 10,814  10,757  10,701  10,644  10,587 
Total amortized cost $1,491,902  $1,558,956  $1,517,226  $1,590,916  $1,548,972 
           
Unrealized gain, net          
Government sponsored agencies and enterprises $1,162  $806  $1,453  $1,274  $1,659 
States and political subdivisions 27,018  23,082  20,259  15,691  21,924 
Mortgage-backed securities 13,734  5,331  12,635  11,683  15,206 
Corporate bonds (1,127) (3,156) (460) 962  1,499 
Equity securities 155  4  125  25  164 
Total unrealized gain, net $40,942  $26,067  $34,012  $29,635  $40,452 
           
Securities held to maturity, at amortized cost:          
States and political subdivisions $986,340  $1,016,519  $1,002,963  $974,032  $764,931 
Mortgage-backed securities 205,570  214,291  221,889  229,595  235,928 
Total amortized cost $1,191,910  $1,230,810  $1,224,852  $1,203,627  $1,000,859 
                     

DEPOSIT MIX

The following table shows the composition of deposits based on period end balances as of the dates indicated (dollars in thousands):

  3/31/2016 12/31/2015 9/30/2015 6/30/2015 3/31/2015
  Amount % of
Total
 Amount % of
Total
 Amount % of
Total
 Amount % of
Total
 Amount % of
Total
Low cost deposits:                    
Noninterest bearing deposits $4,667,410  40% $4,627,184  40% $4,434,067  39% $4,378,005  40% $4,290,499  39%
Money market, NOW and interest bearing deposits 4,048,054  35  4,144,633  36  4,129,414  37  3,842,264  35  4,002,818  36 
Savings 991,300  9  974,555  8  953,746  8  970,875  9  969,560  9 
Total low cost deposits 9,706,764  84  9,746,372  84  9,517,227  84  9,191,144  84  9,262,877  84 
Certificates of deposit:                    
Certificates of deposit 1,255,457  11  1,244,292  11  1,279,842  12  1,261,843  12  1,354,633  12 
Brokered certificates of deposit 571,605  5  514,551  5  457,509  4  408,827  4  401,991  4 
Total certificates of deposit 1,827,062  16  1,758,843  16  1,737,351  16  1,670,670  16  1,756,624  16 
Total deposits $11,533,826  100% $11,505,215  100% $11,254,578  100% $10,861,814  100% $11,019,501  100%
                                    

Non-interest bearing deposits grew by $40.2 million (+0.9%, or +3.5% annualized) during the first quarter of 2016 and comprised 40% of total deposits at quarter-end. Total low cost deposits decreased $39.6 million (-0.4%, or -1.6% annualized) to $9.7 billion at March 31, 2016 compared to December 31, 2015 and represented 84% of total deposits at quarter-end.

The following table shows the composition of deposits based on quarterly average balances for the periods indicated (dollars in thousands):

  1Q16 4Q15 3Q15 2Q15 1Q15
  Amount % of
Total
 Amount % of
Total
 Amount % of
Total
 Amount % of
Total
 Amount % of
Total
Low cost deposits:                    
Noninterest bearing deposits $4,606,008  40% $4,617,076  40% $4,428,065  39% $4,273,931  39% $4,199,948  38%
Money market, NOW and interest bearing deposits 4,109,150  36  4,214,099  37  4,119,625  36  3,940,201  36  3,937,707  36 
Savings 984,019  9  959,049  8  965,060  9  972,327  9  952,345  9 
Total low cost deposits 9,699,177  85  9,790,224  85  9,512,750  84  9,186,459  84  9,090,000  83 
Certificates of deposit:                    
Certificates of deposit 1,237,971  11  1,245,947  11  1,304,516  12  1,302,031  12  1,420,320  13 
Brokered certificates of deposit 534,910  4  492,839  4  427,649  4  412,517  4  476,245  4 
Total certificates of deposit 1,772,881  15  1,738,786  15  1,732,165  16  1,714,548  16  1,896,565  17 
Total deposits $11,472,058  100% $11,529,010  100% $11,244,915  100% $10,901,007  100% $10,986,565  100%
                                    

CAPITAL

Tangible book value per common share was $17.04 at March 31, 2016 compared to $16.53 at December 31, 2015 and $16.08 at March 31, 2015.

Our regulatory capital ratios remain strong. MB Financial Bank, N.A. (the "Bank") was categorized as "well capitalized" at March 31, 2016 under the Prompt Corrective Action ("PCA") provisions. The Bank would be categorized as "well capitalized" under the fully phased in rules under the Basel III regulatory capital reform.

FORWARD-LOOKING STATEMENTS

When used in this press release and in reports filed with or furnished to the Securities and Exchange Commission (the "SEC"), in other press releases or other public stockholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases "believe," "will," "should," "will likely result," "are expected to," "will continue" "is anticipated," "estimate," "project," "plans," or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date made. These statements may relate to our future financial performance, strategic plans or objectives, revenues or earnings projections, or other financial items. By their nature, these statements are subject to numerous uncertainties that could cause actual results to differ materially from those anticipated in the statements.

Important factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to, the following: (1) expected revenues, cost savings, synergies and other benefits from the pending MB Financial-American Chartered merger might not be realized within the expected 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 requisite regulatory approvals for the pending MB Financial-American Chartered merger might not be obtained, or may take longer to obtain than expected; (3) the credit risks of lending activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses, which could necessitate additional provisions for loan losses, resulting both from originated loans and loans acquired from other financial institutions; (4) competitive pressures among depository institutions; (5) interest rate movements and their impact on customer behavior, net interest margin and the value of our mortgage servicing rights; (6) the possibility that our mortgage banking business may experience increased volatility in its revenues and earnings and the possibility that the profitability of our mortgage banking business could be significantly reduced if we are unable to originate and sell mortgage loans at profitable margins or if changes in interest rates negatively impact the value of our mortgage servicing rights; (7) the impact of repricing and competitors' pricing initiatives on loan and deposit products; (8) fluctuations in real estate values; (9) the ability to adapt successfully to technological changes to meet customers' needs and developments in the market place; (10) the possibility that security measures implemented might not be sufficient to mitigate the risk of a cyber attack or cyber theft, and that such security measures might not protect against systems failures or interruptions; (11) our ability to realize the residual values of its direct finance, leveraged and operating leases; (12) the ability to access cost-effective funding; (13) changes in financial markets; (14) changes in economic conditions in general and in the Chicago metropolitan area in particular; (15) the costs, effects and outcomes of litigation; (16) new legislation or regulatory changes, including but not limited to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act") and regulations adopted thereunder, changes in capital requirements pursuant to the Dodd-Frank Act, changes in the interpretation and/or application of laws and regulations by regulatory authorities, other governmental initiatives affecting the financial services industry and changes in federal and/or state tax laws or interpretations thereof by taxing authorities; (17) changes in accounting principles, policies or guidelines; (18) our future acquisitions of other depository institutions or lines of business; and (19) 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.

ADDITIONAL INFORMATION

In connection with the proposed merger between MB Financial and American Chartered, MB Financial filed a registration statement on Form S-4 with the SEC, which was declared effective by the SEC on February 4, 2016. The registration statement includes a proxy statement/prospectus, which was sent to the shareholders of American Chartered. Investors and shareholders of American Chartered are advised to read the proxy statement/prospectus, which was filed by MB Financial with the SEC on February 4, 2016, and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they contain, or will contain, as the case may be, important information about MB Financial, American Chartered and the proposed transaction. Copies of all documents relating to the merger filed by MB Financial can be obtained free of charge from the SEC's website at www.sec.gov. These documents also can be obtained free of charge by accessing MB Financial's website at www.mbfinancial.com under the tab "Investor Relations" and then under "SEC Filings." Alternatively, these documents, when available, can be obtained free of charge from MB Financial upon written request to MB Financial, Inc., Corporate Secretary, 6111 North River Road, Rosemont, Illinois 60018 or by calling (847) 653-1992.

TABLES TO FOLLOW

MB FINANCIAL, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
As of the dates indicated
(In thousands)

  3/31/2016 12/31/2015 9/30/2015 6/30/2015 3/31/2015
ASSETS          
Cash and due from banks $271,732  $307,869  $234,220  $290,266  $248,840 
Interest earning deposits with banks 113,785  73,572  66,025  144,154  52,212 
Total cash and cash equivalents 385,517  381,441  300,245  434,420  301,052 
Federal funds sold       5   
Investment securities:          
Securities available for sale, at fair value 1,532,844  1,585,023  1,551,238  1,620,551  1,589,424 
Securities held to maturity, at amortized cost 1,191,910  1,230,810  1,224,852  1,203,627  1,000,859 
Non-marketable securities - FHLB and FRB Stock 121,750  114,233  91,400  111,400  87,677 
Total investment securities 2,846,504  2,930,066  2,867,490  2,935,578  2,677,960 
Loans held for sale 632,196  744,727  676,020  801,343  686,838 
Loans:          
Total loans, excluding purchased credit-impaired loans 9,820,903  9,652,592  9,233,488  8,929,181  8,693,814 
Purchased credit-impaired loans 140,445  141,406  155,693  164,775  227,514 
Total loans 9,961,348  9,793,998  9,389,181  9,093,956  8,921,328 
Less: Allowance for loan and lease losses 134,493  128,140  124,626  120,070  113,412 
Net loans 9,826,855  9,665,858  9,264,555  8,973,886  8,807,916 
Lease investments, net 216,046  211,687  184,223  167,966  159,191 
Premises and equipment, net 238,578  236,013  234,115  234,651  234,077 
Cash surrender value of life insurance 137,807  136,953  136,089  135,237  134,401 
Goodwill 725,068  725,070  711,521  711,521  711,521 
Other intangibles 43,186  44,812  37,520  34,979  36,488 
Mortgage servicing rights, at fair value 145,800  168,162  148,097  261,034  219,254 
Other real estate owned, net 28,309  31,553  29,587  28,517  21,839 
Other real estate owned related to FDIC transactions 10,397  10,717  13,825  13,867  17,890 
Other assets 339,390  297,948  346,814  285,190  319,883 
Total assets $15,575,653  $15,585,007  $14,950,101  $15,018,194  $14,328,310 
LIABILITIES AND STOCKHOLDERS' EQUITY          
Liabilities          
Deposits:          
Noninterest bearing $4,667,410  $4,627,184  $4,434,067  $4,378,005  $4,290,499 
Interest bearing 6,866,416  6,878,031  6,820,511  6,483,809  6,729,002 
Total deposits 11,533,826  11,505,215  11,254,578  10,861,814  11,019,501 
Short-term borrowings 884,101  1,005,737  940,529  1,382,635  615,231 
Long-term borrowings 439,615  400,274  95,175  89,639  85,477 
Junior subordinated notes issued to capital trusts 185,820  186,164  186,068  185,971  185,874 
Accrued expenses and other liabilities 409,406  400,333  410,523  420,396  363,934 
Total liabilities 13,452,768  13,497,723  12,886,873  12,940,455  12,270,017 
Stockholders' Equity          
Preferred stock 115,280  115,280  115,280  115,280  115,280 
Common stock 756  756  756  754  754 
Additional paid-in capital 1,284,438  1,280,870  1,277,348  1,273,333  1,268,851 
Retained earnings 756,272  731,812  702,789  677,246  651,178 
Accumulated other comprehensive income 24,687  15,777  20,968  18,778  26,101 
Treasury stock (59,863) (58,504) (55,258) (9,035) (5,277)
Controlling interest stockholders' equity 2,121,570  2,085,991  2,061,883  2,076,356  2,056,887 
Noncontrolling interest 1,315  1,293  1,345  1,383  1,406 
Total stockholders' equity 2,122,885  2,087,284  2,063,228  2,077,739  2,058,293 
Total liabilities and stockholders' equity $15,575,653  $15,585,007  $14,950,101  $15,018,194  $14,328,310 
                     

MB FINANCIAL, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(Dollars in thousands, except per share data) 1Q16 4Q15 3Q15 2Q15 1Q15
Interest income:          
Loans:          
Taxable $104,923  $106,137  $100,573  $98,768  $98,846 
Nontaxable 2,586  2,602  2,283  2,259  2,174 
Investment securities:          
Taxable 9,566  9,708  9,655  10,002  9,934 
Nontaxable 10,776  10,969  10,752  10,140  9,113 
Federal funds sold   1       
Other interest earning accounts 141  110  89  57  62 
Total interest income 127,992  129,527  123,352  121,226  120,129 
Interest expense:          
Deposits 5,622  5,357  5,102  4,554  4,645 
Short-term borrowings 721  385  395  355  277 
Long-term borrowings and junior subordinated notes 2,345  2,016  1,886  1,844  1,812 
Total interest expense 8,688  7,758  7,383  6,753  6,734 
Net interest income 119,304  121,769  115,969  114,473  113,395 
Provision for credit losses 7,563  6,758  5,358  4,296  4,974 
Net interest income after provision for credit losses 111,741  115,011  110,611  110,177  108,421 
Non-interest income:          
Lease financing revenue, net 19,046  15,937  20,000  15,564  25,080 
Mortgage banking revenue 27,482  26,542  30,692  35,648  24,544 
Commercial deposit and treasury management fees 11,878  11,711  11,472  11,062  11,038 
Trust and asset management fees 7,950  6,077  6,002  5,752  5,714 
Card fees 3,525  3,651  3,335  4,409  3,927 
Capital markets and international banking service fees 3,227  2,355  2,357  1,508  1,928 
Consumer and other deposit service fees 3,025  3,440  3,499  3,260  3,083 
Brokerage fees 1,158  1,252  1,281  1,543  1,678 
Loan service fees 1,752  1,890  1,531  1,353  1,485 
Increase in cash surrender value of life insurance 854  864  852  836  839 
Net (loss) gain on investment securities   (3) 371  (84) (460)
Net (loss) gain on sale of assets (48)   1  (7) 4 
Other operating income 1,844  1,909  858  2,105  2,408 
Total non-interest income 81,693  75,625  82,251  82,949  81,268 
Non-interest expense:          
Salaries and employee benefits expense 85,591  84,709  87,891  86,145  84,786 
Occupancy and equipment expense 13,260  12,935  12,458  12,177  12,940 
Computer services and telecommunication expense 9,055  8,445  8,567  8,537  8,904 
Advertising and marketing expense 2,878  2,551  2,578  2,497  2,446 
Professional and legal expense 2,589  4,169  1,801  2,413  2,670 
Other intangible amortization expense 1,626  1,546  1,542  1,509  1,518 
Branch exit and facilities impairment charges 44  616  70  438  7,391 
Net (gain) loss recognized on other real estate owned and other expense (346) (729) 577  724  896 
Prepayment fees on interest bearing liabilities         85 
Other operating expenses 21,103  12,989  18,782  18,297  18,284 
Total non-interest expense 135,800  127,231  134,266  132,737  139,920 
Income before income taxes 57,634  63,405  58,596  60,389  49,769 
Income tax expense 18,520  19,798  18,318  19,437  15,658 
Net income 39,114  43,607  40,278  40,952  34,111 
Dividends on preferred shares 2,000  2,000  2,000  2,000  2,000 
Net income available to common stockholders $37,114  $41,607  $38,278  $38,952  $32,111 
                     


  1Q16 4Q15 3Q15 2Q15 1Q15
Common share data:          
Basic earnings per common share $0.51  $0.57  $0.52  $0.52  $0.43 
Diluted earnings per common share 0.50  0.56  0.51  0.52  0.43 
Weighted average common shares outstanding for basic earnings per common share 73,330,731  73,296,602  74,297,281  74,596,925  74,567,104 
Weighted average common shares outstanding for diluted earnings per common share 73,966,935  73,953,165  75,029,827  75,296,029  75,164,716 
Common shares outstanding (at end of period) 73,639,487  73,678,329  73,776,196  75,073,292  75,122,076 
                


Selected Financial Data:          
  1Q16 4Q15 3Q15 2Q15 1Q15
Performance Ratios:          
Annualized return on average assets 1.02% 1.13% 1.06% 1.12% 0.96%
Annualized operating return on average assets (1) 1.09  1.06  1.06  1.14  1.11 
Annualized return on average common equity 7.52  8.48  7.75  8.02  6.78 
Annualized operating return on average common equity (1) 8.08  7.86  7.75  8.19  7.87 
Annualized cash return on average tangible common equity (2) 12.47  13.97  12.74  13.21  11.31 
Annualized cash operating return on average tangible common equity (3) 13.37  12.97  12.74  13.47  13.09 
Net interest rate spread 3.63  3.72  3.60  3.72  3.80 
Cost of funds (4) 0.27  0.24  0.23  0.22  0.23 
Efficiency ratio (5) 63.49  63.95  65.35  64.26  65.29 
Annualized net non-interest expense to average assets (6) 1.31  1.44  1.36  1.32  1.40 
Core non-interest income to revenues (7) 39.38  36.91  40.35  40.80  40.66 
Net interest margin 3.57  3.64  3.52  3.63  3.73 
Tax equivalent effect 0.22  0.22  0.21  0.21  0.20 
Net interest margin - fully tax equivalent basis (8) 3.79  3.86  3.73  3.84  3.93 
Loans to deposits 86.37  85.13  83.43  83.72  80.96 
Asset Quality Ratios:          
Non-performing loans (9) to total loans 0.95% 1.07% 1.03% 1.08% 0.93%
Non-performing assets (9) to total assets 0.79  0.87  0.85  0.84  0.73 
Allowance for loan and lease losses to non-performing loans (9) 142.00  122.43  129.04  122.45  136.18 
Allowance for loan and lease losses to total loans 1.35  1.31  1.33  1.32  1.27 
Net loan (recoveries) charge-offs to average loans (annualized) 0.06  0.14  0.06  (0.12) 0.08 
Capital Ratios:          
Tangible equity to tangible assets (10) 9.24% 8.99% 9.34% 9.41% 9.73%
Tangible common equity to tangible assets (11) 8.46  8.21  8.53  8.60  8.89 
Tangible common equity to risk weighted assets (12) 9.56  9.34  9.69  10.02  10.09 
Total capital (to risk-weighted assets) (13) 12.66  12.54  12.94  13.07  13.22 
Tier 1 capital (to risk-weighted assets) (13) 11.62  11.54  11.92  12.06  12.24 
Common equity tier 1 capital (to risk-weighted assets) (13) 9.34  9.27  9.56  9.66  9.79 
Tier 1 capital (to average assets) (13) 10.38  10.40  10.43  10.69  10.80 
Per Share Data:          
Book value per common share (14) $27.26  $26.77  $26.40  $26.14  $25.86 
Less: goodwill and other intangible assets, net of benefit, per common share 10.22  10.24  9.97  9.78  9.78 
Tangible book value per common share (15) $17.04  $16.53  $16.43  $16.36  $16.08 
Cash dividends per common share $0.17  $0.17  $0.17  $0.17  $0.14 
                     

(1) Annualized operating return on average assets is computed by dividing annualized operating earnings by average total assets. Annualized operating return on average common equity is computed by dividing annualized operating earnings by average common equity. Operating earnings is defined as net income as reported less non-core items, net of tax.
(2) Annualized cash return on average tangible equity is computed by dividing net cash flow available to common stockholders (net income available to common stockholders, plus other intangibles amortization expense, net of tax benefit) by average tangible common equity (average common stockholders' equity less average goodwill and average other intangibles, net of tax benefit).
(3) Annualized cash operating return on average tangible common equity is computed by dividing annualized cash operating earnings (operating earnings plus other intangibles amortization expense, net of tax benefit, less dividends on preferred shares) by average tangible common equity. Operating earnings is defined as net income as reported less non-core items, net of tax.
(4) Equals total interest expense divided by the sum of average interest bearing liabilities and noninterest bearing deposits.
(5) Equals total non-interest expense excluding non-core items divided by the sum of net interest income on a fully tax equivalent basis, total non-interest income less non-core items, and tax equivalent adjustment on the increase in cash surrender value of life insurance.
(6) Equals total non-interest expense excluding non-core items less total non-interest income excluding non-core items, and including tax equivalent adjustment on the increase in cash surrender value of life insurance divided by average assets.
(7) Equals total non-interest income excluding non-core items and tax equivalent adjustment on the increase in cash surrender value of life insurance divided by the sum of net interest income on a fully tax equivalent basis, total non-interest income less non-core items, and tax equivalent adjustment on the increase in cash surrender value of life insurance.
(8) Represents net interest income on a fully tax equivalent basis assuming a 35% tax rate, as a percentage of average interest earning assets.
(9) Non-performing loans excludes purchased credit-impaired loans and loans held for sale. Non-performing assets excludes purchased credit-impaired loans, loans held for sale, and other real estate owned related to FDIC transactions.
(10) 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.
(11) Equals total ending common stockholders' equity less goodwill and other intangibles, net of tax benefit, divided by total assets less goodwill and other intangibles, net of tax benefit.
(12) Equals total ending common stockholders' equity less goodwill and other intangibles, net of tax benefit, divided by risk-weighted assets. Current quarter risk-weighted assets are estimated.
(13) Current quarter ratios are estimated.
(14) Equals total ending common stockholders' equity divided by common shares outstanding.
(15) Equals total ending common stockholders' equity less goodwill and other intangibles, net of tax benefit, divided by common shares outstanding.

NON-GAAP FINANCIAL INFORMATION

This press release contains certain financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (GAAP). These measures include core (or operating) earnings, core non-interest income, core non-interest income to revenues (with non-core items excluded from both core non-interest income and revenues), core non-interest expense, non-core non-interest income and non-core non-interest expense, net interest income on a fully tax equivalent basis, net interest margin on a fully tax equivalent basis, net interest margin on a fully tax equivalent basis excluding acquisition accounting discount accretion on Taylor Capital loans, efficiency ratio and the ratio of annualized net non-interest expense to average assets with net gains and losses on investment securities, net gains and losses on sale of other assets, and increase (decrease) in market value of assets held in trust for deferred compensation excluded from the non-interest income components of these ratios, and prepayment fees on interest bearing liabilities, merger related and repositioning expenses, and increase (decrease) in market value of assets held in trust for deferred compensation excluded from the non-interest expense components of these ratios, with tax equivalent adjustment for tax-exempt interest income and increase in cash surrender value of life insurance, as applicable; ratios of tangible equity to tangible assets, tangible common equity to risk-weighted assets and Tier 1 common capital to risk-weighted assets; tangible book value per common share; annualized operating return on average assets, annualized operating return on average common equity, annualized cash return on average tangible common equity and annualized cash operating return on average tangible common equity. Our management uses these non-GAAP measures, together with the related GAAP measures, in its analysis of our performance and in making business decisions. Management also uses these measures for peer comparisons.

Management believes that operating earnings, core and non-core non-interest income and core and non-core non-interest expense are useful in assessing our core operating performance and in understanding the primary drivers of our non-interest income and non-interest expense when comparing periods.

The tax equivalent adjustment to net interest income, net interest margin, tax-exempt interest income and increase in cash surrender value of life insurance 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. For the same reasons, management believes that the tax equivalent adjustments to tax-exempt interest income and increase in cash surrender value of life insurance are useful.

Management also believes that by excluding net gains and losses on investment securities, net gains and losses on sale of other assets and increase (decrease) in market value of assets held in trust for deferred compensation from the non-interest income components, and excluding prepayment fees on interest bearing liabilities, merger related and repositioning expenses and increase in market value of assets held in trust for deferred compensation from the non-interest expense components, of the efficiency ratio and the ratio of annualized net non-interest expense to average assets, these ratios better reflect our core operating performance, as the excluded items do not pertain to our core business operations and their exclusion makes these ratios more meaningful when comparing our operating results from period to period.

In addition, management believes that presenting the ratio of Tier 1 common equity to risk-weighted assets is useful for assessing our capital strength and for peer comparison purposes. The other measures exclude the acquisition-related goodwill and other intangible assets, net of tax benefit, in determining tangible assets, tangible equity, tangible common equity and average tangible common equity and exclude other intangible amortization expense, net of tax benefit, in determining net cash flow available to common stockholders.  Management believes the presentation of these other financial measures, excluding the impact of such items, provides useful supplemental information that is helpful in understanding our financial results, as they provide a method to assess management's success in utilizing our tangible capital, as well as our capital strength. Management also believes that providing measures that exclude balances of acquisition-related goodwill and other intangible assets, which are subjective components of valuation, facilitates the comparison of our performance with the performance of our peers. In addition, management believes that these are standard financial measures used in the banking industry to evaluate performance.

The non-GAAP disclosures contained herein 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.

Reconciliations of net interest margin on a fully tax equivalent basis to net interest margin and net interest margin on a fully tax equivalent basis excluding acquisition accounting discount accretion on Taylor Capital loans to net interest margin are 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. Reconciliations of core and non-core non-interest income and non-interest expense to non-interest income and non-interest expense are contained in the tables under "Results of Operations—First Quarter Results."

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

  3/31/2016 12/31/2015 9/30/2015 6/30/2015 3/31/2015
Stockholders' equity - as reported $2,122,885  $2,087,284  $2,063,228  $2,077,739  $2,058,293 
Less: goodwill 725,068  725,070  711,521  711,521  711,521 
Less: other intangible assets, net of tax benefit 28,071  29,128  24,388  22,736  23,717 
Tangible equity $1,369,746  $1,333,086  $1,327,319  $1,343,482  $1,323,055 
                     

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

  3/31/2016 12/31/2015 9/30/2015 6/30/2015 3/31/2015
Total assets - as reported $15,575,653  $15,585,007  $14,950,101  $15,018,194  $14,328,310 
Less: goodwill 725,068  725,070  711,521  711,521  711,521 
Less: other intangible assets, net of tax benefit 28,071  29,128  24,388  22,736  23,717 
Tangible assets $14,822,514  $14,830,809  $14,214,192  $14,283,937  $13,593,072 
                     

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

  3/31/2016 12/31/2015 9/30/2015 6/30/2015 3/31/2015
Common stockholders' equity - as reported $2,007,605  $1,972,004  $1,947,948  $1,962,459  $1,943,013 
Less: goodwill 725,068  725,070  711,521  711,521  711,521 
Less: other intangible assets, net of tax benefit 28,071  29,128  24,388  22,736  23,717 
Tangible common equity $1,254,466  $1,217,806  $1,212,039  $1,228,202  $1,207,775 
                     

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

  1Q16 4Q15 3Q15 2Q15 1Q15
Average common stockholders' equity - as reported $1,984,379  $1,945,772  $1,958,947  $1,947,231  $1,922,151 
Less: average goodwill 725,070  711,669  711,521  711,521  711,521 
Less: average other intangible assets, net of tax benefit 28,511  23,826  23,900  23,092  24,157 
Average tangible common equity $1,230,798  $1,210,277  $1,223,526  $1,212,618  $1,186,473 
                     

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

  1Q16 4Q15 3Q15 2Q15 1Q15
Net income available to common stockholders - as reported $37,114  $41,607  $38,278  $38,952  $32,111 
Add: other intangible amortization expense, net of tax benefit 1,057  1,005  1,002  981  987 
Net cash flow available to common stockholders $38,171  $42,612  $39,280  $39,933  $33,098 
                     

The following table presents a reconciliation of net income to operating earnings (in thousands):

  1Q16 4Q15 3Q15 2Q15 1Q15
Net income - as reported $39,114  $43,607  $40,278  $40,952  $34,111 
Less non-core items:          
Net (loss) gain on investment securities   (3) 371  (84) (460)
Net (loss) gain on sale of other assets (48)   1  (7) 4 
Merger related and repositioning expenses (3,287) 4,186  (389) (1,234) (8,069)
Prepayment fees on interest bearing liabilities         (85)
Total non-core items (3,335) 4,183  (17) (1,325) (8,610)
Income tax expense on non-core items (577) 1,140  (6) (526) (3,417)
Non-core items, net of tax (2,758) 3,043  (11) (799) (5,193)
Operating earnings 41,872  40,564  40,289  41,751  39,304 
Dividends on preferred shares 2,000  2,000  2,000  2,000  2,000 
Operating earnings available to common stockholders $39,872  $38,564  $38,289  $39,751  $37,304 
Diluted operating earnings per common share $0.54  $0.52  $0.51  $0.53  $0.50 
Weighted average common shares outstanding for diluted operating earnings per common share  73,966,935   73,953,165   75,029,827   75,296,029   75,164,716 
                

Efficiency Ratio Calculation (Dollars in Thousands)

  1Q16 4Q15 3Q15 2Q15 1Q15
Non-interest expense $135,800  $127,231  $134,266  $132,737  $139,920 
Less merger related and repositioning expenses 3,287  (4,186) 389  1,234  8,069 
Less prepayment fees on interest bearing liabilities         85 
Less increase (decrease) in market value of assets held in trust for deferred compensation 8  565  (872) 7  306 
Non-interest expense - as adjusted $132,505  $130,852  $134,749  $131,496  $131,460 
           
Net interest income $119,304  $121,769  $115,969  $114,473  $113,395 
Tax equivalent adjustment 7,195  7,307  7,019  6,676  6,078 
Net interest income on a fully tax equivalent basis 126,499  129,076  122,988  121,149  119,473 
Plus non-interest income 81,693  75,625  82,251  82,949  81,268 
Plus tax equivalent adjustment on the increase in cash surrender value of life insurance 460  465  459  450  452 
Less net (loss) gain on investment securities   (3) 371  (84) (460)
Less net (loss) gain on sale of other assets (48)   1  (7) 4 
Less increase (decrease) in market value of assets held in trust for deferred compensation 8  565  (872) 7  306 
Net interest income plus non-interest income - as adjusted $208,692  $204,604  $206,198  $204,632  $201,343 
Efficiency ratio 63.49% 63.95% 65.35% 64.26% 65.29%
Efficiency ratio (without adjustments) 67.56% 64.46% 67.74% 67.24% 71.88%
                

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

  1Q16 4Q15 3Q15 2Q15 1Q15
Non-interest expense $135,800  $127,231  $134,266  $132,737  $139,920 
Less merger related and repositioning expenses 3,287  (4,186) 389  1,234  8,069 
Less prepayment fees on interest bearing liabilities         85 
Less increase (decrease) in market value of assets held in trust for deferred compensation 8  565  (872) 7  306 
Non-interest expense - as adjusted 132,505  130,852  134,749  131,496  131,460 
           
Non-interest income 81,693  75,625  82,251  82,949  81,268 
Less net (loss) gain on investment securities   (3) 371  (84) (460)
Less net (loss) gain on sale of other assets (48)   1  (7) 4 
Less increase (decrease) in market value of assets held in trust for deferred compensation 8  565  (872) 7  306 
Non-interest income - as adjusted 81,733  75,063  82,751  83,033  81,418 
Less tax equivalent adjustment on the increase in cash surrender value of life insurance 460  465  459  450  452 
Net non-interest expense $50,312  $55,324  $51,539  $48,013  $49,590 
Average assets $15,487,565  $15,244,633  $15,059,429  $14,631,999  $14,363,244 
Annualized net non-interest expense to average assets 1.31% 1.44% 1.36% 1.32% 1.40%
Annualized net non-interest expense to average assets (without adjustments) 1.41% 1.34% 1.37% 1.36% 1.66%
                

Core Non-interest Income to Revenues Ratio Calculation (Dollars in Thousands)

  1Q16 4Q15 3Q15 2Q15 1Q15
Non-interest income $81,693  $75,625  $82,251  $82,949  $81,268 
Plus tax equivalent adjustment on the increase in cash surrender value of life insurance 460  465  459  450  452 
Less net (loss) gain on investment securities   (3) 371  (84) (460)
Less net (loss) gain on sale of other assets (48)   1  (7) 4 
Less increase (decrease) in market value of assets held in trust for deferred compensation 8  565  (872) 7  306 
Non-interest income - as adjusted $82,193  $75,528  $83,210  $83,483  $81,870 
           
Net interest income $119,304  $121,769  $115,969  $114,473  $113,395 
Tax equivalent adjustment 7,195  7,307  7,019  6,676  6,078 
Net interest income on a fully tax equivalent basis 126,499  129,076  122,988  121,149  119,473 
Plus non-interest income 81,693  75,625  82,251  82,949  81,268 
Plus tax equivalent adjustment on the increase in cash surrender value of life insurance 460  465  459  450  452 
Less net (loss) gain on investment securities   (3) 371  (84) (460)
Less net (loss) gain on sale of other assets (48)   1  (7) 4 
Less increase (decrease) in market value of assets held in trust for deferred compensation 8  565  (872) 7  306 
Total revenue - as adjusted and on a fully tax equivalent basis $208,692  $204,604  $206,198  $204,632  $201,343 
           
Total revenue - unadjusted $200,997  $197,394  $198,220  $197,422  $194,663 
           
Core non-interest income to revenues ratio 39.38% 36.91% 40.35% 40.80% 40.66%
Non-interest income to revenues ratio (without adjustments) 40.64% 38.31% 41.49% 42.02% 41.75%
                

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):

  1Q16 1Q15  4Q15
  Average
Balance
 Interest Yield/
Rate
 Average
Balance
 Interest Yield/
Rate
  Average
Balance
 Interest Yield/
Rate
Interest Earning Assets:                   
Loans held for sale $661,021  $5,966  3.61% $658,169  $5,785  3.52%  $681,682  $6,276  3.68%
Loans (1) (2) (3):                   
Commercial-related credits                   
Commercial 3,531,441  37,357  4.18  3,190,755  32,623  4.09   3,492,161  35,890  4.02 
Commercial loans collateralized by assignment of lease payments 1,754,558  16,577  3.78  1,647,761  15,438  3.75   1,708,404  15,901  3.72 
Real estate commercial 2,734,148  28,039  4.06  2,538,995  27,548  4.34   2,627,004  27,759  4.13 
Real estate construction 276,797  2,902  4.15  191,257  4,081  8.54   274,188  3,736  5.33 
Total commercial-related credits 8,296,944  84,875  4.05  7,568,768  79,690  4.21   8,101,757  83,286  4.02 
Other loans                   
Real estate residential 640,231  5,695  3.56  493,366  5,028  4.08   612,275  5,490  3.59 
Home equity 210,678  2,033  3.88  246,537  2,468  4.06   219,440  2,142  3.87 
Indirect 404,473  4,758  4.73  267,265  3,485  5.29   365,744  4,403  4.78 
Consumer loans 80,569  794  3.97  72,374  797  4.47   83,869  777  3.67 
Total other loans 1,335,951  13,280  4.00  1,079,542  11,778  4.42   1,281,328  12,812  3.97 
Total loans, excluding purchased credit-impaired loans 9,632,895  98,155  4.10  8,648,310  91,468  4.29   9,383,085  96,098  4.06 
Purchased credit-impaired loans 139,451  4,780  13.75  240,376  4,937  8.33   154,562  7,766  19.93 
Total loans 9,772,346  102,935  4.24  8,888,686  96,405  4.40   9,537,647  103,864  4.32 
Taxable investment securities 1,524,583  9,566  2.51  1,556,530  9,934  2.55   1,510,047  9,708  2.57 
Investment securities exempt from federal income taxes (3) 1,362,468  16,579  4.87  1,126,133  14,021  4.98   1,383,592  16,875  4.88 
Federal funds sold 42    1.00  16       100  1  1.00 
Other interest earning deposits 113,748  141  0.50  102,346  62  0.25   141,891  110  0.31 
Total interest earning assets $13,434,208  $135,187  4.05% $12,331,880  $126,207  4.15%  $13,254,959  $136,834  4.10%
Non-interest earning assets 2,053,357      2,031,364       1,989,674     
Total assets $15,487,565      $14,363,244       $15,244,633     
Interest Bearing Liabilities:                   
Core funding:                   
Money market, NOW and interest bearing deposits $4,109,150  $2,086  0.20% $3,937,707  $1,595  0.16%  $4,214,099  $1,999  0.19%
Savings deposits 984,019  159  0.06  952,345  120  0.05   959,049  123  0.05 
Certificates of deposit 1,237,971  1,413  0.46  1,420,320  1,452  0.42   1,245,947  1,431  0.46 
Customer repurchase agreements 190,114  94  0.20  245,875  119  0.20   230,412  115  0.20 
Total core funding 6,521,254  3,752  0.23  6,556,247  3,286  0.20   6,649,507  3,668  0.22 
Wholesale funding:                   
Brokered certificates of deposit (includes fee expense) 534,910  1,964  1.48  476,245  1,478  1.26   492,839  1,804  1.45 
Other borrowings 1,327,274  2,972  0.89  731,688  1,970  1.08   1,031,301  2,286  0.87 
Total wholesale funding 1,862,184  4,936  1.07  1,207,933  3,448  1.12   1,524,140  4,090  1.06 
Total interest bearing liabilities $8,383,438  $8,688  0.42% $7,764,180  $6,734  0.35%  $8,173,647  $7,758  0.38%
Non-interest bearing deposits 4,606,008      4,199,948       4,617,076     
Other non-interest bearing liabilities 398,460      361,685       392,858     
Stockholders' equity 2,099,659      2,037,431       2,061,052     
Total liabilities and stockholders' equity $15,487,565      $14,363,244       $15,244,633     
Net interest income/interest rate spread (4)   $126,499  3.63%   $119,473  3.80%    $129,076  3.72%
Taxable equivalent adjustment   7,195      6,078       7,307   
Net interest income, as reported   $119,304      $113,395       $121,769   
Net interest margin (5)     3.57%     3.73%      3.64%
Tax equivalent effect     0.22%     0.20%      0.22%
Net interest margin on a fully tax equivalent basis (5)     3.79%     3.93%      3.86%
                       

(1) Non-accrual loans are included in average loans.
(2) Interest income includes amortization of deferred loan origination fees and costs.
(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 table below reflects the impact the acquisition accounting loan discount accretion on Taylor Capital loans had on the loan yield and net interest margin on a fully tax equivalent basis for the three months ended March 31, 2016, March 31, 2015 and December 31, 2015 (dollars in thousands):

  1Q16 1Q15 4Q15
  Average
Balance
 Interest Yield Average
Balance
 Interest Yield Average
Balance
 Interest Yield
Loan yield excluding acquisition accounting discount accretion on Taylor Capital loans:                  
Total loans, as reported $9,772,346  $102,935  4.24% $8,888,686  $96,405  4.40% $9,537,647  $103,864  4.32%
Less acquisition accounting discount accretion on non-PCI loans (32,293) 4,950    (57,802) 7,948    (37,865) 6,193   
Less acquisition accounting discount accretion on PCI loans (25,696) 2,403    (35,092) 628    (28,037) 3,510   
Total loans, excluding acquisition accounting discount accretion on Taylor Capital loans $9,830,335  $95,582  3.91% $8,981,580  $87,829  3.97% $9,603,549  $94,161  3.89%
                   
Net interest margin on a fully tax equivalent basis, excluding acquisition accounting discount accretion on Taylor Capital loans:                  
Total interest earning assets, as reported $13,434,208  $126,499  3.79% $12,331,880  $119,473  3.93% $13,254,959  $129,076  3.86%
Less acquisition accounting discount accretion on non-PCI loans (32,293) 4,950    (57,802) 7,948    (37,865) 6,193   
Less acquisition accounting discount accretion on PCI loans (25,696) 2,403    (35,092) 628    (28,037) 3,510   
Total interest earning assets/net interest margin on a fully tax equivalent basis, excluding acquisition accounting discount accretion on Taylor Capital loans $13,492,197  $119,146  3.55% $12,424,774  $110,897  3.62% $13,320,861  $119,373  3.56%
                                  

The table below reflects the impact that the loan discount accretion and provision for credit losses on Taylor Capital loans had on earnings for the three months ended March 31, 2016 and December 31, 2015 (dollars in thousands):

  1Q16 4Q15
Acquisition accounting discount accretion on Taylor Capital loans $7,353  $9,703 
Provision for credit losses on Taylor Capital loans 1,154   
Earnings impact of discount accretion and merger related provision 6,199  9,703 
Tax expense 2,460  3,850 
Earnings impact of discount accretion and merger related provision, net of tax $3,739  $5,853 
         
For Information at MB Financial, Inc. contact: Berry Allen - Investor Relations E-Mail: beallen@mbfinancial.com

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