10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2012

OR

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from               to              

Commission file number 0-24566-01

MB FINANCIAL, INC.

(Exact name of registrant as specified in its charter)

Maryland

(State or other jurisdiction of incorporation or organization)

36-4460265

(I.R.S. Employer Identification No.)

800 West Madison Street, Chicago, Illinois 60607

(Address of principal executive offices)

Registrant’s telephone number, including area code: (888) 422-6562

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.  Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x	Accelerated filer o
Non-accelerated filer o	Smaller reporting company o
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes o No x

There were outstanding 54,786,857 shares of the registrant’s common stock as of October 29, 2012.

MB FINANCIAL, INC. AND SUBSIDIARIES

FORM 10-Q

September 30, 2012

INDEX

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets at September 30, 2012 (Unaudited) and December 31, 2011	1
	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2012 and 2011 (Unaudited)	2 — 3
	Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2012 and 2011 (Unaudited)	4
	Consolidated Statements of Changes in Stockholders’ Equity for the Nine Months Ended September 30, 2012 and 2011 (Unaudited)	5
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2012and 2011 (Unaudited)	6 — 7
	Notes to Consolidated Financial Statements (Unaudited)	8 — 39
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	40 — 59
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	59 — 62
Item 4.	Controls and Procedures	62
PART II.	OTHER INFORMATION
Item 1A.	Risk Factors	63
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	63
Item 6.	Exhibits	63
	Signatures	64

PART I. - FINANCIAL INFORMATION

Item 1. - Financial Statements

MB FINANCIAL, INC. & SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share and per share data) (Unaudited)

	September 30,			December 31,
	2012			2011
ASSETS
Cash and due from banks	$	129,326		$	144,228
Interest earning deposits with banks	327,301			100,337
Total cash and cash equivalents	456,627			244,565
Investment securities:
Securities available for sale, at fair value	1,814,972			1,929,297
Securities held to maturity, at amortized cost ($536,989 and $511,022 fair value at September 30, 2012 and December 31, 2011, respectively)	495,851			499,283
Non-marketable securities - FHLB and FRB stock	57,653			80,832
Total investment securities	2,368,476			2,509,412
Loans held for sale	7,221			4,727
Loans:
Total loans, excluding covered loans	5,128,683			5,288,451
Covered loans	496,162			662,544
Total loans	5,624,845			5,950,995
Less: Allowance for loan loss	121,182			126,798
Net loans	5,503,663			5,824,197
Lease investment, net	113,180			135,490
Premises and equipment, net	214,301			210,705
Cash surrender value of life insurance	127,985			125,309
Goodwill, net	387,069			387,069
Other intangibles, net	25,735			29,494
Other real estate owned, net	42,427			78,452
Other real estate owned related to FDIC transactions	32,607			60,363
FDIC indemnification asset	36,311			80,830
Other assets	147,943			142,459
Total assets	$	9,463,545		$	9,833,072
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Deposits:
Noninterest bearing	$	2,011,542		$	1,885,694
Interest bearing	5,467,805			5,761,913
Total deposits	7,479,347			7,647,607
Short-term borrowings	289,613			219,954
Long-term borrowings	118,798			266,264
Junior subordinated notes issued to capital trusts	152,065			158,538
Accrued expenses and other liabilities	162,892			147,682
Total liabilities	8,202,715			8,440,045
STOCKHOLDERS’ EQUITY
Preferred stock, ($0.01 par value, authorized 1,000,000 shares at September 30, 2012 and December 31, 2011; series A, 5% cumulative perpetual, 196,000 shares issued and outstanding at December 31, 2011, $1,000 liquidation value)	—			194,719
Common stock, ($0.01 par value; authorized 70,000,000 shares at September 30, 2012 and December 31, 2011; issued 54,957,541 shares at September 30, 2012 and 54,824,912 at December 31, 2011)	550			548
Additional paid-in capital	731,679			731,248
Retained earnings	489,426			427,956
Accumulated other comprehensive income	40,985			39,150
Less: 169,476 and 160,419 shares of Treasury stock, at cost, at September 30, 2012 and December 31, 2011, respectively	(3,304		)	(3,044		)
Controlling interest stockholders’ equity	1,259,336			1,390,577
Noncontrolling interest	1,494			2,450
Total stockholders’ equity	1,260,830			1,393,027
Total liabilities and stockholders’ equity	$	9,463,545		$	9,833,072

See accompanying Notes to Consolidated Financial Statements.

1

MB FINANCIAL, INC. & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except common share and per share data) (Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
Interest income:
Loans	$	67,482		$	78,046		$	208,380		$	249,327
Investment securities:
Taxable	7,287			11,699			27,053			29,741
Nontaxable	7,582			4,299			21,624			11,087
Other interest earning accounts	312			244			639			972
Total interest income	82,663			94,288			257,696			291,127
Interest expense:
Deposits	7,374			10,207			24,192			35,312
Short-term borrowings	342			204			910			660
Long-term borrowings and junior subordinated notes	2,872			3,461			9,322			10,127
Total interest expense	10,588			13,872			34,424			46,099
Net interest income	72,075			80,416			223,272			245,028
Provision for credit losses	(13,000		)	11,500			(9,900		)	112,750
Net interest income after provision for credit losses	85,075			68,916			233,172			132,278
Other income:
Capital markets and international banking fees	1,344			605			2,631			1,107
Commercial deposit and treasury management fees	5,860			6,157			17,545			17,643
Lease financing, net	9,671			6,494			23,963			19,138
Trust and asset management fees	4,428			4,272			13,367			13,158
Card fees	2,385			2,071			6,858			5,921
Loan service fees	1,125			1,706			3,459			5,286
Retail and other deposit service fees	3,792			4,123			10,790			12,373
Brokerage fees	1,185			1,273			3,704			4,307
Net gain on investment securities	281			—			244			229
Increase in cash surrender value of life insurance	890			1,014			2,677			3,433
Net (losses) gains on sale of assets	(12		)	—			(37		)	370
Accretion of FDIC indemnification asset	204			985			901			4,155
Net loss recognized on other real estate owned	(3,938		)	(3,118		)	(15,968		)	(8,135		)
Net gain on sale of loans	575			190			1,503			2,241
Other operating income	763			595			3,677			3,429
Total other income	28,553			26,367			75,314			84,655
Other expense:
Salaries and employee benefits	42,083			38,422			122,658			114,012
Occupancy and equipment expense	8,274			9,092			27,032			26,969
Computer services and telecommunication expense	3,777			3,488			11,339			10,503
Advertising and marketing expense	2,025			1,740			6,021			5,207
Professional and legal expense	1,554			1,647			4,470			4,725
Other intangibles amortization expense	1,251			1,414			3,759			4,255
FDIC insurance premiums	1,545			2,272			6,198			9,202
Branch impairment charges	758			—			758			1,000
Other real estate expense, net	874			1,181			2,541			2,830
Prepayment fees on interest bearing liabilities	12,682			—			12,682			—
Other operating expenses	6,342			7,352			17,872			21,497
Total other expense	81,165			66,608			215,330			200,200
Income before income taxes	32,463			28,675			93,156			16,733
Income tax expense (benefit)	9,330			8,978			26,794			(2,542		)
Net income	$	23,133		$	19,697		$	66,362		$	19,275
Dividends and discount accretion on preferred shares	—			2,605			3,269			7,808
Net income available to common stockholders	$	23,133		$	17,092		$	63,093		$	11,467

2

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2012		2011			2012			2011
Common share data:
Basic earnings allocated to common stock per common share	$	0.43	$	0.36		$	1.22		$	0.36
Impact of preferred stock dividends on basic earnings per common share	—		(0.04		)	(0.06		)	(0.15		)
Basic earnings per common share	0.43		0.32			1.16			0.21
Diluted earnings allocated to common stock per common share	0.42		0.36			1.22			0.35
Impact of preferred stock dividends on diluted earnings per common share	—		(0.05		)	(0.06		)	(0.14		)
Diluted earnings per common share	0.42		0.31			1.16			0.21
Weighted average common shares outstanding for basic earnings per common share	54,346,827		54,121,156			54,226,241			54,029,023
Weighted average common shares outstanding for diluted earnings per common share	54,556,517		54,323,320			54,472,617			54,295,622

See Accompanying Notes to Consolidated Financial Statements.

3

MB FINANCIAL, INC. & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands) (Unaudited)

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2012			2011		2012			2011
Net income	$	23,133		$	19,697	$	66,362		$	19,275
Unrealized holding gains on investment securities, net of tax	2,118			5,000		1,981			10,226
Reclassification adjustments for gains included in net income, net of tax	(168		)	—		(146		)	(137		)
Other comprehensive income, net of tax	1,950			5,000		1,835			10,089
Comprehensive income	$	25,083		$	24,697	$	68,197		$	29,364

See Accompanying Notes to Consolidated Financial Statements.

4

MB FINANCIAL, INC. & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Nine Months Ended September 30, 2012 and 2011

(Amounts in thousands, except per share data) (Unaudited)

												Accumulated
												Other
						Additional						Comprehensive								Total Stock-
	Preferred			Common		Paid-in			Retained			Income,		Treasury			Noncontrolling			holders’
	Stock			Stock		Capital			Earnings			Net of Tax		Stock			Interest			Equity
Balance at December 31, 2010	$	194,104		$	546	$	725,400		$	402,810		$	22,233	$	(2,828	)	$	2,521		$	1,344,786
Net income	—			—		—			19,275			—		—			194			19,469
Other comprehensive income, net of tax	—			—		—			—			10,089		—			—			10,089
Cash dividends declared on common shares ($0.03 per share)	—			—		—			(1,636		)	—		—			—			(1,636		)
Dividends and discount accretion on preferred shares	458			—		—			(7,808		)	—		—			—			(7,350		)
Restricted common stock activity, net of tax	—			1		(148		)	(968		)	—		968			—			(147		)
Stock option activity, net of tax	—			1		1,181			(14		)	—		105			—			1,273
Issuance of shares of common stock, net of issuance costs	—			—		16			—			—		—			—			16
Repurchase of common shares in connection with employee benefit plans and held in trust for deferred compensation plan	—			—		77			—			—		(1,255		)	—			(1,178		)
Stock-based compensation expense	—			—		3,530			—			—		—			—			3,530
Distributions to noncontrolling interest	—			—		—			—			—		—			(230		)	(230		)
Balance at September 30, 2011	$	194,562		$	548	$	730,056		$	411,659		$	32,322	$	(3,010	)	$	2,485		$	1,368,622
Balance at December 31, 2011	$	194,719		$	548	$	731,248		$	427,956		$	39,150	$	(3,044	)	$	2,450		$	1,393,027
Net income	—			—		—			66,362			—		—			184			66,546
Other comprehensive income, net of tax	—			—		—			—			1,835		—			—			1,835
Cash dividends declared on common shares ($0.03 per share)	—			—		—			(1,643		)	—		—			—			(1,643		)
Dividends and discount accretion on preferred shares	1,281			—		—			(3,269		)	—		—			—			(1,988		)
Repurchase of preferred shares and warrant	(196,000		)	—		(1,518		)	—			—		—			—			(197,518		)
Restricted common stock activity, net of tax	—			2		(722		)	17			—		1,774			—			1,071
Stock option activity, net of tax	—			—		(625		)	3			—		345			—			(277		)
Repurchase of common shares in connection with employee benefit plans and held in trust for deferred compensation plan	—			—		451			—			—		(2,379		)	—			(1,928		)
Stock-based compensation expense	—			—		3,581			—			—		—			—			3,581
Additional investment in subsidiary	—			—		(736		)	—			—		—			(904		)	(1,640		)
Distributions to noncontrolling interest	—			—		—			—			—		—			(236		)	(236		)
Balance at September 30, 2012	$	—		$	550	$	731,679		$	489,426		$	40,985	$	(3,304	)	$	1,494		$	1,260,830

See Accompanying Notes to Consolidated Financial Statements.

5

MB FINANCIAL, INC. & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands) (Unaudited)

	Nine Months Ended
	September 30,
	2012			2011
Cash Flows From Operating Activities:
Net income	$	66,362		$	19,275
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of premises and equipment	11,450			9,983
Depreciation of leased equipment	28,107			31,556
Impairment charges on branch facilities	758			1,000
Stock-based compensation expense	3,581			3,530
Gain on sales of premises and equipment and leased equipment	(2,746		)	(1,489		)
Amortization of other intangibles	3,759			4,255
Provision for credit losses	(9,900		)	112,750
Deferred income tax expense (benefit)	19,763			(2,018		)
Amortization of premiums and discounts on investment securities, net	31,838			29,898
Accretion of premiums and discounts on loans, net	(13,000		)	(25,558		)
Accretion of FDIC indemnification asset	(901		)	(4,155		)
Net gain on investment securities	(244		)	(229		)
Proceeds from sale of loans held for sale in the ordinary course of business	64,124			30,989
Origination of loans held for sale	(64,980		)	(28,748		)
Net gains on sale of loans held for sale	(1,503		)	(2,241		)
Net gain on sales of other real estate owned	(1,264		)	(904		)
Impairments on other real estate owned	13,919			7,255
Net loss on other real estate owned related to FDIC-assisted transactions	3,313			1,784
Increase in cash surrender value of life insurance	(2,677		)	(3,433		)
(Increase) decrease in other assets, net	(45,242		)	15,740
Increase in other liabilities, net	7,944			23,913
Net cash provided by operating activities	112,461			223,153
Cash Flows From Investing Activities:
Proceeds from sales of investment securities available for sale	12,573			11,360
Proceeds from maturities and calls of investment securities available for sale	432,162			269,053
Purchase of investment securities available for sale	(350,669		)	(582,677		)
Proceeds from maturities and calls of investment securities held to maturity	960			543
Purchase of investment securities held to maturity	(1,923		)	(499,840		)
Purchase of non-marketable securities - FHLB and FRB stock	(24		)	(629		)
Redemption of non-marketable securities - FHLB and FRB stock	23,203			—
Net decrease in loans	329,773			344,002
Proceeds from sale of loans held for sale	—			205,740
Purchases of premises and equipment	(16,952		)	(12,147		)
Purchases of leased equipment	(19,836		)	(42,270		)
Proceeds from sales of premises and equipment	1,498			1,358
Proceeds from sales of leased equipment	11,108			3,569
Proceeds from sale of other real estate owned	28,398			34,241
Capital improvements on other real estate owned	(2,304		)	(983		)
Proceeds from sale of other real estate owned related to FDIC-assisted transactions	29,008			16,227
Principal paid on lease investments	(1,878		)	(302		)
Life insurance death benefit	—			4,115
Net proceeds from FDIC related to covered assets	79,247			123,469
Net cash provided by (used in) investing activities	554,344			(125,171		)
Cash Flows From Financing Activities:
Net decrease in deposits	(168,260		)	(431,051		)
Net increase (decrease) in short-term borrowings	69,659			(11,426		)
Proceeds from long-term borrowings	5,740			12,235
Principal paid on long-term borrowings	(153,206		)	(22,930		)
Redemption of junior subordinated notes issued to capital trusts	(6,186		)	—
Repurchase of preferred stock and warrant	(197,518		)	—
Treasury stock transactions, net	(260		)	(1,090		)
Stock options exercised	154			1,902
Excess tax benefits from share-based payment arrangements	—			15
Dividends paid on preferred stock	(3,239		)	(7,350		)
Dividends paid on common stock	(1,627		)	(1,636		)
Net cash used in financing activities	(454,743		)	(461,331		)
Net increase (decrease) in cash and cash equivalents	$	212,062		$	(363,349	)
Cash and cash equivalents:
Beginning of period	244,565			844,159
End of period	$	456,627		$	480,810

(Continued)

6

MB FINANCIAL, INC. & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(Amounts in Thousands) (Unaudited)

	Nine Months Ended
	September 30,
	2012		2011
Supplemental Disclosures of Cash Flow Information:
Cash payments for:
Interest paid to depositors and other borrowed funds	$	36,156	$	47,411
Income tax payments (refunds), net	4,230		(477		)
Supplemental Schedule of Noncash Investing Activities:
Securities available for sale purchased not settled	$	3,919	$	—
Loans transferred to other real estate owned	2,724		55,603
Loans transferred to other real estate owned related to FDIC-assisted transactions	17,923		49,072
Loans transferred to repossessed vehicles	607		984
Loans transferred to loans held for sale	—		205,740
Operating leases rewritten as direct finance leases included as loans	7,593		2,126
Reclassification of reserves on unfunded credit commitments	—		17,050

See Accompanying Notes to Consolidated Financial Statements.

7

MB FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012 and 2011

(Unaudited)

NOTE 1.                BASIS OF PRESENTATION

These unaudited consolidated financial statements include the accounts of MB Financial, Inc., a Maryland corporation (the “Company”), and its subsidiaries, including its wholly owned national bank subsidiary, MB Financial Bank, N.A. (“MB Financial Bank”), based in Chicago, Illinois.  In the opinion of management, all normal recurring adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods have been made.  The results of operations for the three and nine months ended September 30, 2012 are not necessarily indicative of the results to be expected for the entire fiscal year.

These unaudited interim financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and industry practice.  Certain information in footnote disclosure normally included in financial statements prepared in accordance with U.S. GAAP and industry practice has been condensed or omitted pursuant to rules and regulations of the Securities and Exchange Commission.  These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s December 31, 2011 audited financial statements filed on Form 10-K.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions which affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported amounts of income and expenses during the reported periods.  Actual results could differ from those estimates.

Certain prior period amounts have been reclassified to conform to current period presentation.  These reclassifications did not result in any changes to previously reported net income or stockholders’ equity.

NOTE 2.                EARNINGS PER COMMON SHARE

Earnings per common share is computed using the two-class method.  Basic earnings per common share is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding during the applicable period, excluding outstanding participating securities.  Participating securities include non-vested restricted stock awards and restricted stock units, though no actual shares of common stock related to restricted stock units are issued until the settlement of such units, to the extent holders of these securities receive non-forfeitable dividends or dividend equivalents at the same rate as holders of the Company’s common stock.  Diluted earnings per common share is computed using the weighted-average number of shares determined for the basic earnings per common share computation plus the dilutive effect of stock compensation using the treasury stock method.

8

The following table presents a reconciliation of the number of shares used in the calculation of basic and diluted earnings per common share (amounts in thousands, except common share data).

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2012		2011			2012			2011
Distributed earnings allocated to common stock	$	547	$	546		$	1,643		$	1,634
Undistributed earnings allocated to common stock	22,585		19,149			64,717			17,621
Net earnings allocated to common stock	23,132		19,695			66,360			19,255
Less: preferred stock dividends and discount accretion	—		2,605			3,269			7,808
Net earnings allocated to common stock	23,132		17,090			63,091			11,447
Net earnings allocated to participating securities	1		2			2			20
Net earnings allocated to common stock and participating securities	$	23,133	$	17,092		$	63,093		$	11,467
Weighted average shares outstanding for basic earnings per common share	54,346,827		54,121,156			54,226,241			54,029,023
Dilutive effect of equity awards	209,690		202,164			246,376			266,599
Weighted average shares outstanding for diluted earnings per common share	54,556,517		54,323,320			54,472,617			54,295,622
Basic earnings allocated to common stock per common share	$	0.43	$	0.36		$	1.22		$	0.36
Impact of preferred stock dividends on basic earnings per common share	—		(0.04		)	(0.06		)	(0.15		)
Basic earnings per common share	0.43		0.32			1.16			0.21
Diluted earnings allocated to common stock per common share	0.42		0.36			1.22			0.35
Impact of preferred stock dividends on diluted earnings per common share	—		(0.05		)	(0.06		)	(0.14		)
Diluted earnings per common share	0.42		0.31			1.16			0.21

9

NOTE 3.                INVESTMENT SECURITIES

Carrying amounts and fair values of investment securities are summarized as follows (in thousands):

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
September 30, 2012:
Available for Sale
U.S. Government sponsored agencies and enterprises	$	39,233	$	2,954	$	—		$	42,187
States and political subdivisions	620,489		48,502		(25		)	668,966
Residential mortgage-backed securities	1,009,509		17,019		(4,545		)	1,021,983
Commercial mortgage-backed securities	51,156		2,823		—			53,979
Corporate bonds	16,617		10		(1		)	16,626
Equity securities	10,644		587		—			11,231
	1,747,648		71,895		(4,571		)	1,814,972
Held to Maturity
States and political subdivisions	238,211		21,739		—			259,950
Residential mortgage-backed securities	257,640		19,399		—			277,039
	495,851		41,138		—			536,989
Total	$	2,243,499	$	113,033	$	(4,571	)	$	2,351,961
December 31, 2011:
Available for Sale
U.S. Government sponsored agencies and enterprises	$	39,640	$	2,761	$	—		$	42,401
States and political subdivisions	500,979		34,922		(241		)	535,660
Residential mortgage-backed securities	1,256,696		26,483		(1,373		)	1,281,806
Commercial mortgage-backed securities	51,324		1,361		—			52,685
Corporate bonds	5,899		—		—			5,899
Equity securities	10,457		389		—			10,846
	1,864,995		65,916		(1,614		)	1,929,297
Held to Maturity
States and political subdivisions	240,183		7,489		(8		)	247,664
Residential mortgage-backed securities	259,100		5,032		(774		)	263,358
	499,283		12,521		(782		)	511,022
Total	$	2,364,278	$	78,437	$	(2,396	)	$	2,440,319

10

Unrealized losses on investment securities and the fair value of the related securities at September 30, 2012 are as follows (in thousands):

	Less Than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
Available for Sale
States and political subdivisions	$	9,379	$	(25	)	$	—	$	—		$	9,379	$	(25	)
Residential mortgage-backed securities	225,827		(4,105		)	31,573		(440		)	257,400		(4,545		)
Corporate bonds	5,260		(1		)	—		—			5,260		(1		)
Total	$	240,466	$	(4,131	)	$	31,573	$	(440	)	$	272,039	$	(4,571	)

The total number of security positions in the investment portfolio in an unrealized loss position at September 30, 2012 was 34.  Declines in the fair value of available for sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses to the extent the impairment is related to credit losses. The amount of the impairment related to other factors is recognized in other comprehensive income.  In estimating other-than-temporary impairment losses, management considers, among other things, (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, and (iii) whether or not the Company is more likely than not to sell the security before recovery of its cost basis.

As of September 30, 2012, management does not have the intent to sell any of the securities in the table above and believes that it is more likely than not that the Company will not have to sell any such securities before a recovery of cost.  The fair value is expected to recover as the bonds approach their maturity date or repricing date or if market yields for such investments decline. Accordingly, as of September 30, 2012, management believes the impairments detailed in the table above are temporary.

Net gains recognized on investment securities available for sale are summarized as follows (in thousands):

	Three Months Ended					Nine Months Ended
	September  30,					September  30,
	2012			2011		2012			2011
Realized gains	$	282		$	—	$	472		$	232
Realized losses	(1		)	—		(4		)	(3		)
Impairment charges	—			—		(224		)	—
Net gains	$	281		$	—	$	244		$	229

11

The amortized cost and fair value of investment securities as of September 30, 2012 by contractual maturity are shown below.  Maturities may differ from contractual maturities in mortgage-backed securities because the mortgages underlying the securities may be called or repaid without any penalties.  Therefore, mortgage-backed securities are not included in the maturity categories in the following maturity summary.

	Amortized		Fair
(In thousands)	Cost		Value
Available for sale:
Due in one year or less	$	26,437	$	26,857
Due after one year through five years	226,619		246,211
Due after five years through ten years	106,351		118,585
Due after ten years	316,932		336,126
Equity securities	10,644		11,231
Residential and commercial mortgage-backed securities	1,060,665		1,075,962
	1,747,648		1,814,972
Held to maturity:
Due after one year through five years	1,301		1,400
Due after five years through ten years	10,573		11,331
Due after ten years	226,337		247,219
Residential mortgage-backed securities	257,640		277,039
	495,851		536,989
Total	$	2,243,499	$	2,351,961

Investment securities available for sale with carrying amounts of $1.1 billion and $924.9 million at September 30, 2012 and December 31, 2011, respectively, were pledged as collateral on public deposits and for other purposes as required or permitted by law.

NOTE 4.                LOANS

Loans consist of the following at (in thousands):

	September 30,		December 31,
	2012		2011
Commercial loans	$	1,073,981	$	1,113,123
Commercial loans collateralized by assignment of lease payments	1,219,361		1,208,575
Commercial real estate	1,770,261		1,853,788
Residential real estate	308,866		316,787
Construction real estate	149,872		183,789
Indirect vehicle	206,973		187,481
Home equity	314,718		336,043
Consumer loans	84,651		88,865
Gross loans, excluding covered loans	5,128,683		5,288,451
Covered loans	496,162		662,544
Total loans(1)	$	5,624,845	$	5,950,995

(1)Gross loan balances at September 30, 2012 and December 31, 2011 were net of unearned income, including net deferred loan fees of $955 thousand and $1.0 million, respectively.

Loans are made to individuals as well as commercial and tax exempt entities.  Specific loan terms vary as to interest rate, repayment, and collateral requirements based on the type of loan requested and the credit worthiness of the prospective borrower.  Credit risk tends to be geographically concentrated in that a majority of the loan customers are located in the markets serviced by MB Financial Bank.

12

The Company’s extension of credit is governed by its Credit Risk Policy which was established to control the quality of the Company’s loans.  These policies and procedures are reviewed and approved by the Board of Directors on a regular basis.

Commercial and Industrial Loans.  Commercial credit is extended primarily to middle market customers.  Such credits typically comprise working capital loans, loans for physical asset expansion, asset acquisition loans and other business loans.  Loans to closely held businesses will generally be guaranteed in full or for a meaningful amount by the businesses’ principal owners.  Commercial loans are made based primarily on the historical and projected cash flow of the borrower and secondarily on the underlying collateral provided by the borrower.  The cash flows of borrowers, however, may not behave as forecasted and collateral securing loans may fluctuate in value due to economic or individual performance factors.  Minimum standards and underwriting guidelines have been established for all commercial loan types.

Lease Loans.  The Company makes lease loans to both investment grade and non-investment grade companies.  Investment grade lessees are companies rated in one of the four highest categories by Moody’s Investor Services or Standard & Poor’s Rating Services or, in the event the related lessee has not received any such rating, where the related lessee would be viewed under the underwriting polices of the Company as an investment grade company. Whether or not companies fall into this category, each lease loan is considered on its individual merit based on financial information available at the time of underwriting.

Commercial Real Estate Loans.  Commercial real estate loans are subject to underwriting standards and processes similar to commercial and industrial loans.  These loans are viewed primarily as cash flow loans and the repayment of these loans is largely dependent on the successful operation of the property.  Loan performance may be adversely affected by factors impacting the general economy or conditions specific to the real estate market such as geographic location and/or property type.

Construction Real Estate Loans.  The Company defines construction loans as loans where the loan proceeds are controlled by the Company and used exclusively for the improvement of real estate in which the Company holds a mortgage.  Due to the inherent risk in this type of loan, they are subject to other industry specific policy guidelines outlined in the Company’s Credit Risk Policy.

Consumer Loans.  The Company originates direct and indirect consumer loans including primarily residential real estate, home equity lines and loans, credit cards, and indirect motorcycle loans using a matrix-based credit analysis as part of the underwriting process.  Each loan type has a separate specified matrix which consists of several factors including debt to income, type of collateral and loan to collateral value, credit history and Company relationship with the borrower.  Indirect loan and credit card underwriting use risk-based pricing in the underwriting process.

13

The following table presents the contractual aging of the recorded investment in past due loans by class of loans as of September 30, 2012 and December 31, 2011 (in thousands):

			30-59 Days		60-89 Days		Loans past due		Total
	Current		Past Due		Past Due		90 days or more		Past Due		Total
September 30, 2012:
Commercial	$	1,066,782	$	1,720	$	1,781	$	3,698	$	7,199	$	1,073,981
Commercial collateralized by assignment of lease payments	1,206,547		10,654		2,129		31		12,814		1,219,361
Commercial real estate
Healthcare	180,429		—		—		4,738		4,738		185,167
Industrial	416,478		614		1,963		3,622		6,199		422,677
Multifamily	357,826		899		1,576		3,169		5,644		363,470
Retail	392,608		469		375		5,077		5,921		398,529
Office	172,388		287		—		1,125		1,412		173,800
Other	223,397		1,949		693		579		3,221		226,618
Residential real estate	301,660		296		1,910		5,000		7,206		308,866
Construction real estate	146,926		99		—		2,847		2,946		149,872
Indirect vehicle	204,909		1,307		475		282		2,064		206,973
Home equity	302,218		4,632		1,436		6,432		12,500		314,718
Consumer	84,591		55		2		3		60		84,651
Gross loans, excluding covered loans (1)	5,056,759		22,981		12,340		36,603		71,924		5,128,683
Covered loans	314,888		27,338		27,836		126,100		181,274		496,162
Total loans	$	5,371,647	$	50,319	$	40,176	$	162,703	$	253,198	$	5,624,845
Nonperforming loan aging	$	65,968	$	2,720	$	6,409	$	30,186	$	39,315	$	105,283
Non-covered loans related to FDIC transactions (2)	$	15,594	$	609	$	244	$	6,415	$	7,268	$	22,862
December 31, 2011:
Commercial	$	1,105,139	$	2,178	$	188	$	5,618	$	7,984	$	1,113,123
Commercial collateralized by assignment of lease payments	1,202,323		3,409		2,463		380		6,252		1,208,575
Commercial real estate
Healthcare	176,594		—		—		—		—		176,594
Industrial	450,029		1,013		1,700		6,642		9,355		459,384
Multifamily	383,882		2,398		1,845		2,772		7,015		390,897
Retail	421,079		2,376		480		3,624		6,480		427,559
Office	181,960		—		—		1,544		1,544		183,504
Other	214,137		457		595		661		1,713		215,850
Residential real estate	311,256		1,231		767		3,533		5,531		316,787
Construction real estate	180,471		—		—		3,318		3,318		183,789
Indirect vehicle	185,363		1,376		386		356		2,118		187,481
Home equity	325,173		2,812		2,314		5,744		10,870		336,043
Consumer	88,854		3		3		5		11		88,865
Gross loans, excluding covered loans (1)	5,226,260		17,253		10,741		34,197		62,191		5,288,451
Covered loans	443,332		14,332		12,618		192,262		219,212		662,544
Total loans	$	5,669,592	$	31,585	$	23,359	$	226,459	$	281,403	$	5,950,995
Nonperforming loan aging	$	91,752	$	5,916	$	5,142	$	26,581	$	37,639	$	129,391
Non-covered loans related to FDIC transactions (2)	$	19,656	$	1,958	$	283	$	7,617	$	9,858	$	29,514

(1)Includes loans related to the InBank FDIC-assisted transaction completed by MB Financial Bank in 2009.

(2)Loans related to the InBank FDIC-assisted transaction completed by MB Financial Bank in 2009.

14

The following table presents the recorded investment in nonaccrual loans and loans past due ninety days or more and still accruing by class of loans as of September 30, 2012 and December 31, 2011 (in thousands):

	September 30,				December 31,
	2012				2011
			Loans past due				Loans past due
			90 days or more				90 days or more
	Nonaccrual		and still accruing		Nonaccrual		and still accruing
Commercial	$	21,536	$	36	$	34,813	$	—
Commercial collateralized by assignment of lease payments	1,076		—		2,116		66
Commercial real estate:
Healthcare	4,738		—		6,892		—
Industrial	12,271		410		29,637		—
Multifamily	5,868		—		9,145		—
Retail	18,123		—		15,333		—
Office	2,719		—		2,826		—
Other	11,258		—		12,718		—
Residential real estate	7,368		—		4,300		—
Construction real estate	1,225		—		1,145		—
Indirect vehicles	1,423		6		1,288		16
Home equity	17,204		18		9,087		—
Consumer	4		—		9		—
Total	$	104,813	$	470	$	129,309	$	82

The Company utilizes an internal asset classification system as a means of reporting problem and potential problem loans.  Under the Company’s risk rating system, the Company classifies potential problem and problem loans as “Special Mention,” “Substandard,” and “Doubtful.”  Substandard loans include those characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.  Loans classified as Doubtful have all the weaknesses inherent in those classified Substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.  Loans that do not currently expose the Company to sufficient risk to warrant classification in one of the aforementioned categories, but possess weaknesses that deserve management’s close attention are deemed to be Special Mention.  Risk ratings are updated at least annually and any time the situation warrants.

15

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass-rated loans.  Loans listed as not rated are included in groups of homogeneous loans with similar risk and loss characteristics.  The following tables present the risk category of loans by class of loans based on the most recent analysis performed and the contractual aging as of September 30, 2012 and December 31, 2011 (in thousands):

			Special
	Pass		Mention		Substandard		Doubtful		Total
September 30, 2012:
Commercial	$	973,284	$	41,175	$	58,620	$	902	$	1,073,981
Commercial collateralized by assignment of lease payments	1,209,988		163		9,210		—		1,219,361
Commercial real estate
Healthcare	158,510		21,919		—		4,738		185,167
Industrial	375,869		5,202		41,606		—		422,677
Multifamily	319,097		30,515		13,858		—		363,470
Retail	347,451		21,788		29,290		—		398,529
Office	144,360		6,459		22,981		—		173,800
Other	205,106		5,067		16,445		—		226,618
Construction real estate	131,418		5,814		12,640		—		149,872
Total	$	3,865,083	$	138,102	$	204,650	$	5,640	$	4,213,475
December 31, 2011:
Commercial	$	983,935	$	56,550	$	69,292	$	3,346	$	1,113,123
Commercial collateralized by assignment of lease payments	1,203,933		—		4,642		—		1,208,575
Commercial real estate
Healthcare	169,702		—		—		6,892		176,594
Industrial	370,760		26,294		62,330		—		459,384
Multifamily	328,617		43,256		15,732		3,292		390,897
Retail	384,590		4,031		38,938		—		427,559
Office	159,162		3,924		20,418		—		183,504
Other	183,490		3,822		28,538		—		215,850
Construction real estate	167,907		4,362		11,520		—		183,789
Total	$	3,952,096	$	142,239	$	251,410	$	13,530	$	4,359,275

Approximately $78.8 million and $114.7 million of the substandard and doubtful loans were non-performing as of September 30, 2012 and December 31, 2011, respectively.

16

For consumer, residential real estate, home equity, and indirect vehicle loan classes, the Company also evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity.  The following table presents the recorded investment in those loan classes based on payment activity as of September 30, 2012 and December 31, 2011 (in thousands):

	Performing		Non-performing		Total
September 30, 2012:
Residential real estate	$	301,498	$	7,368	$	308,866
Indirect vehicles	205,544		1,429		206,973
Home equity	297,496		17,222		314,718
Consumer	84,647		4		84,651
Total	$	889,185	$	26,023	$	915,208
December 31, 2011:
Residential real estate	$	312,487	$	4,300	$	316,787
Indirect vehicles	186,177		1,304		187,481
Home equity	326,956		9,087		336,043
Consumer	88,856		9		88,865
Total	$	914,476	$	14,700	$	929,176

Non-performing loans are those on nonaccrual or past due 90 days or more and still accruing interest.

The following tables present loans individually evaluated for impairment by class of loans as of September 30, 2012 and December 31, 2011 (in thousands):

	September 30, 2012
									Three Months Ended				Nine Months Ended
	Unpaid						Allowance for		Average		Interest		Average		Interest
	Principal		Recorded		Partial		Loan Losses		Recorded		Income		Recorded		Income
	Balance		Investment		Charge-offs		Allocated		Investment		Recognized		Investment		Recognized
With no related allowance recorded:
Commercial	$	30,082	$	10,731	$	19,351	$	—	$	10,224	$	—	$	15,249	$	105
Commercial collateralized by assignment of lease payments	94		94		—		—		263		—		224		2
Commercial real estate:
Healthcare	—		—		—		—		—				—
Industrial	12,778		10,702		2,076		—		11,295		—		17,005		29
Multifamily	1,642		1,642		—		—		884		14		1,519		14
Retail	10,105		9,650		455		—		10,738		—		10,402		—
Office	1,136		1,136		—		—		1,365		—		982		—
Other	4,866		4,866		—		—		5,605		—		6,288		—
Residential real estate	8,460		8,085		375		—		8,474		—		7,634		—
Construction real estate	1,147		1,147		—		—		1,150		—		771		—
Indirect vehicles	—		—		—		—		—		—		—		—
Home equity	10,280		10,280		—		—		10,338		—		11,130		—
Consumer	248		248		—		—		248		—		243		—
With an allowance recorded:
Commercial	10,810		10,806		4		2,570		11,295		—		6,950		—
Commercial collateralized by assignment of lease payments	1,074		1,074		—		180		932		16		1,270		66
Commercial real estate:
Healthcare	10,942		4,738		6,204		1,386		4,738		—		5,211		—
Industrial	2,633		1,569		1,064		320		1,445		—		1,972		—
Multifamily	6,398		5,055		1,343		1,302		5,079		16		5,562		78
Retail	9,706		8,704		1,002		2,474		9,288		—		8,279		—
Office	1,590		1,583		7		323		1,642		—		2,054		—
Other	6,535		6,392		143		1,762		6,574		4		6,691		12
Residential real estate	3,224		3,042		182		401		3,229		—		1,084		—
Construction real estate	3,605		1,225		2,380		582		1,332		—		4,242		—
Indirect vehicles	—		—		—		—		—		—		—		—
Home equity	—		—		—		—		—		—		1,826		—
Consumer	—		—		—		—		—		—		—		—
Total	$	137,355	$	102,769	$	34,586	$	11,300	$	106,138	$	50	$	116,588	$	306

17

	December 31, 2011
	Unpaid						Allowance for		Average		Interest
	Principal		Recorded		Partial		Loan Losses		Recorded		Income
	Balance		Investment		Charge-offs		Allocated		Investment		Recognized
With no related allowance recorded:
Commercial	$	47,784	$	28,774	$	19,010	$	—	$	22,952	$	211
Commercial collateralized by assignment of lease payments	107		107		—		—		696		32
Commercial real estate:
Healthcare	—		—		—		—		1,818		—
Industrial	35,338		25,865		9,473		—		37,436		64
Multifamily	1,975		1,975		—		—		10,641		164
Retail	23,656		23,652		4		—		26,783		—
Office	779		779		—		—		5,755		—
Other	6,901		6,901		—		—		16,303		—
Residential real estate	7,157		7,157		—		—		6,580		—
Construction real estate	—		—		—		—		56,846		—
Indirect vehicles	—		—		—		—		—		—
Home equity	11,297		11,297		—		—		7,309		—
Consumer	241		241		—		—		122		—
With an allowance recorded:
Commercial	10,016		6,038		3,978		1,711		10,025		80
Commercial collateralized by assignment of lease payments	2,077		2,077		—		390		475		71
Commercial real estate:
Healthcare	11,750		6,892		4,858		1,560		292		—
Industrial	7,739		3,773		3,966		680		7,780		—
Multifamily	14,387		7,720		6,667		1,757		10,614		208
Retail	11,232		10,672		560		2,394		9,688		—
Office	2,330		2,047		283		77		4,586		—
Other	5,979		5,816		163		1,514		10,489		2
Residential real estate	—		—		—		—		—		—
Construction real estate	3,519		1,145		2,374		721		20,259		—
Indirect vehicles	—		—		—		—		—		—
Home equity	—		—		—		—		—		—
Consumer	—		—		—		—		355		5
Total	$	204,264	$	152,928	$	51,336	$	10,804	$	267,804	$	837

Impaired loans included accruing restructured loans of $17.9 million and $38.0 million that have been modified and are performing in accordance with those modified terms as of September 30, 2012 and December 31, 2011, respectively.  In addition, impaired loans included $27.1 million and $42.5 million of non-performing, restructured loans as of September 30, 2012 and December 31, 2011, respectively.

Loans may be restructured in an effort to maximize collections from financially distressed borrowers.  We use various restructuring techniques, including, but not limited to, deferral of past due interest or principal, implementing an A/B note structure, redeeming past due taxes, reduction of interest rates, extending maturities and modification of amortization schedules. Residential real estate loans are restructured in an effort to minimize losses while allowing borrowers to remain in their primary residences when possible.  Programs that we offer to residential real estate borrowers include the Home Affordable Refinance Program (“HARP”) and a restructuring program similar to the Home Affordable Modification Program (“HAMP”) for first mortgage borrowers as well as the Second Lien Modification Program (“2MP”) and similar programs for home equity borrowers in keeping with the restructuring techniques discussed above.

Periodically, the Company will restructure a note into two separate notes (A/B structure), charging off the entire B portion of the note.  The A note is structured with appropriate loan-to-value and cash flow coverage ratios that provide for a high likelihood of repayment.  The A note is classified as a non-performing note until the borrower has displayed a historical payment performance for a reasonable time prior to and subsequent to the restructuring.  A period of sustained repayment for at least six months generally is required to return the note to accrual status

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provided that management has determined that the performance is reasonably expected to continue.  The A note will be classified as a restructured note (either performing or nonperforming) through the calendar year of the restructuring that the historical payment performance has been established.

A loan classified as a troubled debt restructuring will no longer be included in the troubled debt restructuring disclosures in the years after the restructuring if the loan is not impaired based on the terms specified by the restructuring agreement and the interest rate specified in the restructuring agreement represents a market rate at the time of modification.  The specified interest rate is considered a market rate when the interest rate is equal or greater than the rate the Company is willing to accept at the time of restructuring for a new loan with comparable risk.  If there are concerns that the borrower would not be able to meet the modified terms of the loan, the loan would continue to be included in the troubled debt restructuring disclosures.

Impairment analyses on commercial-related loans classified as troubled debt restructurings are performed in conjunction with the normal allowance for loan loss process.  See Note 1 of the notes to our audited consolidated financial statement contained in our Annual Report on Form 10-K for the year ended December 31, 2011 for additional information.  Consumer loans classified as troubled debt restructurings are aggregated in two pools that share common risk characteristics, home equity and residential real estate loans, when impairment is measured on a quarterly basis based on historical default factors and loss given defaults.

The following tables present loans that have been restructured during the three and nine months ended September 30, 2012 (dollars in thousands):

	Three Months Ended
	September 30, 2012
	Number	Pre-Modification		Post-Modification
	of	Recorded		Recorded		Charge-offs and
	Loans	Investment		Investment		Specific Reserves
Performing:
Home equity	7	$	401	$	325	$	76
Total	7	$	401	$	325	$	76
Non-Performing:
Commercial collateralized by assignment of lease payments	1	$	202	$	202	$	168
Commercial real estate:
Retail	1	202		202		200
Residential real estate	7	173		68		105
Home equity	5	347		232		115
Total	14	$	924	$	704	$	588

	Nine Months Ended
	September 30, 2012
	Number	Pre-Modification		Post-Modification
	of	Recorded		Recorded		Charge-offs and
	Loans	Investment		Investment		Specific Reserves
Performing:
Commercial real estate:
Multifamily	1	$	155	$	155	$	—
Retail	1	236		236		—
Residential real estate	2	808		808		—
Home equity	38	6,009		5,933		76
Total	42	$	7,208	$	7,132	$	76
Non-Performing:
Commercial	4	$	292	$	292	$	96
Commercial collateralized by assignment of lease payments	1	202		202		168
Commercial real estate:
Multifamily	1	149		149		40
Retail	4	923		923		232
Other	1	157		157		50
Residential real estate	13	637		401		236
Home equity	34	5,324		4,899		425
Total	58	$	7,684	$	7,023	$	1,247

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Of the troubled debt restructurings entered into during the past twelve months, $305 thousand subsequently defaulted during the nine months ended September 30, 2012.  Performing troubled debt restructurings are considered to have defaulted when they become 90 days or more past due post restructuring.

The following table presents the activity in the allowance for credit losses, balance in allowance for credit losses and recorded investment in loans by portfolio segment and based on impairment method as of September 30, 2012 and 2011 (in thousands):

				Commercial
				collateralized by
				assignment of			Commercial			Residential			Construction			Indirect			Home						Unfunded
	Commercial			lease payments			real estate			real estate			real estate			vehicles			equity			Consumer			Commitments			Total
September 30, 2012:
Allowance for credit losses:
Three Months Ended
Beginning balance	$	20,789		$	7,490		$	68,713		$	3,592		$	10,586		$	1,941		$	7,617		$	1,028		$	7,084		$	128,840
Transfer to (from) allowance for unfunded credit commitments	—			—			—			—			—			—			—			—			—			—
Charge-offs	(75		)	—			(2,994		)	(474		)	(71		)	(433		)	(1,209		)	(332		)	—			(5,588		)
Recoveries	306			111			12,893			8			752			224			303			77			—			14,674
Provision	1,181			(149		)	(12,253		)	738			(393		)	288			370			558			(3,340		)	(13,000		)
Ending balance	$	22,201		$	7,452		$	66,359		$	3,864		$	10,874		$	2,020		$	7,081		$	1,331		$	3,744		$	124,926
Nine Months Ended
Beginning balance	$	21,106		$	7,561		$	68,695		$	3,935		$	15,639		$	1,834		$	7,333		$	695		$	9,177		$	135,975
Transfer to (from) allowance for unfunded credit commitments	—			—			—			—			1,132			—			—			—			(1,132		)	—
Charge-offs	(2,065		)	(1,720		)	(8,412		)	(1,876		)	(3,951		)	(1,636		)	(3,157		)	(864		)	—			(23,681		)
Recoveries	2,730			460			16,116			230			1,458			835			423			280			—			22,532
Provision	430			1,151			(10,040		)	1,575			(3,404		)	987			2,482			1,220			(4,301		)	(9,900		)
Ending balance	$	22,201		$	7,452		$	66,359		$	3,864		$	10,874		$	2,020		$	7,081		$	1,331		$	3,744		$	124,926
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	2,570		$	180		$	7,567		$	401		$	582		$	—		$	—		$	—		$	1,726		$	13,026
Collectively evaluated for impairment	19,345			7,272			56,851			3,144			10,292			2,020			7,081			1,331			2,018			109,354
Acquired and accounted for under ASC 310-30 (1)	286			—			1,941			319			—			—			—			—			—			2,546
Total ending allowance balance	$	22,201		$	7,452		$	66,359		$	3,864		$	10,874		$	2,020		$	7,081		$	1,331		$	3,744		$	124,926
Loans:
Individually evaluated for impairment	$	21,537		$	1,168		$	56,037		$	11,127		$	2,372		$	—		$	10,280		$	248		$	—		$	102,769
Collectively evaluated for impairment	1,033,534			1,218,193			1,714,224			293,787			147,500			206,973			304,438			84,403			—			5,003,052
Acquired and accounted for under ASC 310-30 (1)	78,275			—			269,348			7,116			125,515			—			568			38,202			—			519,024
Total ending loans balance	$	1,133,346		$	1,219,361		$	2,039,609		$	312,030		$	275,387		$	206,973		$	315,286		$	122,853		$	—		$	5,624,845
September 30, 2011:
Allowance for credit losses:
Three Months Ended
Beginning balance	$	20,550		$	6,442		$	67,260		$	3,593		$	21,861		$	3,709		$	5,955		$	687		$	17,050		$	147,107
Transfer to (from) allowance for unfunded credit commitments	—			—			5,516			—			—			—			—			—			(5,516		)	—
Charge-offs	(3,497		)	—			(7,815		)	(141		)	(6,008		)	(611		)	(1,605		)	(475		)	—			(20,152		)
Recoveries	1,413			5			739			7			681			327			151			83			—			3,406
Provision	(950		)	191			7,920			322			(140		)	(1,115		)	3,231			324			1,717			11,500
Ending balance	$	17,516		$	6,638		$	73,620		$	3,781		$	16,394		$	2,310		$	7,732		$	619		$	13,251		$	141,861
Nine Months Ended
Beginning balance	$	28,747		$	6,424		$	105,875		$	5,104		$	37,215		$	3,157		$	5,062		$	633		$	—		$	192,217
Reclassification to allowance for unfunded credit commitments	(464		)	—			(7,989		)	—			(8,597		)	—			—			—			17,050			—
Transfer to (from) allowance for unfunded credit commitments	—			—			5,516			—			—			—			—			—			(5,516		)	—
Charge-offs	(14,639		)	(93		)	(92,840		)	(11,783		)	(45,928		)	(1,882		)	(9,005		)	(1,363		)				(177,533		)
Recoveries	4,736			224			2,585			40			5,071			1,021			218			532			—			14,427
Provision	(864		)	83			60,473			10,420			28,633			14			11,457			817			1,717			112,750
Ending balance	$	17,516		$	6,638		$	73,620		$	3,781		$	16,394		$	2,310		$	7,732		$	619		$	13,251		$	141,861
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	2,544		$	83		$	6,326		$	—		$	2,463		$	—		$	—		$	—		$	13,251		$	24,667
Collectively evaluated for impairment	14,972			6,555			67,137			3,781			13,931			2,310			7,732			619			—			117,037
Acquired and accounted for under ASC 310-30 (1)	—			—			157			—			—			—			—			—			—			157
Total ending allowance balance	$	17,516		$	6,638		$	73,620		$	3,781		$	16,394		$	2,310		$	7,732		$	619		$	13,251		$	141,861
Loans:
Individually evaluated for impairment	$	37,069		$	631		$	106,728		$	5,842		$	2,913		$	—		$	8,602		$	241		$	—		$	162,026
Collectively evaluated for impairment	982,672			1,066,560			1,738,165			303,776			207,293			189,032			340,333			75,785			—			4,903,616
Acquired and accounted for under ASC 310-30 (1)	119,986			—			348,738			11,710			214,316			—			902			52,444			—			748,096
Total ending loans balance	$	1,139,727		$	1,067,191		$	2,193,631		$	321,328		$	424,522		$	189,032		$	349,837		$	128,470		$	—		$	5,813,738

(1)   Loans acquired in FDIC-assisted transactions and accounted for under ASC Subtopic 310-30 “Receivables — Loans and Debt Securities Acquired with Deteriorated Credit Quality.”

Recoveries of $14.7 million were recorded in the three months ended September 30, 2012, prompting a negative provision for credit losses of $13.0 million.  The provision for credit losses was $11.5 million for the three months ended September 30, 2011.  The results for the nine months ended September 30, 2011 include a provision for credit losses of approximately $50 million in connection with the sale during the quarter ended June 30, 2011 of loans with an aggregate carrying amount of $281.6 million prior to the transfer to loans held for sale, including $156.3 million

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in non-performing loans.  The sale resulted in charge-offs of approximately $87.6 million, which impacted all loan types.

Purchased loans acquired in a business combination, including loans purchased in our FDIC-assisted transactions, are recorded at estimated fair value on their purchase date without a carryover of the related allowance for loan losses.  Purchased credit-impaired loans are loans that have evidence of credit deterioration since origination and it is probable at the date of acquisition that the Company will not collect all contractually required principal and interest payments.  Evidence of credit quality deterioration as of the purchase date may include factors such as past due and non-accrual status.  The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition 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.  Subsequent decreases to the expected cash flows will generally result in a provision for loan losses.  Subsequent increases in cash flows result in a reduction of the remaining portion of any allowance for loan losses previously established and/or a reclassification of the difference from non-accretable to accretable with a positive impact on interest income prospectively.

During the three and nine months ended September 30, 2012 there was a provision for credit losses of $658 thousand and $5.7 million, respectively, and net charge-offs of $422 thousand and $4.0 million, respectively, in relation to nine pools of purchased loans with a total carrying amount of $230.8 million as of September 30, 2012.  There was $2.5 million in allowance for loan losses related to these purchased loans at September 30, 2012 and $827 thousand at December 31, 2011.  The provision for credit losses and accompanying charge-offs are included in the table above.

Changes in the accretable yield for loans acquired in FDIC-assisted transactions and accounted for under ASC 310-30 were as follows for the three and nine months ended September 30, 2012 and 2011 (in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
Balance at beginning of period	$	9,411		$	28,298		$	18,703		$	44,103
Accretion	(3,406		)	(7,854		)	(12,812		)	(25,193		)
Other	403			(600		)	517			934
Balance at end of period	$	6,408		$	19,844		$	6,408		$	19,844

In our FDIC-assisted transactions, the fair value of purchased credit-impaired loans, on the acquisition date, was determined based on assigned risk ratings, expected cash flows and the fair value of loan collateral.  The fair value of loans that were not credit-impaired was determined based on estimates of losses on defaults and other market factors.  Due to the loss-share agreements with the FDIC, MB Financial Bank recorded a receivable (FDIC indemnification asset) from the FDIC equal to the present value of the corresponding reimbursement percentages on the estimated losses embedded in the loan portfolio.

When cash flow estimates are adjusted downward for a particular loan pool, the FDIC indemnification asset is increased.  An allowance for loan losses is established for the impairment of the loans.  A provision for loan losses is recognized for the difference between the increase in the FDIC indemnification asset and the decrease in cash flows.

When cash flow estimates are adjusted upward for a particular loan pool, the FDIC indemnification asset is decreased.  The difference between the decrease in the FDIC indemnification asset and the increase in cash flows is accreted over the estimated life of the loan pool.

When cash flow estimates are adjusted downward for covered foreclosed real estate, the FDIC indemnification asset is increased.  A charge is recognized for the difference between the increase in the FDIC indemnification asset and the decrease in cash flows.

When cash flow estimates are adjusted upward for covered foreclosed real estate, the FDIC indemnification asset is decreased.  Any write-down after the transfer to covered foreclosed real estate is reversed.

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In both scenarios, the clawback liability (the amount the FDIC requires MB Financial Bank to pay back if certain thresholds are met) will increase or decrease accordingly.

The carrying amount of covered loans and other purchased non-covered loans at September 30, 2012 consisted of purchased credit-impaired loans and non-credit-impaired loans as shown in the following table (in thousands):

	Purchased Credit-Impaired Loans		Purchased Non- Credit-Impaired Loans		Total
Covered loans:
Commercial related (1)	$	24,590	$	7,263	$	31,853
Commercial	8,527		18,985		27,512
Commercial real estate	108,073		161,275		269,348
Construction real estate	108,571		16,944		125,515
Other	4,420		37,514		41,934
Total covered loans	$	254,181	$	241,981	$	496,162
Estimated receivable amount from the FDIC under the loss-share agreement (2)	$	14,087	$	19,714	$	33,801
Non covered loans:
Commercial related (3)	$	3,480	$	15,431	$	18,911
Other	65		3,886		3,951
Total non-covered loans	$	3,545	$	19,317	$	22,862

(1)Covered commercial related loans include commercial, commercial real estate and construction real estate loans acquired in connection with the Heritage Community Bank (“Heritage”) and Benchmark Bank (“Benchmark”) FDIC-assisted transactions.

(2)Estimated reimbursable amounts from the FDIC under the loss-share agreement exclude $2.5 million in reimbursable amounts related to covered other real estate owned.

(3)Non covered commercial related loans include commercial, commercial real estate and construction real estate for InBank.

Outstanding balances on purchased loans from the FDIC were $561.7 million and $795.6 million as of September 30, 2012 and December 31, 2011, respectively.  The related carrying amount on loans purchased from the FDIC was $519.0 million and $692.1 million as of September 30, 2012 and December 31, 2011, respectively.

NOTE 5.                GOODWILL AND INTANGIBLES

The excess of the cost of an acquisition over the fair value of the net assets acquired consists of goodwill, and core deposit and client relationship intangibles.  Under ASC Topic 350, goodwill is subject to at least annual assessments for impairment by applying a fair value based test.  The Company reviews goodwill and other intangible assets to determine potential impairment annually, or more frequently if events and circumstances indicate that the asset might be impaired, by comparing the carrying value of the asset with the anticipated future cash flows.

The Company’s annual assessment date is as of December 31.  No impairment losses were recognized during the nine months ended September 30, 2012 or 2011.  Goodwill is tested for impairment at the reporting unit level.  All of our goodwill is allocated to MB Financial, Inc., which is the Company’s only applicable reporting unit for purposes of testing goodwill impairment.  The carrying amount of goodwill was $387.1 million at September 30, 2012 and December 31, 2011.

The Company has other intangible assets consisting of core deposit and client relationship intangibles that had, as of September 30, 2012, a remaining weighted average amortization period of approximately five years.

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The following table presents the changes during the nine months ended September 30, 2012 in the carrying amount of core deposit and client relationship intangibles, gross carrying amount, accumulated amortization, and net book value as of September 30, 2012 (in thousands):

	September 30,
	2012
Balance at beginning of period	$	29,494
Amortization expense	(3,759		)
Balance at end of period	$	25,735
Gross carrying amount	$	71,560
Accumulated amortization	(45,825		)
Net book value	$	25,735

The following presents the estimated future amortization expense of other intangible assets (in thousands):

	Amount
Year ending December 31,
2012	$	1,251
2013	4,530
2014	3,514
2015	3,090
2016	2,747
Thereafter	10,603
	$	25,735

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NOTE 6.               NEW AUTHORITATIVE ACCOUNTING GUIDANCE

ASC Topic 860 “Transfers and Servicing.”  New authoritative accounting guidance under ASC Topic 860, “Transfers and Servicing” amended prior guidance on the accounting for repurchase agreements and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity.  The new authoritative guidance removes from the assessment of effective control the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee and the collateral maintenance implementation guidance related to that criterion.  The new guidance does not change any other existing criteria applicable to the assessment of effective control.  The Company adopted this new authoritative guidance on January 1, 2012, and it did not have an impact on the Company’s statements of operations and financial condition.

ASC Topic 820 “Fair Value Measurement.”  New authoritative accounting guidance under ASC Topic 820, “Fair Value Measurement” amended prior guidance to achieve common fair value measurement and disclosure requirements in U.S. GAAP and International Financial Reporting Standards.  The new authoritative guidance clarifies the highest and best use and valuation premise, measuring the fair value of an instrument classified in a reporting entity’s shareholders’ equity, measuring the fair value of financial instruments that are managed within a portfolio, and the application of premiums and discounts in a fair value measurement. The new authoritative guidance also requires additional disclosures about fair value measurements. The Company adopted this new authoritative guidance on January 1, 2012, and it did not have an impact on the Company’s statements of operations and financial condition.  See Note 14 for the additional disclosures required by this new authoritative guidance.

ASC Topic 220 “Comprehensive Income.”  New authoritative accounting guidance under ASC Topic 220, “Comprehensive Income” amended prior guidance to increase the prominence of items reported in other comprehensive income.  The new guidance requires that all changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  The new guidance does not change the items that must be reported in other comprehensive income.  The Company adopted this new authoritative guidance on January 1, 2012, and it did not have an impact on the Company’s statements of operations and financial condition.  See the Consolidated Statements of Comprehensive Income included in the Consolidated Financial Statements.

ASC Topic 350 “Intangibles — Goodwill and Other.”  New authoritative accounting guidance under ASC Topic 350, “Intangibles — Goodwill and Other” amended prior guidance to allow an entity to use a qualitative approach to test goodwill for impairment.  The new guidance permits an entity to first assess qualitative factors to determine whether it is more likely than not (having a likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount as basis for determining whether it is necessary to perform the two-step goodwill impairment test.    The Company adopted this new authoritative guidance on January 1, 2012, and it did not have an impact on the Company’s statements of operations and financial condition.

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NOTE 7.               STOCK-BASED COMPENSATION

ASC Topic 718 requires that the grant date fair value of equity awards to employees be recognized as compensation expense over the period during which an employee is required to provide service in exchange for such award.

The following table summarizes the impact of the Company’s share-based payment plans in the financial statements for the periods shown (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Total cost of share-based payment plans during the period	$	1,080	$	1,451	$	3,581	$	3,530
Amount of related income tax benefit recognized in income	$	430	$	607	$	1,431	$	1,449

The Company adopted the Omnibus Incentive Plan (the “Omnibus Plan”) in 1997.  In June 2011, the Company’s stockholders approved an amendment and restatement of the Omnibus Plan to add 2,300,000 authorized shares for a total of 8,300,000 shares of common stock for issuance to directors, officers, and employees of the Company or any of its subsidiaries.  Equity grants under the Omnibus Plan can be in the form of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, and other stock-based awards.  Shares awarded in the form of restricted stock, restricted stock units, performance shares, performance units, or other stock-based awards generally will reduce the shares available under the Omnibus Plan on a 2-for-1 basis.  As of September 30, 2012, there were 2,195,608 shares available for future grants.

Annual equity-based incentive awards are typically granted to selected officers and employees mid-year.  Options are granted with an exercise price equal to no less than the market price of the Company’s shares at the date of grant; those option awards generally vest over four years of service and have 10-year contractual terms.  Equity awards may also be granted at other times throughout the year in connection with the recruitment and retention of officers and employees.  Restricted shares granted to officers and employees typically vest over a two to four year period.  Directors currently may elect, in lieu of cash, to receive up to 70% of their fees in stock options with a five-year term which are fully vested on the grant date (provided that the director may not sell the underlying shares for at least six months after the grant date), and up to 100% of their fees in restricted stock, which vests one year after the grant date.

The following table summarizes stock options outstanding for the nine months ended September 30, 2012:

					Weighted
					Average
			Weighted		Remaining	Aggregate
			Average		Contractual	Intrinsic
	Number of		Exercise		Term	Value
	Options		Price		(In Years)	(in thousands)
Options outstanding as of December 31, 2011	2,935,810		$	27.64
Granted	240,569		20.42
Exercised	(207,571	)	20.79
Expired or cancelled	(172,043	)	31.32
Forfeited	(24,986	)	20.04
Options outstanding as of September 30, 2012	2,771,779		$	27.36	4.91	$	1,419
Options exercisable as of September 30, 2012	2,095,162		$	30.20	3.73	$	324

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The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model based on certain assumptions.  Expected volatility is based on historical volatility and the expectations of future volatility of Company shares.  The risk free interest rate for periods within the contractual term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.  The expected life of options is estimated based on historical employee behavior and represents the period of time that options granted are expected to remain outstanding.

The following assumptions were used for options granted during the nine months ended September 30, 2012:

	September 30,
	2012
Risk-free interest rate	1.03		%
Expected volatility of Company’s stock	27.40		%
Expected dividend yield	2.00		%
Expected life of options	5.7 years
Weighted average fair value per option of options granted during the period	$	4.30

The total intrinsic value of options exercised during the nine months ended September 30, 2012 and 2011 was $203 thousand and $314 thousand, respectively.

The following is a summary of changes in restricted shares and units for the nine months ended September 30, 2012:

	Number of Shares		Weighted Average Grant Date Fair Value
Shares and Units Outstanding at December 31, 2011	664,502		$	14.37
Granted	295,681		20.68
Vested	(294,660	)	10.86
Forfeited	(13,377	)	16.65
Shares and Units Outstanding at September 30, 2012	652,146		$	18.78

During the nine months ended September 30, 2012, the Company issued 65,333 performance-based restricted stock units which entitle recipients to shares of common stock at the end of a three year vesting period.  Recipients will earn shares, totaling between 0% and 175% of the number of units issued, based on the Company’s total stockholder return relative to a specified peer group of financial institutions over the three year period.  The performance-based restricted stock units are included in the preceding table as if the recipients earned shares equal to 100% of the units issued.  A Monte Carlo simulation model was used to value the performance-based restricted stock units at the time of issuance.

The Company issued 92,717 shares, 66,193 shares and 164,401 shares of market-based restricted stock in 2011, 2010 and 2009, respectively.  The market component of the vesting terms for each award requires that, for ten consecutive trading days, the closing price of the Company’s stock be at least $27.00 for awards issued in 2011, $25.80 for awards issued in 2010 and $18.14 for awards issued in 2009.  The market components for awards issued in 2011 and 2010 have not been satisfied as of September 30, 2012.  The market component for awards issued in 2009 has been satisfied; therefore, the 2009 awards vested in full in 2012, on the third anniversary of the grant date.  A Monte Carlo simulation model was used to value the market-based restricted stock awards at the time of issuance.

Effective January 1, 2010, the Company began issuing shares of common stock under the Omnibus Plan as Salary Stock, classified as other stock-based awards, to certain executive officers.  This stock is fully vested as of the grant date and the related expense is included in salaries and employee benefits on the Consolidated Statements of Operations.  Holders of Salary Stock have all of the rights of a stockholder, including the right to vote the shares and the right to receive any dividends that may be paid thereon.  As a condition of receiving the Salary Stock, the holders entered into agreements with the Company providing that they may not sell or otherwise transfer the shares of Salary Stock for two years, except in the event of disability or death.  During the nine months ended September 30, 2012, the Company issued 13,647 shares of Salary Stock at a weighted average issuance price of $20.16.

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As of September 30, 2012, there was $11.0 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements (including share option and nonvested share awards) granted under the Omnibus Plan.  At September 30, 2012, the weighted-average period over which the unrecognized compensation expense is expected to be recognized was approximately 2.9 years.

NOTE 8.               DEPOSITS

The following table sets forth the composition of our deposits at the dates indicated (dollars in thousands):

	September 30,				December 31,
	2012				2011
	Amount		Percent		Amount		Percent
Demand deposit accounts, noninterest bearing	$	2,011,542	27	%	$	1,885,694	25	%
NOW and money market accounts	2,682,608		36	%	2,645,334		34	%
Savings accounts	797,741		10	%	753,610		10	%
Certificates of deposit	1,632,370		22	%	1,925,608		25	%
Brokered deposit accounts	355,086		5	%	437,361		6	%
Total	$	7,479,347	100	%	$	7,647,607	100	%

During 2012, the Company prepaid brokered certificates of deposit and recorded expense of $1.2 million related to the prepayment.

NOTE 9.               SHORT-TERM BORROWINGS

Short-term borrowings are summarized as follows as of September 30, 2012 and December 31, 2011 (dollars in thousands):

	September 30,				December 31,
	2012				2011
	Weighted Average Cost		Amount		Weighted Average Cost		Amount
Customer repurchase agreements	0.28	%	$	270,245	0.30	%	$	216,439
Federal Home Loan Bank advances	3.56	%	19,368		3.66	%	3,515
Line of credit	0.00	%	—		0.00	%	—
	0.50	%	$	289,613	0.35	%	$	219,954

Repurchase agreements are agreements in which the Company acquires funds by selling assets to another party under a simultaneous agreement to repurchase the same assets at a specified price and date.  The Company enters into repurchase agreements and also offers a demand deposit account product to customers that sweeps their balances in excess of an agreed upon target amount into overnight repurchase agreements.  All assets sold under agreements to repurchase are recorded on the face of the balance sheet.

The Company had fixed-rate Federal Home Loan Bank advances with maturity dates less than one year totaling $19.4 million at September 30, 2012 and $3.5 million at December 31, 2011.  At September 30, 2012, the Company had fixed rate advances with effective interest rates ranging from 3.26% to 3.98%.  At September 30, 2012, these advances had maturities ranging from April 2013 to July 2013.

On March 9, 2012, the Company entered into a $35.0 million unsecured line of credit with a correspondent bank.  Interest is payable at a rate of one month LIBOR + 2.00%.  As of September 30, 2012, no amount was outstanding.  The line matures on March 8, 2013.

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NOTE 10.             LONG-TERM BORROWINGS

During September 2012, the Company retired a $100.0 million Federal Home Loan Bank advance with an interest rate of 3.85% and recorded prepayment fees of $11.5 million on the early extinguishment of this advance.  The Company had Federal Home Loan Bank advances with original contractual maturities greater than one year of $4.5 million and $144.6 million at September 30, 2012 and December 31, 2011, respectively.  As of September 30, 2012, the advances had fixed terms with effective interest rates, net of discounts, ranging from 3.23% to 5.87%.  At September 30, 2012, the advances had maturities ranging from April 2021 to April 2035.

A collateral pledge agreement exists whereby at all times, the Company must keep on hand, free of all other pledges, liens, and encumbrances, first mortgage loans and home equity loans with unpaid principal balances aggregating no less than 133% for first mortgage loans and 250% for home equity loans of the outstanding advances from the Federal Home Loan Bank.  The Company may also pledge certain investment securities as collateral for advances based on market value.  As of September 30, 2012 and December 31, 2011, the Company had $31.8 million and $197.4 million, respectively, of loans pledged as collateral for long-term Federal Home Loan Bank advances.  Additionally, as of September 30, 2012 and December 31, 2011, the Company had $33.0 million and $33.8 million, respectively, of investment securities pledged as collateral for long-term advances from the Federal Home Loan Bank.  The Company could borrow an additional amount of approximately $532.9 million and $319.4 million from the Federal Home Loan Bank as of September 30, 2012 and December 31, 2011, respectively.

The Company had notes payable to banks totaling $23.8 million and $31.0 million at September 30, 2012 and December 31, 2011, respectively, which as of September 30, 2012, were accruing interest at rates ranging from 2.88% to 12.00%.  Lease investments includes equipment with an amortized cost of $32.7 million and $42.6 million at September 30, 2012 and December 31, 2011, respectively, that is pledged as collateral on these notes.

The Company had a $40.0 million ten-year structured repurchase agreement as of September 30, 2012, which bears interest at a fixed rate borrowing of 4.75% and expires in 2016.

As of September 30, 2012, MB Financial Bank had a $50.0 million outstanding subordinated debt facility.  Interest is payable at a rate of three month LIBOR + 1.70%.  The debt matures on October 1, 2017.

NOTE 11.             JUNIOR SUBORDINATED NOTES ISSUED TO CAPITAL TRUSTS

The Company has established statutory trusts for the sole purpose of issuing trust preferred securities and related trust common securities.  The proceeds from such issuances were used by the trusts to purchase junior subordinated notes of the Company, which are the sole assets of each trust.  Concurrently with the issuance of the trust preferred securities, the Company issued guarantees for the benefit of the holders of the trust preferred securities.  The Company’s outstanding trust preferred securities currently qualify, and are treated by the Company, as Tier 1 regulatory capital.  The Company owns all of the common securities of each trust.  The trust preferred securities issued by each trust rank equally with the common securities in right of payment, except that if an event of default under the indenture governing the notes has occurred and is continuing, the preferred securities will rank senior to the common securities in right of payment.

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The table below summarizes the outstanding junior subordinated notes and the related trust preferred securities issued by each trust as of September 30, 2012 (in thousands):

	Coal City	MB Financial	MB Financial	MB Financial
	Capital Trust I	Capital Trust II	Capital Trust III	Capital Trust IV
Junior Subordinated Notes:
Principal balance	$25,774	$36,083	$10,310	$20,619
Annual interest rate	3-mo LIBOR +1.80%	3-mo LIBOR +1.40%	3-mo LIBOR +1.50%	3-mo LIBOR +1.52%
Stated maturity date	September 1, 2028	September 15, 2035	September 23, 2036	September 15, 2036
Call date	September 1, 2008	December 15, 2010	September 23, 2011	September 15, 2011
Trust Preferred Securities:
Face Value	$25,000	$35,000	$10,000	$20,000
Annual distribution rate	3-mo LIBOR +1.80%	3-mo LIBOR +1.40%	3-mo LIBOR +1.50%	3-mo LIBOR +1.52%
Issuance date	July 1998	August 2005	July 2006	August 2006
Distribution dates (1)	Quarterly	Quarterly	Quarterly	Quarterly

	MB Financial	MB Financial	FOBB
	Capital Trust V	Capital Trust VI	Statutory Trust III (2)
Junior Subordinated Notes:
Principal balance	$30,928	$23,196	$5,155
Annual interest rate	3-mo LIBOR +1.30%	3-mo LIBOR +1.30%	3-mo LIBOR +2.80%
Stated maturity date	December 15, 2037	October 30, 2037	January 23, 2034
Call date	December 15, 2012	October 30, 2012	January 23, 2009
Trust Preferred Securities:
Face Value	$30,000	$22,500	$5,000
Annual distribution rate	3-mo LIBOR +1.30%	3-mo LIBOR +1.30%	3-mo LIBOR +2.80%
Issuance date	September 2007	October 2007	December 2003
Distribution dates (1)	Quarterly	Quarterly	Quarterly

(1)All distributions are cumulative and paid in cash.

(2)FOBB Statutory Trust III was established by First Oak Brook Bancshares, Inc. (“FOBB”) prior to the Company’s acquisition of FOBB, and the junior subordinated note issued by FOBB to FOBB Statutory Trust III was assumed by the Company upon completion of the acquisition.

The trust preferred securities are subject to mandatory redemption, in whole or in part, upon repayment of the junior subordinated notes at the stated maturity date or upon redemption on a date no earlier than the call dates noted in the table above.  Prior to these respective redemption dates, the junior subordinated notes may be redeemed by the Company (in which case the trust preferred securities would also be redeemed) after the occurrence of certain events that would have a negative tax effect on the Company or the trusts, would cause the trust preferred securities to no longer qualify as Tier 1 capital, or would result in a trust being treated as an investment company.  Each trust’s ability to pay amounts due on the trust preferred securities is solely dependent upon the Company making payment on the related junior subordinated notes.  The Company’s obligation under the junior subordinated notes and other relevant trust agreements, in aggregate, constitute a full and unconditional guarantee by the Company of each trust’s obligations under the trust preferred securities issued by each trust.  The Company has the right to defer payment of interest on the notes and, therefore, distributions on the trust preferred securities, for up to five years, but not beyond the stated maturity date in the table above.  During any such deferral period the Company may not pay cash dividends on its stock and generally may not repurchase its stock.

During the third quarter of 2012, the Company redeemed the $6.2 million of junior subordinated notes issued to FOBB Statutory Trust I, which resulted in the redemption of the trust preferred securities issued by FOBB Statutory Trust I.  The junior subordinated note had a rate of 10.60% and a maturity date of September 7, 2030.  The Company assumed this obligation upon the completion of the acquisition of FOBB.

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NOTE 12.             DERIVATIVE FINANCIAL INSTRUMENTS

The Company offers various derivatives, including interest rate swaps and foreign currency forward contracts, to our customers which can mitigate our exposure to market risk through the execution of off-setting positions with inter-bank dealer counterparties.  This also permits the Company to offer customized risk management solutions to our customers.  These customer accommodations and any offsetting financial contracts are treated as stand-alone derivative instruments which do not qualify for hedge accounting.

Interest rate swap and foreign currency forward contracts involve the risk of dealing with counterparties and their ability to meet contractual terms.  The net amount payable or receivable under interest rate swaps is accrued as an adjustment to interest income.  The net amount payable for September 30, 2012 was approximately $22 thousand, and the net amount payable for December 31, 2011 was approximately $23 thousand.  The Company’s credit exposure on interest rate swaps is limited to the Company’s net favorable value and interest payments of all swaps to each counterparty.  In such cases, collateral is generally required from the counterparties involved if the net value of the swaps exceeds a nominal amount.  At September 30, 2012, the Company’s credit exposure relating to interest rate swaps was approximately $28.9 million, which is secured by the underlying collateral on customer loans.

The Company also enters into mortgage banking derivatives which are designated as stand-alone derivatives.  These derivatives include interest rate lock commitments provided to customers to fund certain mortgage loans to be sold into the secondary market and forward commitments for the future delivery of such loans. It is the Company’s practice to enter into forward commitments for the future delivery of residential mortgage loans when interest rate lock commitments are entered into in order to economically hedge the effect of future changes in interest rates on its commitments to fund the loans as well as on its portfolio of mortgage loans held-for-sale.

The Company had fair value commercial loan interest rate swaps, to hedge its interest rate risk, with an aggregate notional amount of $6.9 million at September 30, 2012.  For fair value hedges, the changes in fair values of both the hedging derivative and the hedged item were recorded in current earnings as other income and other expense.

The Company’s derivative financial instruments are summarized below as of September 30, 2012 and December 31, 2011 (in thousands):

	Asset Derivatives								Liability Derivatives
	September 30, 2012				December 31, 2011				September 30, 2012					December 31, 2011
	Notional		Estimated		Notional		Estimated		Notional		Estimated			Notional		Estimated
	Amount		Fair Value		Amount		Fair Value		Amount		Fair Value			Amount		Fair Value
Derivative instruments designated as hedges of fair value:
Interest rate swap contracts (1)	$	—	$	—	$	—	$	—	$	6,916	$	(137	)	$	7,204	$	(315	)
Stand-alone derivative instruments (2)
Interest rate swap contracts	382,865		28,819		343,132		25,931		383,948		(28,922		)	344,294		(26,053		)
Interest rate options contracts	75,780		159		4,287		32		75,780		(159		)	4,287		(32		)
Foreign exchange contracts	16,714		998		8,567		240		16,407		(920		)	8,498		(206		)
Mortgage banking derivatives	7,720		210		2,626		48		6,007		(101		)	2,000		(18		)
Total stand-alone derivative instruments	483,079		30,186		358,612		26,251		482,142		(30,102		)	359,079		(26,309		)
Total	$	483,079	$	30,186	$	358,612	$	26,251	$	489,058	$	(30,239	)	$	366,283	$	(26,624	)

(1) Hedged fixed-rate commercial real estate loans

(2) These portfolio swaps are not designated as hedging instruments under ASC Topic 815.

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Amounts included in the other income in the consolidated statements of operations related to derivative financial instruments were as follows (dollars in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2012		2011		2012			2011
Derivative instruments designated as hedges of fair value:
Interest rate swap contracts	$	1	$	1	$	(36	)	$	(74	)
Stand-alone derivative instruments:
Interest rate swap contracts	6		18		19			108
Interest rate options contracts	—		—		—			—
Foreign exchange contracts	14		12		44			(2		)
Mortgage banking derivatives	9		121		79			121
Total stand-alone derivative instruments	29		151		142			227
Total	$	30	$	152	$	106		$	153

Methods and assumptions used by the Company in estimating the fair value of its interest rate swaps are discussed in Note 14 below.

NOTE 13.             COMMITMENTS AND CONTINGENCIES

Commitments: The Company is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers.  These financial instruments include commitments to extend credit, standby letters of credit and commercial letters of credit.  Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets.

The Company’s exposure to credit loss is represented by the contractual amount of these commitments.  The Company follows the same credit policies in making commitments as it does for on-balance-sheet instruments.

At September 30, 2012 and December 31, 2011, the following financial instruments were outstanding, the contractual amounts of which represent off-balance sheet credit risk (in thousands):

	Contractual Amount
	September 30,		December 31,
	2012		2011
Commitments to extend credit:
Home equity lines	$	253,216	$	275,357
Other commitments	826,411		741,815
Letters of credit:
Standby	63,275		67,720
Commercial	6,067		818

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Commitments generally have fixed expiration dates or other termination clauses and may require a payment of a fee.  The commitments for home equity lines of credit may expire without being drawn upon.  Therefore, the total commitment amounts do not necessarily represent future cash requirements.  The amount of collateral obtained, if it is deemed necessary by the Company, is based on management’s credit evaluation of the customer.

The Company, in the normal course of its business, regularly offers standby and commercial letters of credit to its customers.  Standby and commercial letters of credit are a conditional but irrevocable form of guarantee.  Under

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letters of credit, the Company typically guarantees payment to a third party beneficiary upon the default of payment or nonperformance by the customer and upon receipt of complying documentation from that beneficiary.

Both standby and commercial letters of credit may be issued for any length of time, but normally do not exceed a period of five years.  These letters of credit may also be extended or amended from time to time depending on the bank customer’s needs.  As of September 30, 2012, the maximum remaining term for any standby letters of credit was December 31, 2017.  A fee is charged to the customer and is recognized as income over the life of the letter of credit, unless considered non-rebatable under the terms of a letter of credit application.

At September 30, 2012, the aggregate contractual amount of these letters of credit, which represents the maximum potential amount of future payments that the Company would be obligated to pay, decreased $804 thousand to $69.3 million from $68.5 million at December 31, 2011.  Of the $69.3 million in commitments outstanding at September 30, 2012, approximately $52.6 million of the letters of credit have been issued or renewed since December 31, 2011.

Letters of credit issued on behalf of customers may be done on either a secured, partially secured or an unsecured basis.  If a letter credit is secured or partially secured, the collateral can take various forms including bank accounts, investments, fixed assets, inventory, accounts receivable or real estate, among other things.  The Company takes the same care in making credit decisions and obtaining collateral when it issues letters of credit on behalf of its customers, as it does when making other types of loans.

As of September 30, 2012, the Company had approximately $2.5 million in capital expenditure commitments outstanding which relate to various projects to renovate existing branches.

Concentrations of credit risk:  The majority of the loans, commitments to extend credit and standby letters of credit have been granted to customers in the Company’s market area.  The distribution of commitments to extend credit approximates the distribution of loans outstanding.  Standby letters of credit are granted primarily to commercial borrowers.

Contingencies: In the normal course of business, the Company is involved in various legal proceedings.  In the opinion of management, any liability resulting from pending proceedings would not be expected to have a material adverse effect on the Company’s consolidated financial statements.

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NOTE 14.             FAIR VALUE OF FINANCIAL INSTRUMENTS

ASC Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.  A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability.  The price in the principal (or most advantageous) market used to measure the fair value of the asset or liability shall not be adjusted for transaction costs.  An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction.  Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact.

ASC Topic 820 requires the use of valuation techniques that are consistent with the market approach, the income approach and/or the cost approach.  The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities.  The income approach uses valuation techniques to convert expected future amounts, such as cash flows or earnings, to a single present value amount on a discounted basis.  The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost).  Valuation techniques should be consistently applied.  Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability.  Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.  In that regard, ASC Topic 820 establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.  The fair value hierarchy is as follows:

Level 1:  Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2:  Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3:  Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.

In general, fair value is based upon quoted market prices, where available.  If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters.  Valuation adjustments may be made to ensure that financial instruments are recorded at fair value.  These adjustments may include amounts to reflect counterparty credit quality, the Company’s creditworthiness, among other things, as well as unobservable parameters.  Any such valuation adjustments are applied consistently over time.  Our valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values.  While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.  Transfers between levels of the fair value hierarchy are recognized on the actual date of the event or circumstances that caused the transfer, which generally coincides with the Company’s monthly and/or quarterly valuation process.

Financial Instruments Recorded at Fair Value on a Recurring Basis

Securities Available for Sale. The fair values of securities available for sale are determined by quoted prices in active markets, when available, and classified as Level 1.  If quoted market prices are not available, the fair value is determined by a matrix pricing, which is a mathematical technique, widely used in the industry to value debt

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securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities and classified as Level 2.  In cases where significant credit valuation adjustments are incorporated into the estimation of fair value, reported amounts are classified as Level 3 inputs.

Loans Held for Sale. Mortgage loans originated and held for sale in the secondary market are carried at fair value.  The fair value of loans held for sale is determined using quoted secondary market prices and classified as level 2.

Assets Held in Trust for Deferred Compensation and Associated Liabilities.Assets held in trust for deferred compensation are recorded at fair value and included in “Other Assets” on the consolidated balance sheets.  These assets are invested in mutual funds and classified as Level 1.  Deferred compensation liabilities, also classified as Level 1, are carried at the fair value of the obligation to the employee, which corresponds to the fair value of the invested assets.

Derivatives.  Currently, we use interest rate swaps to manage our interest rate risk.  The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative and classified as Level 2.  This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including LIBOR rate curves.  We also obtain dealer quotations for these derivatives for comparative purposes to assess the reasonableness of the model valuations.  We also offer other derivatives, including foreign currency forward contracts and interest rate lock commitments, to our customers and offset our exposure from such contracts by purchasing other financial contracts, which are valued using market consensus prices.

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The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of September 30, 2012 and December 31, 2011, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):

			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
September 30, 2012
Financial assets
Securities available for sale:
U.S Government sponsored agencies and enterprises	$	42,187	$	—	$	42,187	$	—
States and political subdivisions	668,966		—		668,966		—
Residential mortgage-backed securities	1,021,983		—		1,021,096		887
Commercial mortgage-backed securities	53,979		—		53,979		—
Corporate bonds	16,626		—		11,395		5,231
Equity securities	11,231		11,231		—		—
Loans held for sale	7,221		—		7,221		—
Assets held in trust for deferred compensation	7,802		7,802		—		—
Derivative financial instruments	30,186		—		30,186		—
Financial liabilities
Other liabilities (1)	7,802		7,802		—		—
Derivative financial instruments	30,239		—		30,239		—
December 31, 2011
Financial assets
Securities available for sale:
U.S Government sponsored agencies and enterprises	$	42,401	$	—	$	42,401	$	—
States and political subdivisions	535,660		—		535,660		—
Residential mortgage-backed securities	1,281,806		—		1,280,713		1,093
Commercial mortgage-backed securities	52,685		—		52,685		—
Corporate bonds	5,899		—		—		5,899
Equity securities	10,846		10,846		—		—
Loans held for sale	4,727		—		4,727		—
Assets held in trust for deferred compensation	6,808		6,808		—		—
Derivative financial instruments	26,251		—		26,251		—
Financial liabilities
Other liabilities (1)	6,808		6,808		—		—
Derivative financial instruments	26,624		—		26,624		—

(1) Liabilities associated with assets held in trust for deferred compensation

The significant unobservable inputs used in the Level 3 fair value measurements of the Company’s residential mortgage-backed securities and corporate bonds included in the table above primarily relate to the constant pre-payment rates and credit assumptions used in the discounted cash flows valuation, respectively.  As of September 30, 2012, those constant pre-payment rates ranged from 6% to 12% and the credit assumption averaged a 25% loss.

The Company did not have any transfers between Level 1 and Level 2 of the fair value hierarchy during the nine months ended September 30, 2012.  The Company’s policy for determining transfers between levels occurs at the end of the reporting period when circumstances in the underlying valuation criteria change and result in transfer between levels.

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The following table presents additional information about financial assets measured at fair value on a recurring basis for which the Company used significant unobservable inputs (Level 3):

	Nine Months Ended
	September 30,
(in thousands)	2012			2011
Balance, beginning of period	$	6,992		$	7,476
Other comprehensive income	89			42
Principal payments	(846		)	(485		)
Impairment charge	(117		)	—
	$	6,118		$	7,033

Financial Instruments Recorded at Fair Value on a Nonrecurring Basis

The Company may be required, from time to time, to measure certain financial assets and financial liabilities at fair value on a nonrecurring basis in accordance with U.S. GAAP.  These include assets that are measured at the lower of cost or market value that were recognized at fair value below cost at the end of the period.

Impaired Loans.Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired.  Once a loan is identified as individually impaired, management measures impairment in accordance with ASC Topic 310.  The fair value of impaired loans is estimated using one of several methods, including collateral value, market value of similar debt, enterprise value, liquidation value and discounted cash flows.  Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans.  At September 30, 2012, substantially all of the total impaired loans were evaluated based on the fair value of the collateral.  In accordance with ASC Topic 820, impaired loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy.  Collateral values are estimated using Level 3 inputs based on customized discounting criteria.  For a majority of impaired real estate loans, the Company obtains a current external appraisal.  Other valuation techniques are used as well, including internal valuations, comparable property analysis and contractual sales information.

Non-Financial Assets and Non-Financial Liabilities Recorded at Fair Value

The Company has no non-financial assets or non-financial liabilities measured at fair value on a recurring basis.  Certain non-financial assets and non-financial liabilities measured at fair value on a non-recurring basis include foreclosed assets and non-financial long-lived assets.

Other Real Estate and Repossessed Vehicles Owned (Foreclosed Assets).  Foreclosed assets, upon initial recognition, are measured and reported at fair value through a charge-off to the allowance for possible loan losses based upon the fair value of the foreclosed asset.  The fair value of foreclosed assets, upon initial recognition, are estimated using Level 3 inputs based on customized discounting criteria.

Non-Financial Long-Lived Assets.  During the nine months ended September 30, 2012 and 2011, the Company recognized impairments of $758 thousand and $1.0 million, respectively, caused by the decision to close a branch in each of those years.  The fair value of the branches was estimated using Level 3 inputs based on internal appraisals.

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Assets measured at fair value on a nonrecurring basis as of September 30, 2012 and December 31, 2011 are included in the table below (in thousands):

	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2012
Financial assets:
Impaired loans	$	66,435	$	—	$	—	$	66,435
Foreclosed assets	75,147		—		—		75,147
December 31, 2011
Financial assets:
Impaired loans	$	96,089	$	—	$	—	$	96,089
Foreclosed assets	138,971		—		—		138,971
Non-financial long-lived assets	2,901		—		—		2,901

The significant unobservable inputs used in the Level 3 fair value measurements of the Company’s impaired loans and foreclosed assets included in the table above primarily relate to internal valuations or analyses.

ASC Topic 825 requires disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis.  The methodologies for estimating the fair value of financial assets and financial liabilities that are measured at fair value on a recurring or non-recurring basis are discussed above.  The estimated fair value approximates carrying value for cash and cash equivalents, accrued interest and the cash surrender value of life insurance policies.  The methodologies for other financial assets and financial liabilities are discussed below:

The following methods and assumptions were used by the Company in estimating the fair values of its other financial instruments:

Cash and due from banks and interest bearing deposits with banks: The carrying amounts reported in the balance sheet approximate fair value.

Securities held to maturity: The fair values of securities held to maturity are determined by quoted prices in active markets, when available.  If quoted market prices are not available, the fair value is determined by a matrix pricing.

Non-marketable securities — FHLB and FRB Stock: The carrying amounts reported in the balance sheet approximate fair value.

Loans: The fair values for loans are estimated using discounted cash flow analyses, using the corporate bond curve adjusted for liquidity for commercial loans and the swap curve adjusted for liquidity for retail loans.

Non-interest bearing deposits: The fair values disclosed are equal to their balance sheet carrying amounts, which represent the amount payable on demand.

Interest bearing deposits: The fair values disclosed for deposits with no defined maturities are equal to their carrying amounts, which represent the amounts payable on demand.  Fair values for certificates of deposit are estimated using a discounted cash flow calculation that applies the Company’s current incremental borrowing rates for similar terms.

Short-term borrowings: The carrying amounts of federal funds purchased, borrowings under repurchase agreements and other short-term borrowings with maturities of 90 days or less approximate their fair values.  The fair value of short-term borrowings greater than 90 days is based on the discounted value of contractual cash flows.

Long-term borrowings: The fair values of the Company’s long-term borrowings (other than deposits) are estimated using discounted cash flow analyses, based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements.

37

Junior subordinated notes issued to capital trusts: The fair values of the Company’s junior subordinated notes issued to capital trusts are estimated based on the quoted market prices, when available, of the related trust preferred security instruments, or are estimated based on the quoted market prices of comparable trust preferred securities.

Accrued interest:  The carrying amount of accrued interest receivable and payable approximate their fair values.

The estimated fair values of financial instruments are as follows (in thousands):

	September 30, 2012
	Carrying		Estimated		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets:
Cash and due from banks	$	129,326	$	129,326	$	129,326	$	—	$	—
Interest earning deposits with banks	327,301		327,301		327,301		—		—
Investment securities available for sale	1,814,972		1,814,972		11,231		1,797,623		6,118
Investment securities held to maturity	495,851		536,989		—		536,989		—
Non-marketable securities - FHLB and FRB stock	57,653		57,653		—		—		57,653
Loans held for sale	7,221		7,221		—		7,221		—
Loans, net	5,503,663		5,512,768		—		—		5,512,768
Accrued interest receivable	35,233		35,233		35,233		—		—
Derivative financial instruments	30,186		30,186		—		30,186		—
Financial Liabilities:
Non-interest bearing deposits	$	2,011,542	$	2,011,542	$	2,011,542	$	—	$	—
Interest bearing deposits	5,467,805		5,494,724		—		—		5,494,724
Short-term borrowings	289,613		289,824		—		—		289,824
Long-term borrowings	118,798		123,152		—		—		123,152
Junior subordinated notes issued to capital trusts	152,065		97,028		—		—		97,028
Accrued interest payable	3,250		3,250		3,250		—		—
Derivative financial instruments	30,239		30,239		—		30,239		—

	December 31,
	2011
	Carrying		Estimated
	Amount		Fair Value
Financial Assets:
Cash and due from banks	$	144,228	$	144,228
Interest bearing deposits with banks	100,337		100,337
Investment securities available for sale	1,929,297		1,929,297
Investment securities held to maturity	499,283		511,022
Non-marketable securities - FHLB and FRB stock	80,832		80,832
Loans held for sale	4,727		4,727
Loans, net	5,824,197		5,734,017
Accrued interest receivable	35,870		35,870
Derivative financial instruments	26,251		26,251
Financial Liabilities:
Non-interest bearing deposits	$	1,885,694	$	1,885,694
Interest bearing deposits	5,761,913		5,790,963
Short-term borrowings	219,954		219,983
Long-term borrowings	266,264		279,124
Junior subordinated notes issued to capital trusts	158,538		113,635
Accrued interest payable	4,518		4,518
Derivative financial instruments	26,624		26,624

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NOTE 15.              COMMON AND PREFERRED STOCK

The Series A Preferred Stock was issued on December 5, 2008 as part of the Troubled Asset Relief Program (“TARP”) Capital Purchase Program of the United States Department of the Treasury (“Treasury”).  The Series A Preferred Stock qualified as Tier 1 capital and provided for cumulative dividends on the liquidation preference amount on a quarterly basis at a rate of 5% per annum for the first five years, and 9% per annum thereafter.  Concurrent with issuing the Series A Preferred Stock, the Company issued to the Treasury a ten year warrant (the “Warrant”) to purchase 1,012,048 shares (subsequently reduced to 506,024 shares, as described below) of the Company’s Common Stock at an exercise price of $29.05 per share.

On September 17, 2009, the Company completed a public offering of its common stock by issuing 12,578,125 shares of common stock for aggregate gross proceeds of $201.3 million.  The net proceeds to the Company after deducting underwriting discounts and commissions and offering expenses were approximately $190.9 million.  With the proceeds from this offering and the proceeds received by the Company from issuances pursuant to its Dividend Reinvestment and Stock Purchase Plan, the Company received aggregate gross proceeds from “Qualified Equity Offerings” in excess of the $196.0 million aggregate liquidation preference amount of the Series A Preferred Stock.  As a result, the number of shares of the Company’s common stock underlying the Warrant was reduced by 50%, from 1,012,048 shares to 506,024 shares.

On March 14, 2012, the Company repurchased all $196.0 million of the Series A Preferred Stock.  On May 2, 2012, the Company repurchased the Warrant in full for approximately $1.5 million.

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Item 2. - Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is a discussion and analysis of MB Financial, Inc.’s financial condition and results of operations and should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this report.  The words “the Company,” “we,” “our” and “us” refer to MB Financial, Inc. and its majority owned subsidiaries, unless we indicate otherwise.

Overview

The profitability of our operations depends primarily on our net interest income after provision for credit losses, which is the difference between interest earned on interest earning assets and interest paid on interest bearing liabilities less provision for credit losses.  The provision for credit losses is dependent on changes in our loan portfolio and management’s assessment of the collectability of our loan portfolio as well as prevailing economic and market conditions.  Our net income is also affected by other (non-interest) income and other expenses.  During the periods under report, other income consisted of capital markets and international banking fees, commercial deposit and treasury management fees, net lease financing income, trust and asset management fees, card fees, loan service fees, retail and other deposit service fees, brokerage fees, net gain (loss) on investment securities, increase in cash surrender value of life insurance, net (loss) gain on sale of assets, accretion of the FDIC indemnification asset, net loss recognized on other real estate owned, net gain on sale of loans and other operating income.  During the periods under report, other expenses included salaries and employee benefits, occupancy and equipment expense, computer services and telecommunication expense, advertising and marketing expense, professional and legal expense, other intangibles amortization expense, FDIC insurance premiums, branch impairment charges, other real estate expenses (net of rental income), prepayment fees on interest bearing liabilities and other operating expenses.  Additionally, dividends and discount accretion on preferred shares reduced net income available to common stockholders through the first quarter of 2012.

Net interest income is affected by changes in the volume and mix of interest earning assets, interest earned on those assets, the volume and mix of interest bearing liabilities and interest paid on interest bearing liabilities.  Other income and other expenses are impacted by growth of operations and changes in the number of loan and deposit accounts through both acquisitions and dispositions and core banking business growth.  Growth in operations affects other expenses primarily as a result of additional employees, branch facilities and promotional marketing expense.  Changes in the number of loan and deposit accounts affects other income, including service fees as well as other expenses such as computer services, supplies, postage, telecommunications and other miscellaneous expenses.  Changes in the levels of non-performing assets affect salaries and benefits because of changes in problem loan remediation staffing needs.  Changes in the levels of non-performing assets also affect legal expenses and other real estate owned expenses.

The Company had net income and net income available to common stockholders of $23.1 million for the third quarter of 2012 compared to net income of $19.7 million and net income available to common stockholders of $17.1 million for the third quarter of 2011.  Our 2012 third quarter results generated an annualized return on average assets of 0.97% and an annualized return on average common equity of 7.38% compared to 0.80% and 5.86%, respectively, for the same period in 2011.  Fully diluted earnings per common share for the third quarter of 2012 were $0.42 compared to $0.31 for the third quarter of 2011.

On March 14, 2012, we repurchased all $196.0 million of preferred stock issued in 2008 to the U.S. Department of Treasury as part of the Troubled Asset Relief Program (“TARP”) Capital Purchase Program.  No equity or long term debt was issued in conjunction with the repurchase.  The repurchase resulted in a one-time, non-cash after-tax charge of approximately $1.2 million or $0.02 per common share in the first quarter of 2012, related to unaccreted discount recorded at the date of issuance.

The Company recorded $12.7 million in prepayment fees on interest bearing liabilities as a result of the prepayment of certain brokered certificates of deposits and an FHLB advance in efforts to lower our future funding costs and improve our funding mix.  We also repaid $6.2 million of junior subordinated notes related to the FOBB Statutory Trust I with a 10.6% interest rate.

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Critical Accounting Policies

Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America and follow general practices within the industries in which we operate.  This preparation requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes.  These estimates, assumptions, and judgments are based on information available as of the date of the financial statements; accordingly, as this information changes, actual results could differ from the estimates, assumptions, and judgments reflected in the financial statements.  Certain policies inherently have a greater reliance on the use of estimates, assumptions, and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported.  Management believes the following policies are both important to the portrayal of our financial condition and results of operations and require subjective or complex judgments; therefore, management considers the following to be critical accounting policies.  Management has reviewed the application of these polices with the Audit Committee of our Board of Directors.

Allowance for Loan Losses.Subject to the use of estimates, assumptions, and judgments in management’s evaluation process used to determine the adequacy of the allowance for loan losses, which combines several factors: management’s ongoing review and grading of the loan portfolio, consideration of past loan loss experience, trends in past due and nonperforming loans, risk characteristics of the various classifications of loans, existing economic conditions, the fair value of underlying collateral, and other qualitative and quantitative factors which could affect probable credit losses.  Because current economic conditions can change and future events are inherently difficult to predict, the anticipated amount of estimated loan losses, and therefore the adequacy of the allowance, could change significantly.  As an integral part of their examination process, various regulatory agencies also review the allowance for loan losses.  Such agencies may require that certain loan balances be charged off when their credit evaluations differ from those of management or require that adjustments be made to the allowance for loan losses, based on their judgments about information available to them at the time of their examination.  We believe the allowance for loan losses is adequate and properly recorded in the financial statements.  See “Allowance for Loan Losses” section below for further analysis.

Residual Value of Our Direct Finance, Leveraged, and Operating Leases.  Lease residual value represents the present value of the estimated fair value of the leased equipment at the termination date of the lease.  Realization of these residual values depends on many factors, including management’s use of estimates, assumptions, and judgment to determine such values.  Several other factors outside of management’s control may reduce the residual values realized, including general market conditions at the time of expiration of the lease, whether there has been technological or economic obsolescence or unusual wear and tear on, or use of, the equipment and the cost of comparable equipment.  If, upon the expiration of a lease, we sell the equipment and the amount realized is less than the recorded value of the residual interest in the equipment, we will recognize a loss reflecting the difference.  On a quarterly basis, management reviews the lease residuals for potential impairment.  If we fail to realize our aggregate recorded residual values, our financial condition and profitability could be adversely affected.  At September 30, 2012, the aggregate residual value of the equipment leased under our direct finance, leveraged, and operating leases totaled $48.2 million.  See Note 1 and Note 7 of the notes to our December 31, 2011 audited consolidated financial statements contained in our Annual Report Form 10-K for the year ended December 31, 2011 for additional information.

Income Tax Accounting.  ASC Topic 740 provides guidance on accounting for income taxes by prescribing the minimum recognition threshold that a tax position must meet to be recognized in the financial statements.  ASC Topic 740 also provides guidance on measurement, recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.  As of September 30, 2012, the Company had $93 thousand of uncertain tax positions.  The Company elects to treat interest and penalties recognized for the underpayment of income taxes as income tax expense.  However, interest and penalties imposed by taxing authorities on issues specifically addressed in ASC Topic 740 will be taken out of the tax reserves up to the amount allocated to interest and penalties.  The amount of interest and penalties exceeding the amount allocated in the tax reserves will be treated as income tax expense.  As of September 30, 2012, the Company had $10 thousand of accrued interest related to tax reserves.  The application of income tax law is inherently complex.  Laws and regulations in this area are voluminous and are often ambiguous.  As such, we are required to make many subjective assumptions and judgments regarding our income tax exposures.  Interpretations of and guidance surrounding income tax laws and regulations change over time.  As such, changes in our subjective assumptions and judgments can materially affect amounts recognized in the consolidated balance sheets and statements of operations.

41

Fair Value of Assets and Liabilities.  ASC Topic 820 defines fair value as the price that would be received to sell a financial asset or paid to transfer a financial liability in an orderly transaction between market participants at the measurement date.

The degree of management judgment involved in determining the fair value of assets and liabilities is dependent upon the availability of quoted market prices or observable market parameters.  For financial instruments that trade actively and have quoted market prices or observable market parameters, there is minimal subjectivity involved in measuring fair value.  When observable market prices and parameters are not fully available, management judgment is necessary to estimate fair value.  In addition, changes in market conditions may reduce the availability of quoted prices or observable data.  For example, reduced liquidity in the capital markets or changes in secondary market activities could result in observable market inputs becoming unavailable.  Therefore, when market data is not available, the Company would use valuation techniques requiring more management judgment to estimate the appropriate fair value measurement.

Goodwill.  The excess of the cost of an acquisition over the fair value of the net assets acquired consists of goodwill, and core deposit and client relationship intangibles.  See Note 9 of the notes to our audited consolidated financial statements contained in our Annual Report Form 10-K for the year ended December 31, 2011 for additional information regarding core deposit and client relationship intangibles.  The Company reviews goodwill and other intangible assets to determine potential impairment annually, or more frequently if events and circumstances indicate that the asset might be impaired, by comparing the carrying value of the asset with the anticipated future cash flows.

The Company’s annual assessment date is December 31.  No impairment losses were recognized during the nine months ended September 30, 2012 and 2011.

Goodwill is tested for impairment at the reporting unit level.  All of our goodwill is allocated to MB Financial, Inc., which is the Company’s only applicable reporting unit for purposes of testing goodwill impairment.  Fair value was computed by estimating the future cash flows of the Company and present valuing those cash flows at an interest rate equal to our cost of capital.  In addition, we compared our fair value calculation with our stock price adjusted for a control premium for reasonableness relative to our fair value calculation.  Key assumptions used in estimating future cash flows included loan and deposit growth, the interest rate environment, credit spreads on new and renewed loans, future deposit pricing, loan charge-offs, provision for loan losses, fee income growth and operating expense growth.  Our future cash flows estimates assumed similar credit performance to what we experienced in the last two quarters of 2011.

Results of Operations

Third Quarter Results

The Company had net income and net income available to common stockholders of $23.1 million for the third quarter of 2012 compared to net income of $19.7 million and a net income available to common stockholders of $17.1 million for the third quarter of 2011.  The results for the third quarter of 2012 generated an annualized return on average assets of 0.97% and an annualized return on average common equity of 7.38% compared to 0.80% and 5.86%, respectively, for the same period in 2011.

Net interest income on a tax equivalent basis was $77.3 million for the three months ended September 30, 2012, a decrease of $6.4 million, or 7.6%, from $83.7 million for the comparable period in 2011.  The decrease was primarily due to a decline in the level of interest earning assets of $138.5 million and a 23 basis point decline in the net interest margin on a fully tax equivalent basis.  See “Net Interest Margin” section below for further analysis.

Gross recoveries of $14.7 million were recorded in the third quarter of 2012, prompting a negative provision for credit losses of $13.0 million.  The provision for credit losses for the third quarter of 2011 was $11.5 million.  See “Asset Quality” below for further analysis of the allowance for loan losses.

The Company also recorded prepayment fees on the early retirement of several interest bearing liabilities during the third quarter of 2012.  See “Overview” above.

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Net income available to common stockholders was also impacted by the repurchase in the first quarter of 2012 of all $196 million of preferred stock issued in 2008 to the U.S. Department of Treasury as part of TARP.  As a result, there were no dividends and discount accretion on preferred shares in the third quarter of 2012 compared to $2.6 million in the third quarter of 2011.

Other Income (in thousands):

	Three Months Ended
	September 30,						Increase/			Percentage
	2012			2011			(Decrease)			Change
Other income:
Capital markets and international banking fees	$	1,344		$	605		$	739		122	%
Commercial deposit and treasury management fees	5,860			6,157			(297		)	(5	)%
Lease financing, net	9,671			6,494			3,177			49	%
Trust and asset management fees	4,428			4,272			156			4	%
Card fees	2,385			2,071			314			15	%
Loan service fees	1,125			1,706			(581		)	(34	)%
Retail and other deposit service fees	3,792			4,123			(331		)	(8	)%
Brokerage fees	1,185			1,273			(88		)	(7	)%
Net gain on investment securities	281			—			281			NM
Increase in cash surrender value of life insurance	890			1,014			(124		)	(12	)%
Net loss on sale of assets	(12		)	—			(12		)	NM
Accretion of FDIC indemnification asset	204			985			(781		)	(79	)%
Net loss recognized on other real estate owned	(3,938		)	(3,118		)	(820		)	26	%
Net gain on sale of loans	575			190			385			203	%
Other operating income	763			595			168			28	%
Total other income	$	28,553		$	26,367		$	2,186		8	%

NM — Not meaningful

Other income increased by $2.2 million for the third quarter of 2012 compared to the third quarter of 2011.  Net lease financing income increased as a result of higher promotional and remarketing income as well as increased sales of equipment maintenance contracts.  Capital markets and international banking fees increased due to an increase in interest rate swap fees.  These increases were partly offset by the decreases in accretion of FDIC indemnification asset and loan service fees as well as an increase in the net loss recognized on other real estate.  Accretion of FDIC indemnification asset decreased as accretion is recorded based on the FDIC indemnification asset balance, which has declined as we have received loss-share payments.  Loan service fees decreased due to a decrease in prepayment and exit fees.  Net loss recognized on other real estate owned increased due to updated appraisals with lower valuations on land and construction projects.

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Other Expenses (in thousands):

	Three Months Ended
	September 30,				Increase /			Percentage
	2012		2011		(Decrease)			Change
Other expense:
Salaries and employee benefits	$	42,083	$	38,422	$	3,661		10	%
Occupancy and equipment expense	8,274		9,092		(818		)	(9	)%
Computer services and telecommunication expense	3,777		3,488		289			8	%
Advertising and marketing expense	2,025		1,740		285			16	%
Professional and legal expense	1,554		1,647		(93		)	(6	)%
Other intangibles amortization expense	1,251		1,414		(163		)	(12	)%
FDIC insurance premiums	1,545		2,272		(727		)	(32	)%
Branch impairment charges	758		—		758			NM
Other real estate expense, net	874		1,181		(307		)	(26	)%
Prepayment fees on interest bearing liabilities	12,682		—		12,682			NM
Other operating expenses	6,342		7,352		(1,010		)	(14	)%
Total other expense	$	81,165	$	66,608	$	14,557		22	%

NM — Not meaningful

Other expense increased by $14.6 million for the third quarter of 2012 compared to the third quarter of 2011.  The Company recorded $12.7 million in prepayment fees on interest bearing liabilities as a result of the prepayment of certain brokered certificates of deposit and an FHLB advance in efforts to lower our future funding costs and improve our funding mix.  Salaries and employee benefits expense increased due to annual salary increases and an increase in incentive compensation.  An impairment charge of $758 thousand was recorded in third quarter of 2012 due to our decision to close a branch.  Occupancy and equipment expense decreased due to decreases in real estate taxes and equipment maintenance costs.  FDIC insurance premiums decreased due to a change in the assessment computation during the second quarter of 2012 and the impact of improved credit quality on the computation.  Other real estate expense decreased as a result of decreased holding costs related to other real estate owned given we have fewer properties.  The decrease in other operating expenses was primarily due to a decrease in the clawback liability related to our loss share agreements with the FDIC.

Income Taxes

The Company had income tax expense of $9.3 million for the three months ended September 30, 2012 compared to income tax expense of $9.0 million for the same period in 2011 due to the Company’s primarily due to improvement in pre-tax income.

Year-To-Date Results

The Company had net income of $66.4 million and net income available to common stockholders of $63.1 million in the nine months ended September 30, 2012 compared to net income of $19.3 and net income available to common stockholders of $11.5 million in the nine months ended September 30, 2011.  The results for the nine months ended September 30, 2012 generated an annualized return on average assets of 0.93% and an annualized return on average common equity of 6.87% compared to 0.26% and 1.32%, respectively, for the same period in 2011.  The results for the nine months ended September 30, 2011 included a provision for credit losses of approximately $50 million in connection with the sale during the second quarter of 2011 of loans with an aggregate carrying amount of $281.6 million prior to the transfer to loans held for sale, including $156.3 million in non-performing loans.  The remaining decrease in provision for credit losses was primarily due to the decrease in non-performing and potential problem loan inflows as well as more recoveries in 2012.

Net interest income on a tax equivalent basis was $238.3 million for the nine months ended September 30, 2012, a decrease of $15.4 million, or 6.1%, from $253.7 million for the comparable period in 2011.  The decrease was primarily due to a decline in the level of interest earning assets of $300.1 million and an 11 basis point decline in the net interest margin on a fully tax equivalent basis.  See “Net Interest Margin” section below for further analysis.

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The Company recorded a negative provision for credit losses of $9.9 million in the nine months ended September 30, 2012 compared to a provision for credit losses of $112.8 million in the nine months ended September 30, 2011.  Net charge-offs were $1.1 million in the nine months ended September 30, 2012 compared to $163.1 million in the nine months ended September 30, 2011.  Our provision for credit losses and net charge-offs for the nine months ended September 30, 2011 were impacted by the loan sale in the second quarter of 2011 noted earlier.  See “Asset Quality” below for further analysis of the allowance for loan losses.

Net income available to common stockholders was also impacted by the repurchase in the first quarter of 2012 of all $196 million of preferred stock issued in 2008 to the U.S. Department of Treasury as part of the TARP.  As a result, dividends and discount accretion on preferred shares decreased to $3.3 million in the nine months ended September 30, 2012 from $7.8 million in the nine months ended September 30, 2011.

Other Income (in thousands):

	Nine Months Ended
	September 30,						Increase/			Percentage
	2012			2011			(Decrease)			Change
Other income:
Capital markets and international banking fees	$	2,631		$	1,107		$	1,524		138	%
Commercial deposit and treasury management fees	17,545			17,643			(98		)	(1	)%
Lease financing, net	23,963			19,138			4,825			25	%
Trust and asset management fees	13,367			13,158			209			2	%
Card fees	6,858			5,921			937			16	%
Loan service fees	3,459			5,286			(1,827		)	(35	)%
Retail and other deposit service fees	10,790			12,373			(1,583		)	(13	)%
Brokerage fees	3,704			4,307			(603		)	(14	)%
Net gain on investment securities	244			229			15			7	%
Increase in cash surrender value of life insurance	2,677			3,433			(756		)	(22	)%
Net (loss) gain on sale of assets	(37		)	370			(407		)	(110	)%
Accretion of FDIC indemnification asset	901			4,155			(3,254		)	(78	)%
Net loss recognized on other real estate owned	(15,968		)	(8,135		)	(7,833		)	96	%
Net gain on sale of loans	1,503			2,241			(738		)	(33	)%
Other operating income	3,677			3,429			248			7	%
Total other income	$	75,314		$	84,655		$	(9,341	)	(11	)%

Other income decreased by $9.3 million for the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011.  Other income was primarily impacted by higher losses recognized on other real estate owned and a decrease in accretion of the FDIC indemnification asset, loan service fees and retail and other deposit service fees.  Net loss recognized on other real estate owned increased due to updated appraisals with lower valuations on land and construction projects.  Accretion of the FDIC indemnification asset is recorded based on the FDIC indemnification asset balance which has declined as we have received loss-share payments.  Loan service fees decreased in the nine months ended September 30, 2012 compared to the same period in 2011 due to a decrease in loan prepayment and exit fees.  Retail and other deposit service fees decreased due to a decrease in NSF fees.  Net gain on sale of loans decreased due to the gain recognized during the nine months ended September 30, 2011 on several commercial real estate loans held for sale.  Cash surrender value of life insurance decreased as a result of a death benefit recorded in the nine months ended September 30, 2011.  These decreases were offset by increases in net lease financing, capital markets and international banking fees and card fee income.  Net lease financing income increased primarily due to an increase in promotional and remarketing income as well as increased sales of equipment maintenance contracts.  Capital markets and international banking fees increased due to an increase in interest rate swap fees.  Card fee income increased due primarily to fees earned on prepaid cards and credit cards.

45

Other Expenses (in thousands):

	Nine Months Ended
	September 30,				Increase /			Percentage
	2012		2011		(Decrease)			Change
Other expense:
Salaries and employee benefits	$	122,658	$	114,012	$	8,646		8	%
Occupancy and equipment expense	27,032		26,969		63			0	%
Computer services and telecommunication expense	11,339		10,503		836			8	%
Advertising and marketing expense	6,021		5,207		814			16	%
Professional and legal expense	4,470		4,725		(255		)	(5	)%
Other intangibles amortization expense	3,759		4,255		(496		)	(12	)%
FDIC insurance premiums	6,198		9,202		(3,004		)	(33	)%
Branch impairment charges	758		1,000		(242		)	(24	)%
Other real estate expense, net	2,541		2,830		(289		)	(10	)%
Penalty on prepayment of borrowings	12,682		—		12,682			NM
Other operating expenses	17,872		21,497		(3,625		)	(17	)%
Total other expense	$	215,330	$	200,200	$	15,130		8	%

NM — Not meaningful

Other expense increased $15.1 million for the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011.  The Company recorded $12.7 million in prepayment fees on interest bearing liabilities during the nine months ended September 30, 2012 as a result of the prepayment of certain brokered certificates of deposit and an FHLB advance in efforts to lower our future funding costs and improve our funding mix.  Salaries and employee benefits expense increased primarily due to annual salary increases, higher health insurance claims and an increase in incentive compensation.  Other operating expenses were favorably impacted in the nine months ended September 30, 2012 by a decrease in the clawback liability related to our loss share agreements with the FDIC.  FDIC insurance premiums decreased due to a change in the assessment computation during the second quarter of 2012 and the impact of improved credit quality on the computation.

Income Taxes

The Company had income tax expense of $26.8 million for the nine months ended September 30, 2012 compared to an income tax benefit of $2.5 million for the same period in 2011 primarily due to the Company’s improvement in pre-tax income.

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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 September 30,
	2012						2011
	Average				Yield /		Average				Yield /
	Balance		Interest		Rate		Balance		Interest		Rate
Interest Earning Assets:
Loans (1) (2) (3)	$	5,350,911	$	65,301	4.85	%	$	5,588,053	$	76,179	5.41	%
Loans exempt from federal income taxes (4)	284,196		3,354		4.62		239,128		2,872		4.70
Taxable investment securities	1,418,549		7,287		2.05		1,869,961		11,699		2.50
Investment securities exempt from federal income taxes (4)	843,908		11,665		5.53		456,777		6,614		5.67
Other interest earning deposits	483,622		312		0.26		365,723		244		0.26
Total interest earning assets	8,381,186		$	87,919	4.17		8,519,642		$	97,608	4.55
Non-interest earning assets	1,134,973						1,287,919
Total assets	$	9,516,159					$	9,807,561
Interest Bearing Liabilities:
Deposits:
NOW and money market deposit accounts	$	2,601,181	$	1,026	0.16	%	$	2,656,490	$	1,731	0.26	%
Savings deposits	796,229		181		0.09		742,334		321		0.17
Time deposits	2,105,389		6,167		1.17		2,461,270		8,155		1.31
Short-term borrowings	233,780		342		0.58		225,580		204		0.36
Long-term borrowings and junior subordinated notes	371,057		2,872		3.03		435,414		3,461		3.11
Total interest bearing liabilities	6,107,636		$	10,588	0.69		6,521,088		$	13,872	0.84
Non-interest bearing deposits	2,020,762						1,810,501
Other non-interest bearing liabilities	139,915						123,391
Stockholders’ equity	1,247,846						1,352,581
Total liabilities and stockholders’ equity	$	9,516,159					$	9,807,561
Net interest income/interest rate spread (5)			$	77,331	3.48	%			$	83,736	3.71	%
Taxable equivalent adjustment			5,256						3,320
Net interest income, as reported			$	72,075					$	80,416
Net interest margin (6)					3.42	%					3.74	%
Tax equivalent effect					0.25	%					0.16	%
Net interest margin on a fully tax equivalent basis (6)					3.67	%					3.90	%

(1)Non-accrual loans are included in average loans.

(2)Interest income includes amortization of deferred loan origination fees of $749 thousand and $972 thousand for the three months ended September 30, 2012 and 2011, respectively.

(3)Loans held for sale are included in the average loan balance listed.  Related interest income is included in loan interest income.

(4)Non-taxable loan and investment income is presented on a fully tax equivalent basis assuming a 35% tax rate.

(5)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.

(6)Net interest margin represents net interest income as a percentage of average interest earning assets.

Net interest income on a tax equivalent basis was $77.3 million for the three months ended September 30, 2012, a decrease of $6.4 million, or 7.6%, from $83.7 million for the comparable period in 2011.  The decrease in net interest income was due to a lower level of average interest earning assets, which declined $138.5 million from September 30, 2011, and a 23 basis point decrease in net interest margin on a fully tax equivalent basis.  The decrease in average interest earning assets was due to soft loan demand and paydowns as a result of credit remediations during the nine months ended September 30, 2012.  The net interest margin on a fully tax equivalent basis during the third quarter of 2012 was 3.67% compared to 3.90% during the third quarter of 2011.  The decrease in the margin was a result of lower yields on interest earning assets, as balances shifted from loans (both covered and non-covered) to cash balances maintained at the Federal Reserve and yields on covered loans declined.  The decrease was offset by lower cost of funds as a result of a favorable change in the funding mix and repricing of

47

certificates of deposit.

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):

	Nine Months Ended September 30,
	2012						2011
	Average				Yield /		Average				Yield /
	Balance		Interest		Rate		Balance		Interest		Rate
Interest Earning Assets:
Loans (1) (2) (3)	$	5,446,682	$	202,017	4.95	%	$	5,971,977	$	244,219	5.47	%
Loans exempt from federal income taxes (4)	271,297		9,788		4.74		221,609		7,858		4.68
Taxable investment securities	1,554,243		27,053		2.32		1,619,182		29,741		2.45
Investment securities exempt from federal income taxes (4)	798,660		33,268		5.55		388,208		17,057		5.79
Other interest earning deposits	329,252		639		0.26		499,286		972		0.26
Total interest earning assets	8,400,134		$	272,765	4.34		8,700,262		$	299,847	4.61
Non-interest earning assets	1,176,758						1,289,334
Total assets	$	9,576,892					$	9,989,596
Interest Bearing Liabilities:
Deposits:
NOW and money market deposit accounts	$	2,619,297	$	3,278	0.17	%	$	2,686,327	$	6,139	0.31	%
Savings deposits	784,706		642		0.11		726,316		1,052		0.19
Time deposits	2,219,554		20,272		1.22		2,678,118		28,121		1.40
Short-term borrowings	225,390		910		0.54		246,201		660		0.36
Long-term borrowings and junior subordinated notes	393,464		9,322		3.11		443,115		10,127		3.01
Total interest bearing liabilities	6,242,411		$	34,424	0.74		6,780,077		$	46,099	0.91
Non-interest bearing deposits	1,924,656						1,736,152
Other non-interest bearing liabilities	131,890						120,639
Stockholders’ equity	1,277,935						1,352,728
Total liabilities and stockholders’ equity	$	9,576,892					$	9,989,596
Net interest income/interest rate spread (5)			$	238,341	3.60	%			$	253,748	3.70	%
Taxable equivalent adjustment			15,069						8,720
Net interest income, as reported			$	223,272					$	245,028
Net interest margin (6)					3.55	%					3.77	%
Tax equivalent effect					0.24	%					0.13	%
Net interest margin on a fully tax equivalent basis (6)					3.79	%					3.90	%

(1)Non-accrual loans are included in average loans.

(2)Interest income includes amortization of deferred loan origination fees of $2.5 million and $3.5 million for the nine months ended September 30, 2012 and 2011, respectively.

(3)Loans held for sale are included in the average loan balance listed.  Related interest income is included in loan interest income.

(4)Non-taxable loan and investment income is presented on a fully tax equivalent basis assuming a 35% tax rate.

(5)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.

(6)Net interest margin represents net interest income as a percentage of average interest earning assets.

Net interest income on a tax equivalent basis was $238.3 million for the nine months ended September 30, 2012, a decrease of $15.4 million, or 6.1%, from $253.7 million for the comparable period in 2011.  The decrease in net interest income was due to a lower level of average interest earning assets which declined $300.1 million from September 30, 2011, and an 11 basis point decrease in the net interest margin on a fully tax equivalent basis.  The net interest margin on a fully tax equivalent basis during the nine months ended September 30, 2012 was 3.79% compared to 3.90% during the nine months ended September 30, 2011.  The decrease in the margin was a result of lower yields on interest earning assets, as balances shifted from loans (both covered and non-covered) to investment securities and yields on covered loans declined.  The decrease was offset by lower cost of funds as a result of a favorable change in the funding mix and repricing of certificates of deposit.  In addition, our non-performing loans reduced our net interest margin during the nine months ended September 30, 2012 and the nine months ended September 30, 2011 by approximately eight basis points and 15 basis points, respectively.

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Balance Sheet

Total assets decreased $369.5 million, or 3.8%, from $9.8 billion at December 31, 2011 to $9.5 billion at September 30, 2012.  Interest earning cash increased $227.0 million to $327.3 million at September 30, 2012 compared to $100.3 million at December 31, 2011.  Investment securities decreased $140.9 million from December 31, 2011 to September 30, 2012 primarily due to cash flows on mortgage-backed securities.  Total loans, excluding covered loans and loans held for sale decreased by $159.8 million, or 3.0%, to $5.1 billion at September 30, 2012 from $5.3 billion at December 31, 2011 due to soft loan demand coupled with intense competition for new loans.  In addition, there were paydowns on construction and commercial real estate loans as a result of successful credit remediation.

Total liabilities decreased by $237.3 million from $8.4 billion at December 31, 2011 to $8.2 billion at September 30, 2012.  Total deposits decreased by $168.3 million at September 30, 2012 from $7.6 billion at December 31, 2011.  Noninterest bearing deposits increased approximately $125.8 million from December 31, 2011 to September 30, 2012 due primarily to the addition of new customers.  Money market and NOW accounts increased $37.3 million and savings accounts increased $44.1 million while customer certificates of deposit balances decreased $293.2 million from the December 31, 2011 as we continued our efforts to lower our funding costs and improve our deposit mix.  Part of those efforts also include the prepayment during September 2012 of $101 million in brokered certificates of deposit with a 3.16% average interest rate, a $100 million FHLB advance with a 3.85% interest rate and $6.2 million in junior subordinated notes issued to capital trust with a 10.6% interest rate.

Total stockholders’ equity decreased $132.2 million to $1.3 billion at September 30, 2012 compared to $1.4 billion at December 31, 2011 as a result of the repurchase of all $196.0 million of preferred stock issued as part of TARP in the first quarter of 2012.  During the second quarter of 2012, we repurchased in full the ten-year warrant held by the U.S. Department of Treasury to purchase 506,024 shares of the Company’s common stock issued to the Treasury as part of TARP.  The price paid by the Company to repurchase the warrant was $1.5 million.  Theses repurchases were partly offset by earnings of $66.4 million for the nine months ended September 30, 2012.

49

Loan Portfolio

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

	September 30,				December 31,				September 30,
	2012				2011				2011
	Amount		% of Total		Amount		% of Total		Amount		% of Total
Commercial related credits:
Commercial loans	$	1,073,981	19	%	$	1,113,123	19	%	$	1,042,583	18	%
Commercial loans collateralized by assignment of lease payments	1,219,361		22	%	1,208,575		20	%	1,067,191		18	%
Commercial real estate	1,770,261		31	%	1,853,788		31	%	1,844,894		32	%
Construction real estate	149,872		3	%	183,789		3	%	210,206		4	%
Total commercial related credits	4,213,475		75	%	4,359,275		73	%	4,164,874		72	%
Other loans:
Residential real estate	308,866		5	%	316,787		5	%	316,305		5	%
Indirect vehicle	206,973		3	%	187,481		3	%	189,033		4	%
Home equity	314,718		6	%	336,043		6	%	348,934		6	%
Consumer loans	84,651		2	%	88,865		2	%	76,025		1	%
Total other loans	915,208		16	%	929,176		16	%	930,297		16	%
Gross loans excluding covered loans	5,128,683		91	%	5,288,451		89	%	5,095,171		88	%
Covered loans (1)	496,162		9	%	662,544		11	%	718,566		12	%
Total loans (2)	$	5,624,845	100	%	$	5,950,995	100	%	$	5,813,737	100	%

(1)Loans subject to loss-share with the FDIC are referred to as “covered loans.”

(2)Gross loan balances at September 30, 2012, December 31, 2011 and September 30, 2011 are net of unearned income, including net deferred loan fees of $955 thousand, $1.0 million, and $1.4 million, respectively.

Asset Quality

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

	September 30,			December 31,			September 30,
	2012			2011			2011
Non-performing loans:(1)
Non-accrual loans	$	104,813		$	129,309		$	140,979
Loans 90 days or more past due, still accruing interest	470			82			—
Total non-performing loans	105,283			129,391			140,979
Other real estate owned(2)	42,427			78,452			87,469
Repossessed vehicles	113			156			249
Total non-performing assets	$	147,823		$	207,999		$	228,697
Total allowance for loan losses	$	121,182		$	126,798		$	128,610
Accruing restructured loans (3)	$	17,929		$	37,996		$	34,321
Total non-performing loans to total loans	1.87		%	2.17		%	2.42		%
Total non-performing assets to total assets	1.56		%	2.12		%	2.30		%
Allowance for loan losses to non-performing loans(1)	115.10		%	98.00		%	91.23		%

(1)This table excludes purchased credit-impaired loans that were acquired as part of the Heritage (completed in 2009), InBank (completed in 2009), Benchmark (completed in 2009), Broadway Bank (completed in 2010), and New Century Bank (completed in 2010) FDIC-assisted transactions.  Purchased credit-impaired loans have evidence of deterioration in credit quality prior to acquisition.  This table also excludes loans held for sale.

(2)This table excludes other real estate owned that related to FDIC-assisted transactions.  Other real estate owned related to these transactions totaled $32.6 million at September 30, 2012, $60.4 million at December 31, 2011, and $69.3 million at September 30, 2011.

(3)Accruing restructured loans consists primarily of residential real estate and home equity loans that have been modified and are performing in accordance with those modified terms.  The decrease in accruing restructured loans from December 31, 2011 to September 30, 2012 related primarily to a significant paydown on a commercial real estate loan.

50

A loan is classified as a troubled debt restructuring when a borrower is experiencing financial difficulties that leads to a restructuring of the loan, and the Company grants concessions to the borrower in the restructuring that it would not otherwise consider. These concessions may include rate reductions, principal forgiveness, extension of maturity date and other actions intended to minimize potential losses.  A loan that is modified at a market rate of interest may no longer be classified as troubled debt restructuring in the calendar year subsequent to the restructuring if it is in compliance with the modified terms.  Payment performance prior and subsequent to the restructuring is taken into account in assessing whether it is likely that the borrower can meet the new terms.  This may result in the loan being returned to accrual at the time of restructuring.  A period of sustained repayment for at least six months generally is required for return to accrual status.

The following table represents a summary of other real estate owned (“OREO”), excluding assets acquired in FDIC-assisted transactions, for the nine months ended September 30, 2012 and 2011 (in thousands):

	September 30,
	2012			2011
Balance at beginning of period	$	78,452		$	71,476
Transfers in at fair value less estimated costs to sell	2,724			55,604
Capitalized OREO costs	2,304			982
Fair value adjustments	(13,919		)	(7,255		)
Net gains on sales of OREO	1,264			903
Cash received upon disposition	(28,398		)	(34,241		)
Balance at end of period	$	42,427		$	87,469

The following table presents data related to non-performing loans, excluding purchased credit-impaired loans, by dollar amount and category at September 30, 2012 (dollar amounts in thousands):

	Commercial and Lease				Construction Real Estate				Commercial Real Estate				Consumer			Total Loans
	Number of Relationships	Amount			Number of Relationships	Amount			Number of Relationships	Amount			Amount			Amount
$10.0 million or more	—	$	—		—	$	—		—	$	—		$	—		$	—
$5.0 million to $9.9 million	1	6,022			—	—			—	—			—			6,022
$1.5 million to $4.9 million	3	6,996			—	—			10	28,920			—			35,916
Under $1.5 million	36	9,630			4	1,225			83	26,467			26,023			63,345
	40	$	22,648		4	$	1,225		93	$	55,387		$	26,023		$	105,283
Percentage of individual loan category		0.99		%		0.82		%		3.13		%	2.84		%	1.87		%

Consumer non-performing loans increased $11.3 million to $26.0 million at September 30, 2012 compared to December 31, 2011, which was primarily due to the increase in restructured consumer loans.

The following table presents data related to non-performing loans, excluding purchased credit-impaired loans, by dollar amount and category at December 31, 2011 (dollar amounts in thousands):

	Commercial and Lease				Construction Real Estate				Commercial Real Estate				Consumer			Total Loans
	Number of Relationships	Amount			Number of Relationships	Amount			Number of Relationships	Amount			Amount			Amount
$10.0 million or more	—	$	—		—	$	—		—	$	—		$	—		$	—
$5.0 million to $9.9 million	2	14,322			—	—			2	15,435			—			29,757
$1.5 million to $4.9 million	5	12,031			—	—			13	37,509			—			49,540
Under $1.5 million	42	10,642			3	1,145			61	23,607			14,700			50,094
	49	$	36,995		3	$	1,145		76	$	76,551		$	14,700		$	129,391
Percentage of individual loan category		1.59		%		0.62		%		4.13		%	1.58		%	2.17		%

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Allowance for Loan Losses

Management believes the allowance for loan losses accounting policy is critical to the portrayal and understanding of our financial condition and results of operations.  Selection and application of this “critical accounting policy” involves judgments, estimates, and uncertainties that are subject to change.  In the event that different assumptions or conditions were to prevail, and depending upon the severity of such changes, materially different financial condition or results of operations is a reasonable possibility.

We maintain our allowance for loan losses at a level that management believes is appropriate to absorb probable losses on existing loans based on an evaluation of the collectability of loans, underlying collateral and prior loss experience.

Our allowance for loan losses is comprised of three elements: a general loss reserve; a specific reserve for impaired loans; and a reserve for smaller-balance homogenous loans.  Each element is discussed below.

General Loss Reserve.  We maintain a general loan loss reserve for the four categories of commercial-related loans in our portfolio - commercial loans, commercial loans collateralized by the assignment of lease payments (lease loans), commercial real estate loans and construction real estate loans.  Under our loan risk rating system, each loan, with the exception of those included in large groups of smaller-balance homogeneous loans, is risk rated between one and nine by the originating loan officer, Senior Credit Management, Loan Review or any loan committee.  Loans rated one represent those loans least likely to default and a loan rated nine represents a loss.  The probability of loans defaulting for each risk rating, sometimes referred to as default factors, are estimated based on the frequency with which loans migrate from one risk rating to another and to default status over time.  We use a loan loss reserve model that incorporates the migration of loan risk ratings and historical default data over a multi-year period to develop our estimated default factors (EDFs).  The model tracks annual loan rating migrations by loan type and currently uses loan risk rating migrations for ten years.  The migration data is adjusted by using average losses for an economic cycle to develop EDFs by loan type, risk rating and maturity.  EDFs are updated annually in December.  During 2011, we shortened the period of time used in computing average losses for an economic cycle to ten years.

Estimated loan default factors are multiplied by individual loan balances in each risk-rating category and again multiplied by an historical loss given default estimate for each loan type (which incorporates estimated recoveries) to determine an appropriate level of allowance by loan type.  This approach is applied to the commercial, lease, commercial real estate, and construction real estate components of the portfolio.

To account for current economic conditions, the general allowance for loan and lease losses (ALLL) also includes adjustments for macroeconomic factors.  Macroeconomic factors adjust the ALLL upward or downward based on the current point in the economic cycle using predictive economic data and are applied to the loan loss model through a separate allowance element for the commercial, commercial real estate, construction real estate and lease loan components.  Our macroeconomic factors are developed using regression analyses to select economic indicators that have a high correlation with industry-wide charge-off rates.  The correlation of over 25 indicators to charge-offs were tested (change in fed funds rate, change in personal income, durable goods orders, etc.).  We annually review this data to determine that such a correlation continues to exist.  We currently use the following macroeconomic indicators in our macroeconomic factor computation:

Commercial and industrial loans and lease loans:  Crude oil prices, our prior period charge-off rates and the manufacturing index.

Commercial real estate loans and construction loans:  Crude oil prices, our prior period charge-off rates and the consumer confidence index.

Using the indicators noted above, a predicted industry wide charge-off rate is calculated.  The predicted charge-off percentage is then compared to the cycle average charge-off percentage used in our EDF computation discussed above, and a macroeconomic adjustment factor is calculated.  The macroeconomic adjustment factor is applied to each commercial loan type.  Each year, we review the predictive nature of the macroeconomic factors by comparing actual charge-offs to the predicted model charge-offs, re-run our regression analysis and re-calibrate the macroeconomic factors as appropriate.

52

The general loss reserve was $95.6 million as of September 30, 2012 and $102.2 million as of December 31, 2011.  The decrease in the general reserve was primarily the result of improving overall credit quality in the portfolio.  Reserves on impaired loans are included in the “Specific Reserve” section below.

Specific Reserves.  Our allowance for loan losses also includes specific reserves on impaired loans.  A loan is considered to be impaired when management believes, after considering collection efforts and other factors, the borrower’s financial condition is such that the collection of all contractual principal and interest payments due is doubtful.

At each quarter-end, impaired loans are reviewed individually, with adjustments made to the general calculated reserve for each loan as deemed necessary.  Specific adjustments are made depending on expected cash flows and/or the value of the collateral securing each loan.  Generally, the Company obtains a current external appraisal (within 12 months) on real estate secured impaired loans.  Our appraisal policy is designed to comply with the Interagency Appraisal and Evaluation Guidelines, most recently updated on December 2010. As part of our compliance with these other regulations, we maintain an internal Appraisal Review Department that engages and reviews all third party appraisals.

For impaired loans with real estate as all or part of the collateral, third party appraisals are obtained at least annually. The only exception occurs where we are in a junior position and it is determined that the amount of the senior mortgage (when known) far exceeds a reasonable value for the property.  The real estate portion of the collateral is estimated to have no value under this exception.  Other valuation techniques are used as well, including internal valuations, comparable property analyses and contractual sales information.

In addition, each impaired loan with real estate collateral is reviewed quarterly by the Chief Real Estate Appraiser to determine that the most recent valuation remains appropriate during subsequent quarters until the next appraisal is received.  If considered necessary by the Chief Real Estate Appraiser, the appraised value may be further discounted by internally applying accepted appraisal methodologies to an older appraisal.  Accepted appraisal methodologies include:  income capitalization approach adjusting for changes in underlying leases, adjustments related to condominium projects with units sales, adjustments for loan fundings, and “As is” compared to “As Stabilized” valuations.  As of September 30, 2012, almost all appraisals were completed within the previous 12 months.

Other valuation techniques are also used to value non-real estate assets.  Discounts may be applied in the impairment analysis used for general business assets (GBA).  Examples of GBA include accounts receivable, inventory, and any marketable securities pledged. The discount is used to reflect collection risk in the event of default that may not have been included in the valuation of the asset.

The total specific reserve component of the allowance was $11.3 million as of September 30, 2012 and $10.8 million as of December 31, 2011.

Smaller Balance Homogenous Loans.  Pools of homogeneous loans with similar risk and loss characteristics are also assessed for probable losses.  These loan pools include consumer, residential real estate, home equity and indirect vehicle loans.  Migration probabilities obtained from past due roll rate analyses are applied to current balances to forecast charge-offs over a one-year time horizon.  The reserves for smaller balance homogenous loans totaled $14.3 million at September 30, 2012 and $13.8 million at December 31, 2011.

We consistently apply our methodology for determining the appropriateness of the allowance for loan losses, but may adjust our methodologies and assumptions based on historical information related to charge-offs and management’s evaluation of the loan portfolio.  In this regard, we periodically review the following in order to validate our allowance for loan losses: historical net charge-offs as they relate to prior allowance for loan loss, comparison of historical loan migration in past years compared to the current year, overall credit trends and ratios and any significant changes in loan concentrations.  In reviewing this data, we adjust qualitative factors within our allowance methodology to appropriately reflect any changes warranted by the validation process.

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A reconciliation of the activity in the allowance for credit and loan losses follows (dollar amounts in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
Balance at the beginning of period	$	128,840		$	147,107		$	135,975		$	192,217
Provision for credit losses	(13,000		)	11,500			(9,900		)	112,750
Charge-offs:
Commercial loans	(75		)	(3,497		)	(2,065		)	(14,639		)
Commercial loans collateralized by assignment of lease payments (lease loans)	—			—			(1,720		)	(93		)
Commercial real estate loans	(2,994		)	(7,815		)	(8,412		)	(92,840		)
Construction real estate	(71		)	(6,008		)	(3,951		)	(45,928		)
Residential real estate	(474		)	(141		)	(1,876		)	(11,783		)
Indirect vehicle	(433		)	(611		)	(1,636		)	(1,882		)
Home equity	(1,209		)	(1,605		)	(3,157		)	(9,005		)
Consumer loans	(332		)	(475		)	(864		)	(1,363		)
Total charge-offs	(5,588		)	(20,152		)	(23,681		)	(177,533		)
Recoveries:
Commercial loans	306			1,413			2,730			4,736
Commercial loans collateralized by assignment of lease payments (lease loans)	111			5			460			224
Commercial real estate loans	12,893			739			16,116			2,585
Construction real estate	752			681			1,458			5,071
Residential real estate	8			7			230			40
Indirect vehicle	224			327			835			1,021
Home equity	303			151			423			218
Consumer loans	77			83			280			532
Total recoveries	14,674			3,406			22,532			14,427
Total net recoveries (charge-offs)	9,086			(16,746		)	(1,149		)	(163,106		)
Allowance for credit losses	124,926			141,861			124,926			141,861
Allowance for unfunded credit commitments	(3,744		)	(13,251		)	(3,744		)	(13,251		)
Allowance for loan losses	$	121,182		$	128,610		$	121,182		$	128,610
Total loans, excluding loans held for sale	$	5,624,845		$	5,813,737		$	5,624,845		$	5,813,737
Average loans, excluding loans held for sale	$	5,630,232		$	5,827,181		$	5,714,657		$	6,191,268
Ratio of allowance for loan losses to total loans, excluding loans held for sale	2.15		%	2.21		%	2.15		%	2.21		%
Net loan charge-offs to average loans, excluding loans held for sale (annualized)	-0.64		%	1.14		%	0.03		%	3.52		%

Gross recoveries of $14.7 million were recorded in the three months ended September 30, 2012, prompting a negative provision for credit losses of $13.0 million.  The provision for credit losses was $11.5 million for the three months ended September 30, 2011.  The results for the nine months ended September 30, 2011 include a provision for credit losses of approximately $50 million in connection with the sale, as noted earlier, during the quarter ended June 30, 2011 of loans with an aggregate carrying amount of $281.6 million prior to the transfer to loans held for sale, including $156.3 million in non-performing loans.  The sale resulted in charge-offs of approximately $87.6 million, which impacted all loan types.  The remaining decrease in provision for credit losses was primarily due to the decrease in non-performing and potential problem loan inflows as well as more recoveries in 2012.

Additions to the allowance for loan losses, which are charged to earnings through the provision for credit losses, are determined based on a variety of factors, including specific reserves, current loan risk ratings, delinquent loans, historical loss experience and economic conditions in our market area.  In addition, federal regulatory authorities, as part of the examination process, periodically review our allowance for loan losses.  The regulators may require us to record adjustments to the allowance level based upon their assessment of the information available to them at the time of examination.  Although management believes the allowance for loan losses is sufficient to cover probable

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losses inherent in the loan portfolio, there can be no assurance that the allowance will prove sufficient to cover actual loan losses.

We utilize an internal asset classification system as a means of reporting problem and potential problem assets.  At scheduled meetings of the board of directors of MB Financial Bank, a watch list is presented, showing significant loan relationships listed as “Special Mention,” “Substandard,” and “Doubtful.”  An asset is classified Substandard if it is inadequately protected by the current net worth and paying capacity of the obligor or the collateral pledged, if any.  Substandard assets include those characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected.  Assets classified as Doubtful have all the weaknesses inherent in those classified Substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.  Assets classified as Loss are those considered uncollectible and viewed as valueless assets and have been charged-off.  Assets that do not currently expose us to sufficient risk to warrant classification in one of the aforementioned categories, but possess weaknesses that deserve management’s close attention are deemed to be Special Mention.

Our determination as to the classification of our assets and the amount of our valuation allowances is subject to review by the Office of the Comptroller of the Currency, MB Financial Bank’s primary regulator, which can order the establishment of additional general or specific loss allowances.  There can be no assurance that regulators, in reviewing our loan portfolio, will not request us to materially adjust our allowance for loan losses.  The Office of the Comptroller of the Currency, in conjunction with the other federal banking agencies, has adopted an interagency policy statement on the allowance for loan losses.  The policy statement provides guidance for financial institutions on both the responsibilities of management for the assessment and establishment of adequate allowances and guidance for banking agency examiners to use in determining the adequacy of general valuation guidelines.  Generally, the policy statement recommends that (1) institutions have effective systems and controls to identify, monitor and address asset quality problems; (2) management has analyzed all significant factors that affect the collectability of the portfolio in a reasonable manner; and (3) management has established acceptable allowance evaluation processes that meet the objectives set forth in the policy statement.  We analyze our process regularly, with modifications made if needed, and report those results four times per year at meetings of our board of directors.  However, there can be no assurance that regulators, in reviewing our loan portfolio, will not request us to materially adjust our allowance for loan losses at the time of their examination.

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.

Potential Problem Loans

We define potential problem loans as performing loans rated substandard and that do not meet the definition of a non-performing loan (See “Asset Quality” section above for non-performing loans).  We do not necessarily expect to realize losses on potential problem loans, but we recognize potential problem loans carry a higher probability of default and require additional attention by management.  The aggregate principal amounts of potential problem loans as of September 30, 2012 and December 31, 2011 were approximately $134.3 million and $149.8 million, respectively.  As of September 30, 2012, potential problem loans included $73.9 million and $37.9 million in commercial real estate and commercial loans, respectively.  Management believes it has established an adequate allowance for probable loan losses as appropriate under GAAP.

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Lease Investments

The lease portfolio is comprised of various types of equipment, generally technology related, including computer systems and satellite equipment, material handling and general manufacturing equipment.  The credit quality of the lessee is often an investment grade public debt rating by Moody’s or Standard & Poors, or the equivalent as determined by us, and at times below investment grade.

Lease investments by categories follow (in thousands):

	September 30,			December 31,			September 30,
	2012			2011			2011
Direct finance leases:
Minimum lease payments	$	49,395		$	56,744		$	55,561
Estimated unguaranteed residual values	5,919			6,681			6,397
Less: unearned income	(4,538		)	(5,349		)	(5,308		)
Direct finance leases (1)	$	50,776		$	58,076		$	56,650
Leveraged leases:
Minimum lease payments	$	27,072		$	21,907		$	20,468
Estimated unguaranteed residual values	2,606			2,702			2,853
Less: unearned income	(2,397		)	(2,004		)	(2,051		)
Less: related non-recourse debt	(25,655		)	(20,629		)	(19,251		)
Leveraged leases (1)	$	1,626		$	1,976		$	2,019
Operating leases:
Equipment, at cost	$	206,798		$	242,453		$	240,444
Less: accumulated depreciation	(93,618		)	(106,963		)	(107,099		)
Lease investments, net	$	113,180		$	135,490		$	133,345

(1)Direct finance and leveraged leases are included as commercial loans collateralized by assignment of lease payments for financial statement purposes.

Leases that transfer substantially all of the benefits and risk related to the equipment ownership to the lessee are classified as direct financing.  If these direct finance leases have non-recourse debt associated with them, they are further classified as leveraged leases, and the associated debt is netted with the outstanding balance in the consolidated financial statements.  Interest income on direct finance and leveraged leases is recognized using methods which approximate a level yield over the term of the lease.

Operating leases are investments in equipment leased to other companies, where the residual component makes up more than 10% of the investment.  The Company funds most of the lease equipment purchases internally, but has some loans at other banks which totaled $23.8 million at September 30, 2012, $31.0 million at December 31, 2011 and $32.3 million at September 30, 2011.

The lease residual value represents the present value of the estimated fair value of the leased equipment at the termination of the lease.  Lease residual values are reviewed quarterly and any write-downs, or charge-offs deemed necessary are recorded in the period in which they become known.  Gains on leased equipment periodically result when a lessee renews a lease or purchases the equipment at the end of a lease, or the equipment is sold to a third party at a profit.  Individual lease transactions can, however, result in a loss.  This generally happens when, at the end of a lease, the lessee does not renew the lease or purchase the equipment.  To mitigate this risk of loss, we usually limit individual leased equipment residuals (expected lease book values at the end of initial lease terms) to approximately $500 thousand per transaction and seek to diversify both the type of equipment leased and the industries in which the lessees to whom such equipment is leased participate.  Often times, there are several individual lease schedules under one master lease.  There were 2,357 leases at September 30, 2012 compared to 2,668 leases at December 31, 2011 and 2,621 leases at September 30, 2011.  The average residual value per lease schedule was approximately $20 thousand at September 30, 2012 compared to $21 thousand at December 31, 2011 and $21 thousand at September 30, 2011.  The average residual value per master lease schedule was approximately $159 thousand at September 30, 2012, $166 thousand at December 31, 2011 and $176 thousand at September 30, 2011.

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At September 30, 2012, the following reflects the residual values for leases by category in the year the initial lease term ends (in thousands):

	Residual Values
	Direct
	Finance		Leveraged		Operating
	Leases		Leases		Leases		Total
End of initial lease term December 31,
2012	$	785	$	44	$	5,457	$	6,286
2013	1,684		633		6,451		8,768
2014	2,002		880		10,662		13,544
2015	796		891		7,388		9,075
2016	331		158		6,887		7,376
Thereafter	321		—		2,796		3,117
	$	5,919	$	2,606	$	39,641	$	48,166

Investment Securities

The following table sets forth the amortized cost and fair value of our investment securities, by type of security as indicated (in thousands):

	September 30, 2012				December 31, 2011				September 30, 2011
	Amortized		Fair		Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value		Cost		Value
Available for sale
U.S. Government sponsored agencies and enterprises	$	39,233	$	42,187	$	39,640	$	42,401	$	53,016	$	56,007
States and political subdivisions	620,489		668,966		500,979		535,660		366,651		394,279
Residential mortgage-backed securities	1,009,509		1,021,983		1,256,696		1,281,806		1,348,460		1,369,967
Commercial mortgage-backed securities	51,156		53,979		51,324		52,685		51,341		51,822
Corporate bonds	16,617		16,626		5,899		5,899		5,899		5,899
Equity securities	10,644		11,231		10,457		10,846		10,324		10,764
	1,747,648		1,814,972		1,864,995		1,929,297		1,835,691		1,888,738
Held to maturity
States and political subdivisions	238,211		259,950		240,183		247,664		240,839		243,487
Residential mortgage-backed securities	257,640		277,039		259,100		263,358		258,199		263,867
	495,851		536,989		499,283		511,022		499,038		507,354
Total	$	2,243,499	$	2,351,961	$	2,364,278	$	2,440,319	$	2,334,729	$	2,396,092

Liquidity and Sources of Capital

Our cash flows are composed of three classifications: cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities.

Cash flows from operating activities primarily include results of operations for the period, adjusted for items in net income that did not impact cash.  Net cash provided by operating activities decreased by $110.7 million to $112.5 million for the nine months ended September 30, 2012 from the nine months ended September 30, 2011, primarily as a result of lower provision for credit losses.

Cash flows from investing activities reflects the impact of loans and investments acquired for the Company’s interest-earning asset portfolios, as well as cash flows from asset sales.  For the nine months ended September 30, 2012, the Company had net cash flows provided by investing activities of $554.3 million compared to net cash flows used in investing activities $125.2 million for the nine months ended September 30, 2011.  This change in cash flows was mainly the result of fewer purchases of investment securities in the nine months ended September 30, 2012 compared to the same period in the prior year.

Cash flows from financing activities include transactions and events whereby cash is obtained from depositors, creditors or investors.  For the nine months ended September 30, 2012, the Company had net cash flows used in financing activities of $454.7 million compared to $461.3 million for the nine months ended September 30, 2011.  The change in cash flows from financing activities was primarily due to less of a decrease in deposits partially offset

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by the repurchase in the first quarter of 2012 of the preferred stock issued to the U.S. Department of Treasury as part of the TARP Capital Purchase Program and the prepayment of the $100.0 million FHLB advance.

We expect to have adequate cash to meet our liquidity needs.  Liquidity management is monitored by an Asset/Liability Management Committee, consisting of members of management, which review historical funding requirements, current liquidity position, sources and stability of funding, marketability of assets, options for attracting additional funds, and anticipated future funding needs, including the level of unfunded commitments.

The Company has numerous sources of liquidity including readily marketable investment securities, shorter-term loans within the loan portfolio, principal and interest cash flows from investments and loans, the ability to attract retail and public fund time deposits and to purchase brokered time deposits.

In the event that additional short-term liquidity is needed or the Company is unable to retain brokered deposits, MB Financial Bank has established relationships with several large regional banks to provide short-term borrowings in the form of federal funds purchases.  While at September 30, 2012, there were no firm lending commitments in place, management believes that MB Financial Bank could borrow approximately $255.0 million for a short time from these banks on a collective basis.  MB Financial Bank is a member of Federal Home Loan Bank of Chicago (FHLB).  As of September 30, 2012, MB Financial Bank had $23.8 million outstanding in FHLB advances and could borrow an additional amount of approximately $532.9 million.  As a contingency plan for significant funding needs, the Asset/Liability Management Committee may also consider the sale of investment securities, selling securities under agreement to repurchase, or the temporary curtailment of lending activities.  As of September 30, 2012, the Company had approximately $1.2 billion of unpledged securities, excluding securities available for pledge at the FHLB.

See Notes 9 and 10 of the Financial Statements presented under Item 1 of this report for details of period end balances and other information for these various funding sources.  There were no material changes outside the ordinary course of business in the Company’s contractual obligations at September 30, 2012 as compared to December 31, 2011.

At September 30, 2012, the Company’s total risk-based capital ratio was 17.91%; Tier 1 capital to risk-weighted assets ratio was 15.83% and Tier 1 capital to average asset ratio was 10.60%.  MB Financial Bank’s total risk-based capital ratio was 17.13%; Tier 1 capital to risk-weighted assets ratio was 15.04% and Tier 1 capital to average asset ratio was 10.07%.  MB Financial Bank, N.A. was categorized as “Well-Capitalized” at September 30, 2012 under the regulations of the Office of the Comptroller of the Currency.

Non-GAAP Financial Information

This report contains certain financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (GAAP).  These measures include net interest income on a fully tax equivalent basis and net interest margin on a fully tax equivalent basis.  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.  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.  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.  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.”

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Forward-Looking Statements

When used in this Quarterly Report on Form 10-Q and in other filings with the Securities and Exchange Commission, in 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 MB Financial, Inc.’s 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 our merger and acquisition activities might not be realized within the anticipated time frames or at all, and costs or difficulties relating to integration matters, including but not limited to customer and employee retention, might be greater than expected; (2) the possibility that the expected benefits of the FDIC-assisted transactions we previously completed will not be realized; (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 loans we originate and loans we acquire from other financial institutions; (4) results of examinations by the Office of Comptroller of Currency and other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our allowance for loan losses or write-down assets; (5) competitive pressures among depository institutions; (6) interest rate movements and their impact on customer behavior and net interest margin; (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) our ability to realize the residual values of our direct finance, leveraged, and operating leases; (11) our ability to access cost-effective funding; (12) changes in financial markets; (13) changes in economic conditions in general and in the Chicago metropolitan area in particular; (14) the costs, effects and outcomes of litigation; (15) new legislation or regulatory changes, including but not limited to the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and regulations adopted thereunder, any changes in capital requirements pursuant to the Dodd-Frank Act and the implementation of the Basel III capital standards other governmental initiatives affecting the financial services industry and changes in federal and/or state tax laws or interpretations thereof by taxing authorities; (16) changes in accounting principles, policies or guidelines; (17) our future acquisitions of other depository institutions or lines of business; and (18) 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.

Item 3. - Quantitative and Qualitative Disclosures about Market Risk

Market Risk.  Market risk is the risk that the market value or estimated fair value of our assets, liabilities, and derivative financial instruments will decline as a result of changes in interest rates or financial market volatility, or that our net income will be significantly reduced by interest rate changes.  Market risk is managed operationally in our Treasury Group, and is addressed through a selection of funding and hedging instruments supporting balance sheet assets, as well as monitoring our asset investment strategies.

Asset Liability Management.  Management and our Treasury Group continually monitor our sensitivity to interest rate changes.  It is our policy to maintain an acceptable level of interest rate risk over a range of possible changes in interest rates while remaining responsive to market demand for loan and deposit products.  The strategy we employ to manage our interest rate risk is to measure our risk using an asset/liability simulation model.  The model considers several factors to determine our potential exposure to interest rate risk, including measurement of repricing gaps, duration, convexity, value at risk, and the market value of portfolio equity under assumed changes in the level of interest rates, shape of the yield curves, and general market volatility.  Management controls our interest rate exposure using several strategies, which include adjusting the maturities of securities in our investment portfolio, and limiting fixed rate loans or fixed rate deposits with terms of more than five years.  We also use derivative

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instruments, principally interest rate swaps, to manage our interest rate risk.  See Note 12 to the Consolidated Financial Statements.

Interest Rate Risk.  Interest rate risk can come in a variety of forms, including repricing risk, yield curve risk, basis risk, and prepayment risk.  We experience repricing risk when the change in the average yield of either our interest earning assets or interest bearing liabilities is more sensitive than the other to changes in market interest rates.  Such a change in sensitivity could reflect a number of possible mismatches in the repricing opportunities of our assets and liabilities.

In the event that yields on our assets and liabilities do adjust to changes in market rates to the same extent, we may still be exposed to yield curve risk.  Yield curve risk reflects the possibility the changes in the shape of the yield curve could have different effects on our assets and liabilities.

Variable or floating rate, assets and liabilities that reprice at similar times and have base rates of similar maturity may still be subject to interest rate risk.  If financial instruments have different base rates, we are subject to basis risk reflecting the possibility that the spread from those base rates will deviate.

We hold mortgage-related investments, including mortgage loans and mortgage-backed securities.  Prepayment risk is associated with mortgage-related investments and results from homeowners’ ability to pay off their mortgage loans prior to maturity.  We limit this risk by restricting the types of mortgage-backed securities we may own to those with limited average life changes under certain interest-rate shock scenarios, or securities with embedded prepayment penalties.  We also limit the fixed rate mortgage loans held with maturities greater than five years.

Measuring Interest Rate Risk.  As noted above, interest rate risk can be measured by analyzing the extent to which the repricing of assets and liabilities are mismatched to create an interest sensitivity gap.  An asset or liability is said to be interest rate sensitive within a specific period if it will mature or reprice within that period.  The interest rate sensitivity gap is defined as the difference between the amount of interest earning assets maturing or repricing within a specific time period and the amount of interest bearing liabilities maturing or repricing within that same time period.  A gap is considered positive when the amount of interest rate sensitive assets exceeds the amount of interest rate sensitive liabilities.  A gap is considered negative when the amount of interest rate sensitive liabilities exceeds the amount of interest rate sensitive assets.  During a period of falling interest rates, therefore, a positive gap would tend to adversely affect net interest income.  Conversely, during a period of rising interest rates, a positive gap position would tend to result in an increase in net interest income.

The following table sets forth the amounts of interest earning assets and interest bearing liabilities outstanding at September 30, 2012 that we anticipate, based upon certain assumptions, to reprice or mature in each of the future time periods shown.  Except as stated below, the amount of assets and liabilities shown which reprice or mature during a particular period were determined based on the earlier of the term to repricing or the term to repayment of the asset or liability.  The table is intended to provide an approximation of the projected repricing of assets and liabilities at September 30, 2012 based on contractual maturities and scheduled rate adjustments within a three-month period and subsequent selected time intervals.  The loan amounts in the table reflect principal balances expected to be reinvested and/or repriced because of contractual amortization and rate adjustments on adjustable-rate loans.  Loan and investment securities’ contractual maturities and amortization reflect expected prepayment assumptions.  While NOW, money market and savings deposit accounts have adjustable rates, it is assumed that the interest rates on some of the accounts will not adjust immediately to changes in other interest rates.

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Therefore, the information in the table is calculated assuming that NOW, money market and savings deposits will reprice as follows: 4%, 10% and 5%, respectively, in the first three months, 12%, 26% and 15%, respectively, in the next nine months, 52%, 58% and 57%, respectively, from one year to five years, and 32%, 6% and 23%, respectively over five years (dollars in thousands):

	Time to Maturity or Repricing
	0 - 90			91 - 365			1 - 5			Over 5
	Days			Days			Years			Years			Total
Interest Earning Assets:
Interest earning deposits with banks	$	325,648		$	478		$	1,175		$	—		$	327,301
Investment securities	267,502			384,571			1,031,159			685,244			2,368,476
Loans held for sale	7,221			—			—			—			7,221
Loans, including covered loans	2,397,647			1,250,417			1,900,456			76,325			5,624,845
Total interest earning assets	$	2,998,018		$	1,635,466		$	2,932,790		$	761,569		$	8,327,843
Interest Bearing Liabilities:
NOW and money market deposits accounts	$	209,602		$	565,024		$	1,491,798		$	416,184		$	2,682,608
Savings deposits	43,698			123,187			453,080			177,776			797,741
Time deposits	493,988			908,954			520,054			64,460			1,987,456
Short-term borrowings	46,065			70,629			155,789			17,130			289,613
Long-term borrowings	80,662			20,147			15,291			2,698			118,798
Junior subordinated notes issued to capital trusts	152,065			—			—			—			152,065
Total interest bearing liabilities	$	1,026,080		$	1,687,941		$	2,636,012		$	678,248		$	6,028,281
Rate sensitive assets (RSA)	$	2,998,018		$	4,633,484		$	7,566,274		$	8,327,843		$	8,327,843
Rate sensitive liabilities (RSL)	$	1,026,080		$	2,714,021		$	5,350,033		$	6,028,281		$	6,028,281
Cumulative GAP (GAP=RSA-RSL)	$	1,971,938		$	1,919,463		$	2,216,241		$	2,299,562		$	2,299,562
RSA/Total assets	31.68		%	48.96		%	79.95		%	88.00		%	88.00		%
RSL/Total assets	10.84		%	28.68		%	56.53		%	63.70		%	63.70		%
GAP/Total assets	20.84		%	20.28		%	23.42		%	24.30		%	24.30		%
GAP/RSA	65.77		%	41.43		%	29.29		%	27.61		%	27.61		%

Certain shortcomings are inherent in the method of analysis presented in the foregoing table.  For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates.  Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types of assets may lag behind changes in market rates.  Additionally, in the event of a change in interest rates, prepayment and early withdrawal levels would likely deviate significantly from those assumed in calculating the table.  Therefore, we do not rely on a gap analysis to manage our interest rate risk, but rather we use what we believe to be the more reliable simulation model relating to changes in net interest income.

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Based on simulation modeling which assumes gradual changes in interest rates over a one-year period, we believe that our net interest income would change due to changes in interest rates as follows (dollars in thousands):

Gradual	Changes in Net Interest Income Over Once Year Horizon
Changes in	At September 30, 2012				At December 31, 2011
Levels of	Dollar		Percentage		Dollar		Percentage
Interest Rates	Change		Change		Change		Change
+ 2.00%	$	8,695	2.86	%	$	9,221	2.90	%
+ 1.00%	$	2,740	0.90	%	$	3,538	1.10	%

In the interest rate sensitivity table above, changes in net interest income between September 30, 2012 and December 31, 2011 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.  The changes in net interest income incorporate the impact of loan floors as well as shifts from low cost deposits to certificates of deposit in a rising rate environment.

The assumptions used in our interest rate sensitivity simulation 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.  Our model assumes that a portion of our variable rate loans that have minimum interest rates will remain in our portfolio regardless of changes in the interest rate environment.  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.

As a result of the current interest rate environment, the Company does not anticipate any significant declines in interest rates over the next twelve months.  For this reason, we did not use an interest rate sensitivity simulation that assumes a gradual decline in the level of interest rates over the next twelve months.

Item 4. - Controls and Procedures

Evaluation of Disclosure Controls and Procedures: An evaluation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Act”)) was carried out as of September 30, 2012 under the supervision and with the participation of our Chief Executive Officer, Chief Financial Officer and several other members of our senior management.  Our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2012, our disclosure controls and procedures were effective in ensuring that the information we are required to disclose in the reports we file or submit under the Act is (i) accumulated and communicated to our management (including the Chief Executive Officer and Chief Financial Officer) to allow timely decisions regarding required disclosure, and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Changes in Internal Control Over Financial Reporting: There were no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2012 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

We do not expect that our disclosure controls and procedures and internal control over financial reporting will prevent all error and all fraud.  A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met.  Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.  These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns in controls or procedures can occur because of simple error or mistake.  Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.  The design of any control procedure also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.  Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.

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PART II. — OTHER INFORMATION

Item 1A. - Risk Factors

There have been no material changes to the risk factors disclosed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2011.

Item 2. - Unregistered Sales of Equity Securities and Use of Proceeds

The following table sets forth information for the three months ended September 30, 2012 with respect to our repurchases of our outstanding common shares:

				Number of Shares	Maximum Number of
				Purchased as Part	Shares that May Yet Be
	Total Number of	Average Price		Publicly Announced	Purchased Under the
	Shares Purchased (1)	Paid per Share		Plans or Programs	Plans or Programs
July 1, 2012 - July 31, 2012	78,316	$	20.28	—	—
August 1, 2012 - August 31, 2012	714	$	20.43	—	—
September 1, 2012 - September 30, 2012	—	$	—	—	—
Totals	79,030			—

(1)Represents shares withheld to satisfy tax withholding obligations upon the exercise of stock options and vesting of restricted stock awards.

Subsequent to September 30, 2012, our board of directors authorized us to purchase up to one million shares of common stock from time to time over the next two years, subject to market conditions and other factors.

Item 6. - Exhibits

See Exhibit Index.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		MB FINANCIAL, INC.
Date:	October 29, 2012	By:	/s/ Mitchell Feiger
		Mitchell Feiger
		President and Chief Executive Officer
		(Principal Executive Officer)
Date:	October 29, 2012	By:	/s/ Jill E. York
		Jill E. York
		Vice President and Chief Financial Officer
		(Principal Financial and Principal Accounting Officer)

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EXHIBIT INDEX

Exhibit Number	Description
2.2	Agreement and Plan of Merger, dated as of May 1, 2006, by and among the Registrant, MBFI Acquisition Corp. and First Oak Brook Bancshares, Inc. (“First Oak Brook”)(incorporated herein by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed on May 2, 2006 (File No.0-24566-01))
2.3	Purchase and Assumption Agreement among Federal Deposit Insurance Corporation, Receiver of Corus Bank, National Association, Chicago, Illinois, Federal Deposit Insurance Corporation and MB Financial Bank, N.A., dated as of September 11, 2009 (incorporated herein by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed on September 17, 2010 (File No.0-24566-01))
2.4	Purchase and Assumption Agreement among Federal Deposit Insurance Corporation, Receiver of Broadway Bank, Chicago, Illinois, Federal Deposit Insurance Corporation and MB Financial Bank, N.A., dated as of April 23, 2010 (incorporated herein by reference to Exhibit 2.6 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010 (File No. 0-24566-01))
2.5	Purchase and Assumption Agreement among Federal Deposit Insurance Corporation, Receiver of New Century Bank, Chicago, Illinois, Federal Deposit Insurance Corporation and MB Financial Bank, N.A., dated as of April 23, 2010 (incorporated herein by reference to Exhibit 2.7 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010 (File No. 0-24566-01))
3.1	Charter of the Registrant, as amended (incorporated herein by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 (File No. 0-24566-01))
3.1A	Articles Supplementary to the Charter of the Registrant for the Registrant’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A (incorporated herein by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on December 8, 2008 (File No.0-24566-01))
3.2	By-laws of the Registrant, as amended (incorporated herein by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on April 2, 2012 (File No. 0-24566-01))
4.1	The Registrant hereby agrees to furnish to the Commission, upon request, the instruments defining the rights of the holders of each issue of long-term debt of the Registrant and its consolidated subsidiaries
4.2	Certificate of Registrant’s Common Stock (incorporated herein by reference to Exhibit 4.1 to Amendment No. One to the Registrant’s Registration Statement on Form S-4 (No. 333-64584))
4.3	Warrant to purchase shares of the Registrant’s Common Stock (incorporated herein by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on December 8, 2008 (File No.0-24566-01))
10.1	Letter Agreement, dated as of December 5, 2008, between the Registrant and the United States Department of the Treasury (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on December 8, 2008 (File No.0-24566-01))
10.2	Amended and Restated Employment Agreement between the Registrant and Mitchell Feiger (incorporated herein by reference to Exhibit 10.2 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 0-24566-01))
10.3	Employment Agreement between MB Financial Bank, N.A. and Burton J. Field (incorporated herein by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 (File No. 0-24566-01))
10.4	Form of Change and Control Severance Agreement between MB Financial Bank, National Association and Jill E. York (incorporated herein by reference to Exhibit 10.4 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 0-24566-01))

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Exhibit Number	Description
10.4B	Form of Change and Control Severance Agreement between MB Financial Bank, National Association and each of Burton Field, Larry J. Kallembach, Brian Wildman, Rosemarie Bouman and Susan Peterson (incorporated herein by reference to Exhibit 10.4B to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 0-24566-01))
10.4C	Form of Change in Control Severance Agreement between MB Financial Bank, National Association and each of Mark A. Heckler and Edward F. Milefchik (incorporated herein by reference to Exhibit 10.4C to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2011 (File No. 0-24566-01))
10.5	Form of Letter Agreement dated December 4, 2008 between MB Financial, Inc. and each of Mitchell Feiger, Jill E. York, Burton Field, Larry J. Kallembach, Brian Wildman, Rosemarie Bouman, and Susan Peterson relating to the TARP Capital Purchase Program (incorporated herein by reference to Exhibit 10.5 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 0-24566-01))
10.5A	Form of Compensation Amendment and Waiver Agreement under the TARP Capital Purchase Program between MB Financial, Inc. and certain employees (incorporated herein by reference to Exhibit 10.5A to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009 (File No. 0-24566-01))
10.5B	Form of Compensation Amendment and Waiver Agreement under the TARP Capital Purchase Program between MB Financial, Inc. and each of Mark A. Heckler and Edward F. Milefchik (incorporated herein by reference to Exhibit 10.5B to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2011 (File No. 0-24566-01))
10.6	Coal City Corporation 1995 Stock Option Plan (incorporated herein by reference to Exhibit 10.6 to the Registrant’s Registration Statement on Form S-4 (No. 333-64584))
10.6A	Amendment to Coal City Corporation 1995 Stock Option Plan ((incorporated herein by reference to Exhibit 10.6A to the Registrant’s Annual Report on Form 10-K/A for the year ended December 31, 2006, filed on March 2, 2007 (File No. 0-24566-01))
10.7	MB Financial, Inc. Second Amended and Restated Omnibus Incentive Plan (the “Omnibus Incentive Plan”) (incorporated herein by reference to Appendix A to the Registrant’s definitive proxy statement filed on April 27, 2011 (File No. 0-24566-01))
10.8	MB Financial Stock Deferred Compensation Plan (incorporated herein by reference to Exhibit 10.8 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 0-24566-01))
10.9	MB Financial Non-Stock Deferred Compensation Plan (incorporated herein by reference to Exhibit 10.9 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 0-24566-01))
10.10	Avondale Federal Savings Bank Supplemental Executive Retirement Plan Agreement (incorporated herein by reference to Exhibit 10.2 to Old MB Financial’ s (then known as Avondale Financial Corp.) Annual Report on Form 10-K for the year ended December 31, 1996 (File No. 0-24566))
10.11	Agreement Regarding Salary Adjustment and Portion of Salary Payable by Stock, dated as of December 21, 2009, between MB Financial, Inc. and Mitchell Feiger (incorporated herein by reference to Exhibit 10.11 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2009 (File No. 0-24566-01))

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Exhibit Number	Description
10.11A	Form of Agreement Regarding Salary Adjustment and Portion of Salary Payable by Stock between MB Financial, Inc. and Rosemarie Bouman, Burton J. Field, Mark A. Heckler, Larry J. Kallembach, Edward F. Milefchik, Susan G. Peterson and Brian J. Wildman (incorporated herein by reference to Exhibit 10.11A to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2011 (File No. 0-24566-01))
10.12	Agreement Regarding Salary Adjustment and Portion of Salary Payable by Stock, dated as of December 21, 2009, between MB Financial, Inc. and Jill E. York (incorporated herein by reference to Exhibit 10.12 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2009 (File No. 0-24566-01))
10.13	Amended and Restated Employment Agreement between MB Financial Bank, N.A. and Ronald D. Santo (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on December 14, 2004 (File No. 0-24566-01))
10.13A	Amendment to Amended and Restated Employment Agreement between MB Financial Bank, N.A. and Ronald D. Santo ((incorporated herein by reference to Exhibit 10.13A to the Registrant’s Annual Report on Form 10-K/A for the year ended December 31, 2006, filed on March 2, 2007 (File No. 0-24566-01))
10.15	Tax Gross Up Agreements between the Registrant and each of Mitchell Feiger, Burton J. Field, Jill E. York, Larry J. Kallembach, Brian Wildman, and Susan Peterson (incorporated herein by reference to Exhibit 10.15 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 0-24566-01))
10.15A	Tax Gross Up Agreement between the Registrant and Rosemarie Bouman (incorporated herein by reference to Exhibit 10.15A to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 0-24566-01))
10.16	Form of Incentive Stock Option Agreement for Executive Officers under the Omnibus Incentive Plan (incorporated herein by reference to Exhibit 10.16 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 (File No. 0-24566-01))
10.17	Form of Non-Qualified Stock Option Agreement for Directors under the Omnibus Incentive Plan (incorporated herein by reference to Exhibit 10.16 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 (File No. 0-24566-01))
10.18	Form of Restricted Stock Agreement for Executive Officers under the Omnibus Incentive Plan (incorporated herein by reference to Exhibit 10.16 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 (File No. 0-24566-01))
10.18A	Amendment to Form of Incentive Stock Option Agreement and Form of Restricted Stock Agreement for Executive Officers under the Omnibus Incentive Plan (incorporated herein by reference to Exhibit 10.18A to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 0-24566-01))
10.18B	Form of Performance-Based Restricted Stock Agreement for Executive Officers under the Omnibus Incentive Plan (incorporated herein by reference to Exhibit 10.18B to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009 (File No. 0-24566-01))
10.18C	Form of Restricted Stock Agreement for grants on December 2, 2009 to Mitchell Feiger, Jill E. York and Burton J. Field (incorporated herein by reference to Exhibit 10.18C to the Registrant’s Current Report on Form 8-K filed on December 7, 2009 (File No. 0-24566-01))

67

Exhibit Number	Description
10.19	Form of Restricted Stock Agreement for Directors under the Omnibus Incentive Plan (incorporated herein by reference to Exhibit 10.16 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 (File No. 0-24566-01))
10.20	First Oak Brook Bancshares, Inc. Incentive Compensation Plan (incorporated herein by reference to Appendix A to the definitive proxy statement filed by First Oak Brook on March 30, 2004 (File No. 0-14468))
10.20A	Amendment to First Oak Brook Bancshares, Inc. Incentive Compensation Plan ((incorporated herein by reference to Exhibit 10.20A to the Registrant’s Annual Report on Form 10-K/A for the year ended December 31, 2006, filed on March 2, 2007 (File No. 0-24566-01))
10.21	First Oak Brook Bancshares, Inc. 2001 Stock Incentive Plan (incorporated herein by reference to Appendix A to the definitive proxy statement filed by First Oak Brook on April 2, 2001 (File No. 0-14468))
10.21A	Amendment to First Oak Brook Bancshares, Inc. 2001 Stock Incentive Plan ((incorporated herein by reference to Exhibit 10.21A to the Registrant’s Annual Report on Form 10-K/A for the year ended December 31, 2006, filed on March 2, 2007 (File No. 0-24566-01))
10.22	First Oak Brook Bancshares, Inc. Directors Stock Plan (incorporated herein by reference to Exhibit 4.1 to the Registration Statement on Form S-8 filed by First Oak Brook on October 25, 1999 (File No. 333-89647))
10.22A	Amendment to First Oak Brook Bancshares, Inc. Directors Stock Plan (incorporated herein by reference to Exhibit 10.22A to the Registrant’s Quarterly Report on Form 10-Q/A for the quarter ended March 31, 2007 filed on May 15, 2007 (File No. 0-24566-01))
10.23	Reserved.
10.24	Reserved.
10.25	Reserved.
10.26	Reserved.
10.27	First Oak Brook Bancshares, Inc. Executive Deferred Compensation Plan (incorporated by reference to Exhibit 10.3 to First Oak Brook’s Annual Report on Form 10-K for the year ended December 31, 1997 (File No. 0-14468))
10.27A	Amendment to First Oak Brook Bancshares, Inc. Executive Deferred Compensation Plan (incorporated herein by reference to Exhibit 10.27A to the Registrant’s Quarterly Report on Form 10-Q/A for the quarter ended March 31, 2007 filed on May 15, 2007)
10.29	Form of Transitional Employment Agreement between the Registrant (as successor to First Oak Brook) and Rosemarie Bouman (incorporated herein by reference to Exhibit 10.10 to First Oak Brook’s Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 0-14468))

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Exhibit Number	Description
10.29A	First Amendment to Transitional Employment Agreement between the Registrant (as successor to First Oak Brook) and Rosemarie Bouman (incorporated herein by reference to Exhibit 10.28A to the Registrant’s Annual Report on Form 10-K/A for the year ended December 31, 2006, filed March 2, 2007 (File No. 0-24566-01))
10.29B	Second Amendment to Transitional Employment Agreement between the Registrant (as successor to First Oak Brook) and Rosemarie Bouman (incorporated herein by reference to Exhibit 10.28B to the Registrant’s Annual Report on Form 10-K/A for the year ended December 31, 2006, filed March 2, 2007 (File No. 0-24566-01))
10.30	Form of Performance Share Unit Award Agreement (incorporated herein by reference to Exhibit 10.30 to the Registrant’s Current Report on Form 8-K filed on September 5, 2012 (File No. 0-24566-01))
10.31	Form of Incentive Stock Option Agreement (Management Committee) (incorporated herein by reference to Exhibit 10.31 to the Registrant’s Current Report on Form 8-K filed on September 5, 2012 (File No. 0-24566-01))
10.31A	Form of Non-Qualified Stock Option Agreement (Management Committee) (incorporated herein by reference to Exhibit 10.31A to the Registrant’s Current Report on Form 8-K filed on September 5, 2012 (File No. 0-24566-01))
10.32	Form of Restricted Stock Agreement (Management Committee) (incorporated herein by reference to Exhibit 10.32 to the Registrant’s Current Report on Form 8-K filed on September 5, 2012 (File No. 0-24566-01))
10.32A	Form of Restricted Stock Unit Agreement (Management Committee) (incorporated herein by reference to Exhibit 10.32A to the Registrant’s Current Report on Form 8-K filed on September 5, 2012 (File No. 0-24566-01))
31.1	Rule 13a — 14(a)/15d — 14(a) Certification (Chief Executive Officer)*
31.2	Rule 13a — 14(a)/15d — 14(a) Certification (Chief Financial Officer)*
32	Section 1350 Certifications*
101	The following financial statements from the MB Financial, Inc. Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, formatted in Extensive Business Reporting Language (XBRL): (i) consolidated balance sheets, (ii) consolidated statements of operations, (iii) consolidated statements of cash flows and (iv) the notes to consolidated financial statements*

*  Filed herewith.

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EX-31.1

Exhibit 31.1

CERTIFICATION

I, Mitchell Feiger, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of MB Financial, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	October 29, 2012
/s/Mitchell Feiger
Mitchell Feiger
President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Jill E. York, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of MB Financial, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	October 29, 2012
/s/ Jill E. York
Jill E. York
Vice President and Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned hereby certifies in his or her capacity as an officer of MB Financial, Inc. (the Company) that the Annual Report of the Company on Form 10-Q for the quarter ended September 30, 2012 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the financial statements included in such report.

Date:	October 29, 2012	/s/ Mitchell Feiger
		Mitchell Feiger
		President and Chief Executive Officer
Date:	October 29, 2012	/s/ Jill E. York
		Jill E. York
		Vice President and Chief Financial Officer

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LOANS (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012 investmentrating	Dec. 31, 2011	Sep. 30, 2011
Loans
Total loans, excluding covered loans	$ 5,128,683	$ 5,288,451
Covered loans	496,162	662,544
Total loans	5,624,845	5,950,995	5,813,738
Net unearned income, including net deferred loan fees	955	1,000
Number of highest rating categories to be achieved for classification as investment grade companies	1
Number of highest rating categories by Moody's Investor Services or Standard & Poor's Rating Services	4
Commercial loans
Loans
Total loans, excluding covered loans	1,073,981	1,113,123
Covered loans	27,512
Total loans	1,133,346		1,139,727
Commercial loans collateralized by assignment of lease payments
Loans
Total loans, excluding covered loans	1,219,361	1,208,575
Total loans	1,219,361		1,067,191
Commercial real estate
Loans
Total loans, excluding covered loans	1,770,261	1,853,788
Covered loans	269,348
Total loans	2,039,609		2,193,631
Residential real estate
Loans
Total loans, excluding covered loans	308,866	316,787
Total loans	312,030		321,328
Construction real estate
Loans
Total loans, excluding covered loans	149,872	183,789
Covered loans	125,515
Total loans	275,387		424,522
Indirect vehicle
Loans
Total loans, excluding covered loans	206,973	187,481
Total loans	206,973		189,032
Home equity
Loans
Total loans, excluding covered loans	314,718	336,043
Total loans	315,286		349,837
Consumer loans
Loans
Total loans, excluding covered loans	84,651	88,865
Total loans	$ 122,853		$ 128,470

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COMMITMENTS AND CONTINGENCIES (Details) (USD $)	9 Months Ended
	Sep. 30, 2012	Dec. 31, 2011
Commitments:
Maximum maturity period for letters of credit	5 years
Decrease in maximum potential amount of future payments under letters of credit	$ 804,000
Dollar amount of letters of credit outstanding	69,300,000	68,500,000
Letters of credit issued or renewed	52,600,000
Capital expenditure commitments outstanding	2,500,000
Home equity
Commitments and contingencies
Dollar amount of line of credit outstanding	253,216,000	275,357,000
Other commitments to extend credit
Commitments and contingencies
Dollar amount of line of credit outstanding	826,411,000	741,815,000
Standby letters of credit outstanding
Commitments and contingencies
Dollar amount of line of credit outstanding	63,275,000	67,720,000
Commercial letters of credit outstanding
Commitments and contingencies
Dollar amount of line of credit outstanding	$ 6,067,000	$ 818,000

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DEPOSITS (Details) (USD $)	1 Months Ended
	Sep. 30, 2012	Dec. 31, 2011
Composition of deposits
Demand deposit accounts, noninterest bearing	$ 2,011,542,000	$ 1,885,694,000
NOW and money market accounts	2,682,608,000	2,645,334,000
Savings accounts	797,741,000	753,610,000
Certificates of deposit	1,632,370,000	1,925,608,000
Brokered deposit accounts	355,086,000	437,361,000
Total deposits	7,479,347,000	7,647,607,000
Percentage of interest bearing and noninterest bearing deposits to total deposits
Demand deposit accounts, noninterest bearing (as a percent)	27.00%	25.00%
NOW and money market accounts (as a percent)	36.00%	34.00%
Savings accounts (as a percent)	10.00%	10.00%
Certificates of deposit (as a percent)	22.00%	25.00%
Brokered deposit accounts (as a percent)	5.00%	6.00%
Total (as a percent)	100.00%	100.00%
Recorded expense related to the prepayment	$ 1,200,000

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Financial assets
Loans held for sale	$ 7,221	$ 4,727
Quoted Prices in Active Markets for Identical Assets (Level 1)
Financial assets
Securities available for sale	11,231
Significant Other Observable Inputs (Level 2)
Financial assets
Securities available for sale	1,797,623
Loans held for sale	7,221
Derivative financial instruments, assets	30,186
Financial liabilities
Derivative financial instrument, liabilities	30,239
Significant Unobservable Inputs (Level 3)
Financial assets
Securities available for sale	6,118
Recurring basis | Total Fair Value
Financial assets
Loans held for sale	7,221	4,727
Assets held in trust for deferred compensation	7,802	6,808
Derivative financial instruments, assets	30,186	26,251
Financial liabilities
Other liabilities	7,802	6,808
Derivative financial instrument, liabilities	30,239	26,624
Recurring basis | Total Fair Value | U.S. Government sponsored agencies and enterprises
Financial assets
Securities available for sale	42,187	42,401
Recurring basis | Total Fair Value | States and political subdivisions
Financial assets
Securities available for sale	668,966	535,660
Recurring basis | Total Fair Value | Residential mortgage-backed securities
Financial assets
Securities available for sale	1,021,983	1,281,806
Recurring basis | Total Fair Value | Commercial mortgage-backed securities
Financial assets
Securities available for sale	53,979	52,685
Recurring basis | Total Fair Value | Corporate bonds
Financial assets
Securities available for sale	16,626	5,899
Recurring basis | Total Fair Value | Equity securities
Financial assets
Securities available for sale	11,231	10,846
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1)
Financial assets
Assets held in trust for deferred compensation	7,802	6,808
Financial liabilities
Other liabilities	7,802	6,808
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Equity securities
Financial assets
Securities available for sale	11,231	10,846
Recurring basis | Significant Other Observable Inputs (Level 2)
Financial assets
Loans held for sale	7,221	4,727
Derivative financial instruments, assets	30,186	26,251
Financial liabilities
Derivative financial instrument, liabilities	30,239	26,624
Recurring basis | Significant Other Observable Inputs (Level 2) | U.S. Government sponsored agencies and enterprises
Financial assets
Securities available for sale	42,187	42,401
Recurring basis | Significant Other Observable Inputs (Level 2) | States and political subdivisions
Financial assets
Securities available for sale	668,966	535,660
Recurring basis | Significant Other Observable Inputs (Level 2) | Residential mortgage-backed securities
Financial assets
Securities available for sale	1,021,096	1,280,713
Recurring basis | Significant Other Observable Inputs (Level 2) | Commercial mortgage-backed securities
Financial assets
Securities available for sale	53,979	52,685
Recurring basis | Significant Other Observable Inputs (Level 2) | Corporate bonds
Financial assets
Securities available for sale	11,395
Recurring basis | Significant Unobservable Inputs (Level 3) | Residential mortgage-backed securities
Financial assets
Securities available for sale	887	1,093
Recurring basis | Significant Unobservable Inputs (Level 3) | Corporate bonds
Financial assets
Securities available for sale	$ 5,231	$ 5,899

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GOODWILL AND INTANGIBLES (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011
GOODWILL AND INTANGIBLES
Carrying amount of goodwill	$ 387,069		$ 387,069		$ 387,069
Weighted average amortization period			P5Y
Changes in the carrying amount of core deposit and client relationship intangibles
Balance at beginning of period			29,494
Amortization expense	(1,251)	(1,414)	(3,759)	(4,255)
Balance at end of period	25,735		25,735
Gross carrying amount	71,560		71,560
Accumulated amortization	(45,825)		(45,825)
Net book value	25,735		25,735
Estimated future amortization expense
2012	1,251		1,251
2013	4,530		4,530
2014	3,514		3,514
2015	3,090		3,090
2016	2,747		2,747
Thereafter	10,603		10,603
Total estimated future amortization expense	$ 25,735		$ 25,735

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COMMITMENTS AND CONTINGENCIES (Tables)

9 Months Ended

Sep. 30, 2012

COMMITMENTS AND CONTINGENCIES

Schedule of outstanding financial instruments, contractual amounts of off-balance sheet credit risk

	Contractual Amount
	September 30,		December 31,
	2012		2011
Commitments to extend credit:
Home equity lines	$	253,216	$	275,357
Other commitments	826,411		741,815
Letters of credit:
Standby	63,275		67,720
Commercial	6,067		818

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Details 3) (Discounted cash flow)	9 Months Ended
	Sep. 30, 2012
Minimum
Unobservable inputs used in the fair value measurement of financial assets measured on a recurring basis
Constant pre-payment rates (as a percent)	6.00%
Maximum
Unobservable inputs used in the fair value measurement of financial assets measured on a recurring basis
Constant pre-payment rates (as a percent)	12.00%
Weighted Average
Unobservable inputs used in the fair value measurement of financial assets measured on a recurring basis
Credit assumption (as a percent)	25.00%

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INVESTMENT SECURITIES (Tables)

9 Months Ended

Sep. 30, 2012

INVESTMENT SECURITIES

Schedule of amortized cost, gross unrealized gains and losses, and fair value of investment securities

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
September 30, 2012:
Available for Sale
U.S. Government sponsored agencies and enterprises	$	39,233	$	2,954	$	—		$	42,187
States and political subdivisions	620,489		48,502		(25		)	668,966
Residential mortgage-backed securities	1,009,509		17,019		(4,545		)	1,021,983
Commercial mortgage-backed securities	51,156		2,823		—			53,979
Corporate bonds	16,617		10		(1		)	16,626
Equity securities	10,644		587		—			11,231
	1,747,648		71,895		(4,571		)	1,814,972
Held to Maturity
States and political subdivisions	238,211		21,739		—			259,950
Residential mortgage-backed securities	257,640		19,399		—			277,039
	495,851		41,138		—			536,989
Total	$	2,243,499	$	113,033	$	(4,571	)	$	2,351,961
December 31, 2011:
Available for Sale
U.S. Government sponsored agencies and enterprises	$	39,640	$	2,761	$	—		$	42,401
States and political subdivisions	500,979		34,922		(241		)	535,660
Residential mortgage-backed securities	1,256,696		26,483		(1,373		)	1,281,806
Commercial mortgage-backed securities	51,324		1,361		—			52,685
Corporate bonds	5,899		—		—			5,899
Equity securities	10,457		389		—			10,846
	1,864,995		65,916		(1,614		)	1,929,297
Held to Maturity
States and political subdivisions	240,183		7,489		(8		)	247,664
Residential mortgage-backed securities	259,100		5,032		(774		)	263,358
	499,283		12,521		(782		)	511,022
Total	$	2,364,278	$	78,437	$	(2,396	)	$	2,440,319

Unrealized losses on investment securities and the fair value of the related securities

	Less Than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
Available for Sale
States and political subdivisions	$	9,379	$	(25	)	$	—	$	—		$	9,379	$	(25	)
Residential mortgage-backed securities	225,827		(4,105		)	31,573		(440		)	257,400		(4,545		)
Corporate bonds	5,260		(1		)	—		—			5,260		(1		)
Total	$	240,466	$	(4,131	)	$	31,573	$	(440	)	$	272,039	$	(4,571	)

Summary of realized gains on the sale of investment securities available for sale

	Three Months Ended					Nine Months Ended
	September  30,					September  30,
	2012			2011		2012			2011
Realized gains	$	282		$	—	$	472		$	232
Realized losses	(1		)	—		(4		)	(3		)
Impairment charges	—			—		(224		)	—
Net gains	$	281		$	—	$	244		$	229

Schedule of remaining contractual maturities of securities included in the securities portfolio

	Amortized		Fair
(In thousands)	Cost		Value
Available for sale:
Due in one year or less	$	26,437	$	26,857
Due after one year through five years	226,619		246,211
Due after five years through ten years	106,351		118,585
Due after ten years	316,932		336,126
Equity securities	10,644		11,231
Residential and commercial mortgage-backed securities	1,060,665		1,075,962
	1,747,648		1,814,972
Held to maturity:
Due after one year through five years	1,301		1,400
Due after five years through ten years	10,573		11,331
Due after ten years	226,337		247,219
Residential mortgage-backed securities	257,640		277,039
	495,851		536,989
Total	$	2,243,499	$	2,351,961

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LONG-TERM BORROWINGS (Details) (USD $)	1 Months Ended			9 Months Ended		9 Months Ended
	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2012 Minimum	Sep. 30, 2012 Notes payable to banks	Dec. 31, 2011 Notes payable to banks	Sep. 30, 2012 Structured repurchase agreement	Sep. 30, 2012 Subordinated debt facility
LONG-TERM BORROWINGS
Federal Home Loan Bank advances	$ 100,000,000
Effective interest rates on Federal Home Loan Bank advances (as a percent)	3.85%
Fee on early extinguishment of Federal Home Loan Bank advance	11,500,000
Federal Home Loan Bank advances	4,500,000	144,600,000
Effective interest rates on Federal Home Loan Bank advances, low end of range (as a percent)	3.23%
Effective interest rates on Federal Home Loan Bank advances, high end of range (as a percent)	5.87%
Loans pledged as collateral for long-term Federal Home Loan Bank advances	31,800,000	197,400,000
Investment securities pledged as collateral for long-term Federal Home Loan Bank advances	33,000,000	33,800,000
Additional amount available to borrow from the Federal Home Loan Bank	532,900,000	319,400,000
Long-term borrowings
Percentage of collateral pledge of first mortgage loans as per agreement			133.00%
Percentage of collateral pledge of home equity loans as per agreement			250.00%
Long-term borrowings	118,798,000	266,264,000		23,800,000	31,000,000	40,000,000	50,000,000
Minimum interest rates (as a percent)				2.88%
Maximum interest rates (as a percent)				12.00%
Equipment pledged as collateral				$ 32,700,000	$ 42,600,000
Term of structured repurchase agreement						10 years
Description of interest rate basis							three month LIBOR
Interest rate, basis spread (as a percent)							1.70%
Fixed borrowing rate (as a percent)						4.75%

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LOANS (Details 4) (USD $) In Thousands, unless otherwise specified	3 Months Ended	9 Months Ended
	Sep. 30, 2012 loan	Sep. 30, 2012 loan
Restructured loans
Number of separate notes restructured into A/B by the company		2
Minimum period of sustained repayment required to return the note to accrual status		6 months
Number of pools for classification of troubled debt restructurings for consumer loans		2
Redefaulted loans	$ 305,000	$ 305,000
Period past due of recorded re-defaulted loans		90 days
Performing
Restructured loans
Number of loans	7	42
Pre-Modification Recorded Investment	401	7,208
Post-Modification Recorded Investment	325	7,132
Charge-offs and Specific Reserves	76	76
Non-performing
Restructured loans
Number of loans	14	58
Pre-Modification Recorded Investment	924	7,684
Post-Modification Recorded Investment	704	7,023
Charge-offs and Specific Reserves	588	1,247
Commercial loans | Non-performing
Restructured loans
Number of loans		4
Pre-Modification Recorded Investment		292
Post-Modification Recorded Investment		292
Charge-offs and Specific Reserves		96
Commercial loans collateralized by assignment of lease payments | Non-performing
Restructured loans
Number of loans	1	1
Pre-Modification Recorded Investment	202	202
Post-Modification Recorded Investment	202	202
Charge-offs and Specific Reserves	168	168
Multifamily | Performing
Restructured loans
Number of loans		1
Pre-Modification Recorded Investment		155
Post-Modification Recorded Investment		155
Multifamily | Non-performing
Restructured loans
Number of loans		1
Pre-Modification Recorded Investment		149
Post-Modification Recorded Investment		149
Charge-offs and Specific Reserves		40
Retail | Performing
Restructured loans
Number of loans		1
Pre-Modification Recorded Investment		236
Post-Modification Recorded Investment		236
Retail | Non-performing
Restructured loans
Number of loans	1	4
Pre-Modification Recorded Investment	202	923
Post-Modification Recorded Investment	202	923
Charge-offs and Specific Reserves	200	232
Other. | Non-performing
Restructured loans
Number of loans		1
Pre-Modification Recorded Investment		157
Post-Modification Recorded Investment		157
Charge-offs and Specific Reserves		50
Residential real estate | Performing
Restructured loans
Number of loans		2
Pre-Modification Recorded Investment		808
Post-Modification Recorded Investment		808
Residential real estate | Non-performing
Restructured loans
Number of loans	7	13
Pre-Modification Recorded Investment	173	637
Post-Modification Recorded Investment	68	401
Charge-offs and Specific Reserves	105	236
Home equity | Performing
Restructured loans
Number of loans	7	38
Pre-Modification Recorded Investment	401	6,009
Post-Modification Recorded Investment	325	5,933
Charge-offs and Specific Reserves	76	76
Home equity | Non-performing
Restructured loans
Number of loans	5	34
Pre-Modification Recorded Investment	347	5,324
Post-Modification Recorded Investment	232	4,899
Charge-offs and Specific Reserves	$ 115	$ 425

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INVESTMENT SECURITIES (Details 2) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012 security
Available for Sale
Less Than 12 Months, Fair Value	$ 240,466
Less Than 12 Months, Unrealized Losses	(4,131)
12 Months or More, Fair Value	31,573
12 Months or More, Unrealized Losses	(440)
Total Fair Value	272,039
Total Unrealized Losses	(4,571)
Number of security positions in the investment portfolio in an unrealized loss position	34
States and political subdivisions
Available for Sale
Less Than 12 Months, Fair Value	9,379
Less Than 12 Months, Unrealized Losses	(25)
Total Fair Value	9,379
Total Unrealized Losses	(25)
Corporate bonds
Available for Sale
Less Than 12 Months, Fair Value	5,260
Less Than 12 Months, Unrealized Losses	(1)
Total Fair Value	5,260
Total Unrealized Losses	(1)
Residential mortgage-backed securities
Available for Sale
Less Than 12 Months, Fair Value	225,827
Less Than 12 Months, Unrealized Losses	(4,105)
12 Months or More, Fair Value	31,573
12 Months or More, Unrealized Losses	(440)
Total Fair Value	257,400
Total Unrealized Losses	$ (4,545)

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JUNIOR SUBORDINATED NOTES ISSUED TO CAPITAL TRUSTS (Details 2) (Trust Preferred Securities, USD $)	3 Months Ended	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2012
Coal City Capital Trust I
Trust preferred securities issued by each trust
Face Value	$ 25,000,000	25,000,000
Description of annual interest distribution basis		three month LIBOR
Annual distribution rate, basis spread (as a percent)		1.80%
MB Financial Capital Trust II
Trust preferred securities issued by each trust
Face Value	35,000,000	35,000,000
Description of annual interest distribution basis		three month LIBOR
Annual distribution rate, basis spread (as a percent)		1.40%
MB Financial Capital Trust III
Trust preferred securities issued by each trust
Face Value	10,000,000	10,000,000
Description of annual interest distribution basis		three month LIBOR
Annual distribution rate, basis spread (as a percent)		1.50%
MB Financial Capital Trust IV
Trust preferred securities issued by each trust
Face Value	20,000,000	20,000,000
Description of annual interest distribution basis		three month LIBOR
Annual distribution rate, basis spread (as a percent)		1.52%
MB Financial Capital Trust V
Trust preferred securities issued by each trust
Face Value	30,000,000	30,000,000
Description of annual interest distribution basis		three month LIBOR
Annual distribution rate, basis spread (as a percent)		1.30%
MB Financial Capital Trust VI
Trust preferred securities issued by each trust
Face Value	22,500,000	22,500,000
Description of annual interest distribution basis		three month LIBOR
Annual distribution rate, basis spread (as a percent)		1.30%
FOBB Statutory Trust I
Trust preferred securities issued by each trust
Annual distribution rate (as a percent)		10.60%
Principal amount of trust preferred securities redeemed	6,000,000
FOBB Statutory Trust III
Trust preferred securities issued by each trust
Face Value	$ 5,000,000	5,000,000
Description of annual interest distribution basis		three month LIBOR
Annual distribution rate, basis spread (as a percent)		2.80%

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STOCK-BASED COMPENSATION (Details) (USD $)	3 Months Ended		9 Months Ended				9 Months Ended					12 Months Ended			9 Months Ended				9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012 Omnibus Incentive Plan (the "Omnibus Plan")	Jun. 30, 2011 Omnibus Incentive Plan (the "Omnibus Plan")	Sep. 30, 2012 Stock options	Sep. 30, 2011 Stock options	Sep. 30, 2012 Stock options Director	Sep. 30, 2012 Restricted stock and restricted stock units	Sep. 30, 2012 Restricted stock and restricted stock units Director	Dec. 31, 2011 Market-based restricted stock	Dec. 31, 2010 Market-based restricted stock	Dec. 31, 2009 Market-based restricted stock	Sep. 30, 2012 Salary Stock	Sep. 30, 2012 Performance-based restricted stock units	Sep. 30, 2012 Performance-based restricted stock units Minimum	Sep. 30, 2012 Performance-based restricted stock units Maximum	Sep. 30, 2012 Restricted stock Minimum	Sep. 30, 2012 Restricted stock Maximum
Impact of the share-based payment plans in the financial statements
Total cost of share-based payment plans during the period (in dollars)	$ 1,080,000	$ 1,451,000	$ 3,581,000	$ 3,530,000
Amount of related income tax benefit recognized in income (in dollars)	430,000	607,000	1,431,000	1,449,000
Stock-based compensation
Number of additional authorized shares						2,300,000
Number of common shares authorized for issuance						8,300,000
Numerator of shares granted beyond threshold limit			2
Denominator of shares granted beyond threshold limit			1
Number of shares available for future grants					2,195,608
Continuous service period for vesting of option awards							4 years
Contractual terms of option awards							10 years
Maximum percentage of director's fees eligible to be received in equity-based incentive awards in lieu of cash									70.00%		100.00%
Vesting period									5 years		1 year					3 years			2 years	4 years
Period of restriction for sale of underlying shares									6 months
Number of shares issued												92,717	66,193	164,401	13,647	65,333
Percentage of shares earned to the number of units issued																100.00%	0.00%	175.00%
Number of consecutive trading days over which a specified closing price of the entity's stock must be maintained												10 days	10 days	10 days
Minimum closing price of the entity's stock (in dollars per share)												$ 27.00	$ 25.80	$ 18.14
Period of restriction for sale of shares of Salary Stock															2 years
Weighted average issuance price of Salary Stock (in dollars per share)															$ 20.16
Unrecognized compensation cost (in dollars)					11,000,000
Expected weighted-average period for recognition of unrecognized compensation expense					2 years 10 months 24 days
Options outstanding activity
Options outstanding at the beginning of the period (in shares)							2,935,810
Granted (in shares)							240,569
Exercised (in shares)							(207,571)
Expired or cancelled (in shares)							(172,043)
Forfeited (in shares)							(24,986)
Options outstanding at the end of the period (in shares)							2,771,779
Options exercisable at end of the period (in shares)							2,095,162
Weighted Average Exercise Price
Options outstanding at the beginning of the period (in dollars per share)							$ 27.64
Granted (in dollars per share)							$ 20.42
Exercised (in dollars per share)							$ 20.79
Expired or cancelled (in dollars per share)							$ 31.32
Forfeited (in dollars per share)							$ 20.04
Options outstanding at the end of the period (in dollars per share)							$ 27.36
Options exercisable at end of the period (in dollars per share)							$ 30.20
Weighted Average Remaining Contractual Term
Options outstanding at the end of the period							4 years 10 months 28 days
Options exercisable at end of the period							3 years 8 months 23 days
Aggregate Intrinsic Value
Options outstanding at end of period (in dollars)							1,419,000
Options exercisable at end of period (in dollars)							324,000
Fair value assumptions
Risk free interest rate (as a percent)							1.03%
Expected volatility of Company's stock (as a percent)							27.40%
Expected dividend yield (as a percent)							2.00%
Expected life of options							5 years 8 months 12 days
Weighted average fair value per option of options granted during the year (in dollars per share)							$ 4.30
Total intrinsic value of options exercised (in dollars)							$ 203,000	$ 314,000
Changes in restricted shares
Shares and Units Outstanding at beginning of period										664,502
Granted (in shares)										295,681
Vested (in shares)										(294,660)
Forfeited (in shares)										(13,377)
Shares and Units Outstanding at end of period										652,146
Weighted Average Grant Date Fair Value, restricted shares
Shares and Units Outstanding at beginning of period (in dollars per share)										$ 14.37
Granted (in dollars per share)										$ 20.68
Vested (in dollars per share)										$ 10.86
Forfeited (in dollars per share)										$ 16.65
Shares and Units Outstanding at end of period (in dollars per share)										$ 18.78

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BASIS OF PRESENTATION

9 Months Ended

Sep. 30, 2012

BASIS OF PRESENTATION

BASIS OF PRESENTATION

NOTE 1.               BASIS OF PRESENTATION

These unaudited consolidated financial statements include the accounts of MB Financial, Inc., a Maryland corporation (the “Company”), and its subsidiaries, including its wholly owned national bank subsidiary, MB Financial Bank, N.A. (“MB Financial Bank”), based in Chicago, Illinois.  In the opinion of management, all normal recurring adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods have been made.  The results of operations for the three and nine months ended September 30, 2012 are not necessarily indicative of the results to be expected for the entire fiscal year.

These unaudited interim financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and industry practice.  Certain information in footnote disclosure normally included in financial statements prepared in accordance with U.S. GAAP and industry practice has been condensed or omitted pursuant to rules and regulations of the Securities and Exchange Commission.  These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s December 31, 2011 audited financial statements filed on Form 10-K.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions which affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported amounts of income and expenses during the reported periods.  Actual results could differ from those estimates.

Certain prior period amounts have been reclassified to conform to current period presentation.  These reclassifications did not result in any changes to previously reported net income or stockholders’ equity.

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LOANS (Details 5) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011
Allowance for credit losses
Beginning balance			$ 126,798,000	$ 192,217,000
Allowance for credit losses, beginning balance	128,840,000	147,107,000	135,975,000	192,217,000
Transfer to (from) allowance for unfunded credit commitments		(5,516,000)	(1,132,000)	(5,516,000)
Reclassification to allowance for unfunded credit commitments				17,050,000
Charge-offs	(5,588,000)	(20,152,000)	(23,681,000)	(177,533,000)
Recoveries	14,674,000	3,406,000	22,532,000	14,427,000
Provision	(13,000,000)	11,500,000	(9,900,000)	112,750,000
Ending balance	121,182,000	128,610,000	121,182,000	128,610,000
Allowance for Credit losses, ending balance	124,926,000	141,861,000	124,926,000	141,861,000
Ending allowance balance attributable to loans:
Individually evaluated for impairment	13,026,000	24,667,000	13,026,000	24,667,000
Collectively evaluated for impairment	109,354,000	117,037,000	109,354,000	117,037,000
Acquired and accounted for under ASC 310-30	2,546,000	157,000	2,546,000	157,000
Total ending allowance balance	121,182,000	128,610,000	121,182,000	128,610,000
Total ending allowance for loan losses and unfunded commitment	124,926,000	141,861,000	124,926,000	141,861,000
Loans:
Individually evaluated for impairment	102,769,000	162,026,000	102,769,000	162,026,000
Collectively evaluated for impairment	5,003,052,000	4,903,616,000	5,003,052,000	4,903,616,000
Acquired and accounted for under ASC 310-30	519,024,000	748,096,000	519,024,000	748,096,000
Total loans	5,624,845,000	5,813,738,000	5,624,845,000	5,813,738,000	5,950,995,000
Unfunded Commitments
Allowance for unfunded commitments, beginning balance	7,084,000	17,050,000	9,177,000
Transfer to (from) allowance for unfunded credit commitments		(5,516,000)	(1,132,000)	(5,516,000)
Reclassification to allowance for unfunded credit commitments				17,050,000
Allowance for unfunded commitments, Provision	(3,340,000)	1,717,000	(4,301,000)	1,717,000
Allowance for unfunded commitments, ending balance	3,744,000	13,251,000	3,744,000	13,251,000
Individually evaluated for impairment for unfunded commitments	1,726,000	13,251,000	1,726,000	13,251,000
Collectively evaluated for impairment for unfunded commitments	2,018,000		2,018,000
Provision for credit losses of loans sold				50,000,000
Carrying amount of loans sold		281,600,000		281,600,000
Carrying amount of non-performing loans sold		156,300,000		156,300,000
Charge-offs recorded as a result of sale of performing, sub-performing and non-performing loans				87,600,000
Commercial loans
Allowance for credit losses
Beginning balance	20,789,000	20,550,000	21,106,000	28,747,000
Reclassification to off balance sheet credit losses				(464,000)
Charge-offs	(75,000)	(3,497,000)	(2,065,000)	(14,639,000)
Recoveries	306,000	1,413,000	2,730,000	4,736,000
Provision	1,181,000	(950,000)	430,000	(864,000)
Ending balance	22,201,000	17,516,000	22,201,000	17,516,000
Ending allowance balance attributable to loans:
Individually evaluated for impairment	2,570,000	2,544,000	2,570,000	2,544,000
Collectively evaluated for impairment	19,345,000	14,972,000	19,345,000	14,972,000
Acquired and accounted for under ASC 310-30	286,000		286,000
Total ending allowance balance	22,201,000	17,516,000	22,201,000	17,516,000
Loans:
Individually evaluated for impairment	21,537,000	37,069,000	21,537,000	37,069,000
Collectively evaluated for impairment	1,033,534,000	982,672,000	1,033,534,000	982,672,000
Acquired and accounted for under ASC 310-30	78,275,000	119,986,000	78,275,000	119,986,000
Total loans	1,133,346,000	1,139,727,000	1,133,346,000	1,139,727,000
Commercial loans collateralized by assignment of lease payments
Allowance for credit losses
Beginning balance	7,490,000	6,442,000	7,561,000	6,424,000
Charge-offs			(1,720,000)	(93,000)
Recoveries	111,000	5,000	460,000	224,000
Provision	(149,000)	191,000	1,151,000	83,000
Ending balance	7,452,000	6,638,000	7,452,000	6,638,000
Ending allowance balance attributable to loans:
Individually evaluated for impairment	180,000	83,000	180,000	83,000
Collectively evaluated for impairment	7,272,000	6,555,000	7,272,000	6,555,000
Total ending allowance balance	7,452,000	6,638,000	7,452,000	6,638,000
Loans:
Individually evaluated for impairment	1,168,000	631,000	1,168,000	631,000
Collectively evaluated for impairment	1,218,193,000	1,066,560,000	1,218,193,000	1,066,560,000
Total loans	1,219,361,000	1,067,191,000	1,219,361,000	1,067,191,000
Commercial real estate
Allowance for credit losses
Beginning balance	68,713,000	67,260,000	68,695,000	105,875,000
Transfer to (from) allowance for unfunded credit commitments		5,516,000		5,516,000
Reclassification to off balance sheet credit losses				(7,989,000)
Charge-offs	(2,994,000)	(7,815,000)	(8,412,000)	(92,840,000)
Recoveries	12,893,000	739,000	16,116,000	2,585,000
Provision	(12,253,000)	7,920,000	(10,040,000)	60,473,000
Ending balance	66,359,000	73,620,000	66,359,000	73,620,000
Ending allowance balance attributable to loans:
Individually evaluated for impairment	7,567,000	6,326,000	7,567,000	6,326,000
Collectively evaluated for impairment	56,851,000	67,137,000	56,851,000	67,137,000
Acquired and accounted for under ASC 310-30	1,941,000	157,000	1,941,000	157,000
Total ending allowance balance	66,359,000	73,620,000	66,359,000	73,620,000
Loans:
Individually evaluated for impairment	56,037,000	106,728,000	56,037,000	106,728,000
Collectively evaluated for impairment	1,714,224,000	1,738,165,000	1,714,224,000	1,738,165,000
Acquired and accounted for under ASC 310-30	269,348,000	348,738,000	269,348,000	348,738,000
Total loans	2,039,609,000	2,193,631,000	2,039,609,000	2,193,631,000
Unfunded Commitments
Transfer to (from) allowance for unfunded credit commitments		5,516,000		5,516,000
Residential real estate
Allowance for credit losses
Beginning balance	3,592,000	3,593,000	3,935,000	5,104,000
Charge-offs	(474,000)	(141,000)	(1,876,000)	(11,783,000)
Recoveries	8,000	7,000	230,000	40,000
Provision	738,000	322,000	1,575,000	10,420,000
Ending balance	3,864,000	3,781,000	3,864,000	3,781,000
Ending allowance balance attributable to loans:
Individually evaluated for impairment	401,000		401,000
Collectively evaluated for impairment	3,144,000	3,781,000	3,144,000	3,781,000
Acquired and accounted for under ASC 310-30	319,000		319,000
Total ending allowance balance	3,864,000	3,781,000	3,864,000	3,781,000
Loans:
Individually evaluated for impairment	11,127,000	5,842,000	11,127,000	5,842,000
Collectively evaluated for impairment	293,787,000	303,776,000	293,787,000	303,776,000
Acquired and accounted for under ASC 310-30	7,116,000	11,710,000	7,116,000	11,710,000
Total loans	312,030,000	321,328,000	312,030,000	321,328,000
Construction real estate
Allowance for credit losses
Beginning balance	10,586,000	21,861,000	15,639,000	37,215,000
Transfer to (from) allowance for unfunded credit commitments			1,132,000
Reclassification to off balance sheet credit losses				(8,597,000)
Charge-offs	(71,000)	(6,008,000)	(3,951,000)	(45,928,000)
Recoveries	752,000	681,000	1,458,000	5,071,000
Provision	(393,000)	(140,000)	(3,404,000)	28,633,000
Ending balance	10,874,000	16,394,000	10,874,000	16,394,000
Ending allowance balance attributable to loans:
Individually evaluated for impairment	582,000	2,463,000	582,000	2,463,000
Collectively evaluated for impairment	10,292,000	13,931,000	10,292,000	13,931,000
Total ending allowance balance	10,874,000	16,394,000	10,874,000	16,394,000
Loans:
Individually evaluated for impairment	2,372,000	2,913,000	2,372,000	2,913,000
Collectively evaluated for impairment	147,500,000	207,293,000	147,500,000	207,293,000
Acquired and accounted for under ASC 310-30	125,515,000	214,316,000	125,515,000	214,316,000
Total loans	275,387,000	424,522,000	275,387,000	424,522,000
Unfunded Commitments
Transfer to (from) allowance for unfunded credit commitments			1,132,000
Indirect vehicle
Allowance for credit losses
Beginning balance	1,941,000	3,709,000	1,834,000	3,157,000
Charge-offs	(433,000)	(611,000)	(1,636,000)	(1,882,000)
Recoveries	224,000	327,000	835,000	1,021,000
Provision	288,000	(1,115,000)	(987,000)	14,000
Ending balance	2,020,000	2,310,000	2,020,000	2,310,000
Ending allowance balance attributable to loans:
Collectively evaluated for impairment	2,020,000	2,310,000	2,020,000	2,310,000
Total ending allowance balance	2,020,000	2,310,000	2,020,000	2,310,000
Loans:
Collectively evaluated for impairment	206,973,000	189,032,000	206,973,000	189,032,000
Total loans	206,973,000	189,032,000	206,973,000	189,032,000
Home equity
Allowance for credit losses
Beginning balance	7,617,000	5,955,000	7,333,000	5,062,000
Charge-offs	(1,209,000)	(1,605,000)	(3,157,000)	(9,005,000)
Recoveries	303,000	151,000	423,000	218,000
Provision	370,000	3,231,000	(2,482,000)	11,457,000
Ending balance	7,081,000	7,732,000	7,081,000	7,732,000
Ending allowance balance attributable to loans:
Collectively evaluated for impairment	7,081,000	7,732,000	7,081,000	7,732,000
Total ending allowance balance	7,081,000	7,732,000	7,081,000	7,732,000
Loans:
Individually evaluated for impairment	10,280,000	8,602,000	10,280,000	8,602,000
Collectively evaluated for impairment	304,438,000	340,333,000	304,438,000	340,333,000
Acquired and accounted for under ASC 310-30	568,000	902,000	568,000	902,000
Total loans	315,286,000	349,837,000	315,286,000	349,837,000
Consumer loans
Allowance for credit losses
Beginning balance	1,028,000	687,000	695,000	633,000
Charge-offs	(332,000)	(475,000)	(864,000)	(1,363,000)
Recoveries	77,000	83,000	280,000	532,000
Provision	558,000	324,000	(1,220,000)	817,000
Ending balance	1,331,000	619,000	1,331,000	619,000
Ending allowance balance attributable to loans:
Collectively evaluated for impairment	1,331,000	619,000	1,331,000	619,000
Total ending allowance balance	1,331,000	619,000	1,331,000	619,000
Loans:
Individually evaluated for impairment	248,000	241,000	248,000	241,000
Collectively evaluated for impairment	84,403,000	75,785,000	84,403,000	75,785,000
Acquired and accounted for under ASC 310-30	38,202,000	52,444,000	38,202,000	52,444,000
Total loans	122,853,000	128,470,000	122,853,000	128,470,000
Purchased loans
Allowance for credit losses
Beginning balance			827,000
Provision	658,000		5,700,000
Net charge-offs	(422,000)		(4,000,000)
Ending balance	2,500,000		2,500,000
Ending allowance balance attributable to loans:
Total ending allowance balance	2,500,000		2,500,000
Loans:
Total loans	$ 230,800,000		$ 230,800,000
Unfunded Commitments
Provision and charge-offs related to the number of pools			9

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DEPOSITS (Tables)

9 Months Ended

Sep. 30, 2012

DEPOSITS

Schedule of composition of deposits

	September 30,				December 31,
	2012				2011
	Amount		Percent		Amount		Percent
Demand deposit accounts, noninterest bearing	$	2,011,542	27	%	$	1,885,694	25	%
NOW and money market accounts	2,682,608		36	%	2,645,334		34	%
Savings accounts	797,741		10	%	753,610		10	%
Certificates of deposit	1,632,370		22	%	1,925,608		25	%
Brokered deposit accounts	355,086		5	%	437,361		6	%
Total	$	7,479,347	100	%	$	7,647,607	100	%

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STOCK-BASED COMPENSATION (Tables)

9 Months Ended

Sep. 30, 2012

STOCK-BASED COMPENSATION

Summary of the impact of share-based payment plans in the financial statements

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Total cost of share-based payment plans during the period	$	1,080	$	1,451	$	3,581	$	3,530
Amount of related income tax benefit recognized in income	$	430	$	607	$	1,431	$	1,449

Additional information related to options outstanding

					Weighted
					Average
			Weighted		Remaining	Aggregate
			Average		Contractual	Intrinsic
	Number of		Exercise		Term	Value
	Options		Price		(In Years)	(in thousands)
Options outstanding as of December 31, 2011	2,935,810		$	27.64
Granted	240,569		20.42
Exercised	(207,571	)	20.79
Expired or cancelled	(172,043	)	31.32
Forfeited	(24,986	)	20.04
Options outstanding as of September 30, 2012	2,771,779		$	27.36	4.91	$	1,419
Options exercisable as of September 30, 2012	2,095,162		$	30.20	3.73	$	324

Assumptions used for options granted

	September 30,
	2012
Risk-free interest rate	1.03		%
Expected volatility of Company’s stock	27.40		%
Expected dividend yield	2.00		%
Expected life of options	5.7 years
Weighted average fair value per option of options granted during the period	$	4.30

Summary of changes in restricted shares and units

	Number of Shares		Weighted Average Grant Date Fair Value
Shares and Units Outstanding at December 31, 2011	664,502		$	14.37
Granted	295,681		20.68
Vested	(294,660	)	10.86
Forfeited	(13,377	)	16.65
Shares and Units Outstanding at September 30, 2012	652,146		$	18.78

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2012	Sep. 30, 2011
Financial assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3)
Balance at the beginning of the period		$ 6,992	$ 7,476
Other comprehensive income		89	42
Principal payments		(846)	(485)
Impairment charge		(117)
Balance at the end of the period	6,118	6,118	7,033
Branch impairment charges	$ 758	$ 758	$ 1,000

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LOANS (Details 6) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Changes in the accretable yield for purchased credit-impaired loans
Balance at beginning of period	$ 9,411	$ 28,298	$ 18,703	$ 44,103
Accretion	(3,406)	(7,854)	(12,812)	(25,193)
Other	403	(600)	517	934
Balance at end of period	$ 6,408	$ 19,844	$ 6,408	$ 19,844

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SHORT-TERM BORROWINGS (Tables)

9 Months Ended

Sep. 30, 2012

SHORT-TERM BORROWINGS

Summary of short-term borrowings

	September 30,				December 31,
	2012				2011
	Weighted Average Cost		Amount		Weighted Average Cost		Amount
Customer repurchase agreements	0.28	%	$	270,245	0.30	%	$	216,439
Federal Home Loan Bank advances	3.56	%	19,368		3.66	%	3,515
Line of credit	0.00	%	—		0.00	%	—
	0.50	%	$	289,613	0.35	%	$	219,954

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JUNIOR SUBORDINATED NOTES ISSUED TO CAPITAL TRUSTS (Tables)

9 Months Ended

Sep. 30, 2012

JUNIOR SUBORDINATED NOTES ISSUED TO CAPITAL TRUSTS

Outstanding junior subordinated notes and the related trust preferred securities issued by each trust

	Coal City	MB Financial	MB Financial	MB Financial
	Capital Trust I	Capital Trust II	Capital Trust III	Capital Trust IV
Junior Subordinated Notes:
Principal balance	$25,774	$36,083	$10,310	$20,619
Annual interest rate	3-mo LIBOR +1.80%	3-mo LIBOR +1.40%	3-mo LIBOR +1.50%	3-mo LIBOR +1.52%
Stated maturity date	September 1, 2028	September 15, 2035	September 23, 2036	September 15, 2036
Call date	September 1, 2008	December 15, 2010	September 23, 2011	September 15, 2011
Trust Preferred Securities:
Face Value	$25,000	$35,000	$10,000	$20,000
Annual distribution rate	3-mo LIBOR +1.80%	3-mo LIBOR +1.40%	3-mo LIBOR +1.50%	3-mo LIBOR +1.52%
Issuance date	July 1998	August 2005	July 2006	August 2006
Distribution dates (1)	Quarterly	Quarterly	Quarterly	Quarterly

	MB Financial	MB Financial	FOBB
	Capital Trust V	Capital Trust VI	Statutory Trust III (2)
Junior Subordinated Notes:
Principal balance	$30,928	$23,196	$5,155
Annual interest rate	3-mo LIBOR +1.30%	3-mo LIBOR +1.30%	3-mo LIBOR +2.80%
Stated maturity date	December 15, 2037	October 30, 2037	January 23, 2034
Call date	December 15, 2012	October 30, 2012	January 23, 2009
Trust Preferred Securities:
Face Value	$30,000	$22,500	$5,000
Annual distribution rate	3-mo LIBOR +1.30%	3-mo LIBOR +1.30%	3-mo LIBOR +2.80%
Issuance date	September 2007	October 2007	December 2003
Distribution dates (1)	Quarterly	Quarterly	Quarterly

(1)All distributions are cumulative and paid in cash.

(2)FOBB Statutory Trust III was established by First Oak Brook Bancshares, Inc. (“FOBB”) prior to the Company’s acquisition of FOBB, and the junior subordinated note issued by FOBB to FOBB Statutory Trust III was assumed by the Company upon completion of the acquisition.

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Cash Flows From Operating Activities:
Net income	$ 66,362	$ 19,275
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of premises and equipment	11,450	9,983
Depreciation of leased equipment	28,107	31,556
Impairment charges on branch facilities	758	1,000
Stock-based compensation expense	3,581	3,530
Gain on sales of premises and equipment and leased equipment	(2,746)	(1,489)
Amortization of other intangibles	3,759	4,255
Provision for credit losses	(9,900)	112,750
Deferred income tax expense (benefit)	19,763	(2,018)
Amortization of premiums and discounts on investment securities, net	31,838	29,898
Accretion of premiums and discounts on loans, net	(13,000)	(25,558)
Accretion of FDIC indemnification asset	(901)	(4,155)
Net gain on investment securities	(244)	(229)
Proceeds from sale of loans held for sale in the ordinary course of business	64,124	30,989
Origination of loans held for sale	(64,980)	(28,748)
Net gains on sale of loans held for sale	(1,503)	(2,241)
Net gain on sales of other real estate owned	(1,264)	(904)
Impairments on other real estate owned	13,919	7,255
Net loss on other real estate owned related to FDIC-assisted transactions	3,313	1,784
Increase in cash surrender value of life insurance	(2,677)	(3,433)
(Increase) decrease in other assets, net	(45,242)	15,740
Increase in other liabilities, net	7,944	23,913
Net cash provided by operating activities	112,461	223,153
Cash Flows From Investing Activities:
Proceeds from sales of investment securities available for sale	12,573	11,360
Proceeds from maturities and calls of investment securities available for sale	432,162	269,053
Purchase of investment securities available for sale	(350,669)	(582,677)
Proceeds from maturities and calls of investment securities held to maturity	960	543
Purchase of investment securities held to maturity	(1,923)	(499,840)
Purchase of non-marketable securities - FHLB and FRB stock	(24)	(629)
Redemption of non-marketable securities - FHLB and FRB stock	23,203
Net decrease in loans	329,773	344,002
Proceeds from sale of loans held for sale		205,740
Purchases of premises and equipment	(16,952)	(12,147)
Purchases of leased equipment	(19,836)	(42,270)
Proceeds from sales of premises and equipment	1,498	1,358
Proceeds from sales of leased equipment	11,108	3,569
Proceeds from sale of other real estate owned	28,398	34,241
Capital improvements on other real estate owned	(2,304)	(983)
Proceeds from sale of other real estate owned related to FDIC-assisted transactions	29,008	16,227
Principal paid on lease investments	(1,878)	(302)
Life insurance death benefit		4,115
Net proceeds from FDIC related to covered assets	79,247	123,469
Net cash provided by (used in) investing activities	554,344	(125,171)
Cash Flows From Financing Activities:
Net decrease in deposits	(168,260)	(431,051)
Net increase (decrease) in short-term borrowings	69,659	(11,426)
Proceeds from long-term borrowings	5,740	12,235
Principal paid on long-term borrowings	(153,206)	(22,930)
Redemption of junior subordinated notes issued to capital trusts	(6,186)
Repurchase of preferred stock and warrant	(197,518)
Treasury stock transactions, net	(260)	(1,090)
Stock options exercised	154	1,902
Excess tax benefits from share-based payment arrangements		15
Dividends paid on preferred stock	(3,239)	(7,350)
Dividends paid on common stock	(1,627)	(1,636)
Net cash used in financing activities	(454,743)	(461,331)
Net increase (decrease) in cash and cash equivalents	212,062	(363,349)
Cash and cash equivalents:
Beginning of period	244,565	844,159
End of period	456,627	480,810
Cash payments for:
Interest paid to depositors and other borrowed funds	36,156	47,411
Income tax payments (refunds), net	4,230	(477)
Supplemental Schedule of Noncash Investing Activities:
Securities available for sale purchased not settled	3,919
Loans transferred to other real estate owned	2,724	55,603
Loans transferred to other real estate owned related to FDIC-assisted transactions	17,923	49,072
Loans transferred to repossessed vehicles	607	984
Loans transferred to loans held for sale		205,740
Operating leases rewritten as direct finance leases included as loans	7,593	2,126
Reclassification of reserves on unfunded credit commitments		$ 17,050

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DERIVATIVE FINANCIAL INSTRUMENTS (Tables)

9 Months Ended

Sep. 30, 2012

DERIVATIVE FINANCIAL INSTRUMENTS

Summary of derivative financial instruments

	Asset Derivatives								Liability Derivatives
	September 30, 2012				December 31, 2011				September 30, 2012					December 31, 2011
	Notional		Estimated		Notional		Estimated		Notional		Estimated			Notional		Estimated
	Amount		Fair Value		Amount		Fair Value		Amount		Fair Value			Amount		Fair Value
Derivative instruments designated as hedges of fair value:
Interest rate swap contracts (1)	$	—	$	—	$	—	$	—	$	6,916	$	(137	)	$	7,204	$	(315	)
Stand-alone derivative instruments (2)
Interest rate swap contracts	382,865		28,819		343,132		25,931		383,948		(28,922		)	344,294		(26,053		)
Interest rate options contracts	75,780		159		4,287		32		75,780		(159		)	4,287		(32		)
Foreign exchange contracts	16,714		998		8,567		240		16,407		(920		)	8,498		(206		)
Mortgage banking derivatives	7,720		210		2,626		48		6,007		(101		)	2,000		(18		)
Total stand-alone derivative instruments	483,079		30,186		358,612		26,251		482,142		(30,102		)	359,079		(26,309		)
Total	$	483,079	$	30,186	$	358,612	$	26,251	$	489,058	$	(30,239	)	$	366,283	$	(26,624	)

(1) Hedged fixed-rate commercial real estate loans

(2) These portfolio swaps are not designated as hedging instruments under ASC Topic 815.

Schedule of the amount of gains and losses on derivative contracts designated as hedges and not designated as hedges

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2012		2011		2012			2011
Derivative instruments designated as hedges of fair value:
Interest rate swap contracts	$	1	$	1	$	(36	)	$	(74	)
Stand-alone derivative instruments:
Interest rate swap contracts	6		18		19			108
Interest rate options contracts	—		—		—			—
Foreign exchange contracts	14		12		44			(2		)
Mortgage banking derivatives	9		121		79			121
Total stand-alone derivative instruments	29		151		142			227
Total	$	30	$	152	$	106		$	153

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LOANS (Details 2) (USD $)	9 Months Ended
	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2011
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	$ 5,128,683,000	$ 5,288,451,000
Total loans	5,624,845,000	5,950,995,000	5,813,738,000
Period past due of recorded investment in loans	90 days
Recorded investment in nonaccrual loans and loans past due ninety days or more and still accruing
Non-performing substandard and doubtful loans	78,800,000	114,700,000
Pass
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	3,865,083,000	3,952,096,000
Special Mention
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	138,102,000	142,239,000
Substandard
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	204,650,000	251,410,000
Doubtful
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	5,640,000	13,530,000
Total risk rated category
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	4,213,475,000	4,359,275,000
Non-performing
Contractual aging of the recorded investment in loans
Current	65,968,000	91,752,000
30-59 days, past due	2,720,000	5,916,000
60-89 days, past due	6,409,000	5,142,000
Loans past due, 90 days or more	30,186,000	26,581,000
Total, past due	39,315,000	37,639,000
Total loans	105,283,000	129,391,000
Commercial loans
Contractual aging of the recorded investment in loans
Current	1,066,782,000	1,105,139,000
30-59 days, past due	1,720,000	2,178,000
60-89 days, past due	1,781,000	188,000
Loans past due, 90 days or more	3,698,000	5,618,000
Total, past due	7,199,000	7,984,000
Total loans, excluding covered loans	1,073,981,000	1,113,123,000
Total loans	1,133,346,000		1,139,727,000
Recorded investment in nonaccrual loans and loans past due ninety days or more and still accruing
Nonaccrual	21,536,000	34,813,000
Loans past due 90 days or more and still accruing	36,000
Commercial loans | Pass
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	973,284,000	983,935,000
Commercial loans | Special Mention
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	41,175,000	56,550,000
Commercial loans | Substandard
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	58,620,000	69,292,000
Commercial loans | Doubtful
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	902,000	3,346,000
Commercial loans | Total risk rated category
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	1,073,981,000	1,113,123,000
Commercial loans collateralized by assignment of lease payments
Contractual aging of the recorded investment in loans
Current	1,206,547,000	1,202,323,000
30-59 days, past due	10,654,000	3,409,000
60-89 days, past due	2,129,000	2,463,000
Loans past due, 90 days or more	31,000	380,000
Total, past due	12,814,000	6,252,000
Total loans, excluding covered loans	1,219,361,000	1,208,575,000
Total loans	1,219,361,000		1,067,191,000
Recorded investment in nonaccrual loans and loans past due ninety days or more and still accruing
Nonaccrual	1,076,000	2,116,000
Loans past due 90 days or more and still accruing		66,000
Commercial loans collateralized by assignment of lease payments | Pass
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	1,209,988,000	1,203,933,000
Commercial loans collateralized by assignment of lease payments | Special Mention
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	163,000
Commercial loans collateralized by assignment of lease payments | Substandard
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	9,210,000	4,642,000
Commercial loans collateralized by assignment of lease payments | Total risk rated category
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	1,219,361,000	1,208,575,000
Commercial real estate
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	1,770,261,000	1,853,788,000
Total loans	2,039,609,000		2,193,631,000
Healthcare
Contractual aging of the recorded investment in loans
Current	180,429,000	176,594,000
Loans past due, 90 days or more	4,738,000
Total, past due	4,738,000
Total loans, excluding covered loans	185,167,000	176,594,000
Recorded investment in nonaccrual loans and loans past due ninety days or more and still accruing
Nonaccrual	4,738,000	6,892,000
Healthcare | Pass
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	158,510,000	169,702,000
Healthcare | Special Mention
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	21,919,000
Healthcare | Doubtful
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	4,738,000	6,892,000
Healthcare | Total risk rated category
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	185,167,000	176,594,000
Industrial
Contractual aging of the recorded investment in loans
Current	416,478,000	450,029,000
30-59 days, past due	614,000	1,013,000
60-89 days, past due	1,963,000	1,700,000
Loans past due, 90 days or more	3,622,000	6,642,000
Total, past due	6,199,000	9,355,000
Total loans, excluding covered loans	422,677,000	459,384,000
Recorded investment in nonaccrual loans and loans past due ninety days or more and still accruing
Nonaccrual	12,271,000	29,637,000
Loans past due 90 days or more and still accruing	410,000
Industrial | Pass
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	375,869,000	370,760,000
Industrial | Special Mention
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	5,202,000	26,294,000
Industrial | Substandard
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	41,606,000	62,330,000
Industrial | Total risk rated category
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	422,677,000	459,384,000
Multifamily
Contractual aging of the recorded investment in loans
Current	357,826,000	383,882,000
30-59 days, past due	899,000	2,398,000
60-89 days, past due	1,576,000	1,845,000
Loans past due, 90 days or more	3,169,000	2,772,000
Total, past due	5,644,000	7,015,000
Total loans, excluding covered loans	363,470,000	390,897,000
Recorded investment in nonaccrual loans and loans past due ninety days or more and still accruing
Nonaccrual	5,868,000	9,145,000
Multifamily | Pass
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	319,097,000	328,617,000
Multifamily | Special Mention
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	30,515,000	43,256,000
Multifamily | Substandard
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	13,858,000	15,732,000
Multifamily | Doubtful
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans		3,292,000
Multifamily | Total risk rated category
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	363,470,000	390,897,000
Retail
Contractual aging of the recorded investment in loans
Current	392,608,000	421,079,000
30-59 days, past due	469,000	2,376,000
60-89 days, past due	375,000	480,000
Loans past due, 90 days or more	5,077,000	3,624,000
Total, past due	5,921,000	6,480,000
Total loans, excluding covered loans	398,529,000	427,559,000
Recorded investment in nonaccrual loans and loans past due ninety days or more and still accruing
Nonaccrual	18,123,000	15,333,000
Retail | Pass
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	347,451,000	384,590,000
Retail | Special Mention
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	21,788,000	4,031,000
Retail | Substandard
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	29,290,000	38,938,000
Retail | Total risk rated category
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	398,529,000	427,559,000
Office
Contractual aging of the recorded investment in loans
Current	172,388,000	181,960,000
30-59 days, past due	287,000
Loans past due, 90 days or more	1,125,000	1,544,000
Total, past due	1,412,000	1,544,000
Total loans, excluding covered loans	173,800,000	183,504,000
Recorded investment in nonaccrual loans and loans past due ninety days or more and still accruing
Nonaccrual	2,719,000	2,826,000
Office | Pass
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	144,360,000	159,162,000
Office | Special Mention
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	6,459,000	3,924,000
Office | Substandard
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	22,981,000	20,418,000
Office | Total risk rated category
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	173,800,000	183,504,000
Other.
Contractual aging of the recorded investment in loans
Current	223,397,000	214,137,000
30-59 days, past due	1,949,000	457,000
60-89 days, past due	693,000	595,000
Loans past due, 90 days or more	579,000	661,000
Total, past due	3,221,000	1,713,000
Total loans, excluding covered loans	226,618,000	215,850,000
Recorded investment in nonaccrual loans and loans past due ninety days or more and still accruing
Nonaccrual	11,258,000	12,718,000
Other. | Pass
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	205,106,000	183,490,000
Other. | Special Mention
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	5,067,000	3,822,000
Other. | Substandard
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	16,445,000	28,538,000
Other. | Total risk rated category
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	226,618,000	215,850,000
Residential real estate
Contractual aging of the recorded investment in loans
Current	301,660,000	311,256,000
30-59 days, past due	296,000	1,231,000
60-89 days, past due	1,910,000	767,000
Loans past due, 90 days or more	5,000,000	3,533,000
Total, past due	7,206,000	5,531,000
Total loans, excluding covered loans	308,866,000	316,787,000
Total loans	312,030,000		321,328,000
Recorded investment in nonaccrual loans and loans past due ninety days or more and still accruing
Nonaccrual	7,368,000	4,300,000
Residential real estate | Performing
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	301,498,000	312,487,000
Residential real estate | Non-performing
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	7,368,000	4,300,000
Construction real estate
Contractual aging of the recorded investment in loans
Current	146,926,000	180,471,000
30-59 days, past due	99,000
Loans past due, 90 days or more	2,847,000	3,318,000
Total, past due	2,946,000	3,318,000
Total loans, excluding covered loans	149,872,000	183,789,000
Total loans	275,387,000		424,522,000
Recorded investment in nonaccrual loans and loans past due ninety days or more and still accruing
Nonaccrual	1,225,000	1,145,000
Construction real estate | Pass
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	131,418,000	167,907,000
Construction real estate | Special Mention
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	5,814,000	4,362,000
Construction real estate | Substandard
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	12,640,000	11,520,000
Construction real estate | Total risk rated category
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	149,872,000	183,789,000
Indirect vehicle
Contractual aging of the recorded investment in loans
Current	204,909,000	185,363,000
30-59 days, past due	1,307,000	1,376,000
60-89 days, past due	475,000	386,000
Loans past due, 90 days or more	282,000	356,000
Total, past due	2,064,000	2,118,000
Total loans, excluding covered loans	206,973,000	187,481,000
Total loans	206,973,000		189,032,000
Recorded investment in nonaccrual loans and loans past due ninety days or more and still accruing
Nonaccrual	1,423,000	1,288,000
Loans past due 90 days or more and still accruing	6,000	16,000
Indirect vehicle | Performing
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	205,544,000	186,177,000
Indirect vehicle | Non-performing
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	1,429,000	1,304,000
Home equity
Contractual aging of the recorded investment in loans
Current	302,218,000	325,173,000
30-59 days, past due	4,632,000	2,812,000
60-89 days, past due	1,436,000	2,314,000
Loans past due, 90 days or more	6,432,000	5,744,000
Total, past due	12,500,000	10,870,000
Total loans, excluding covered loans	314,718,000	336,043,000
Total loans	315,286,000		349,837,000
Recorded investment in nonaccrual loans and loans past due ninety days or more and still accruing
Nonaccrual	17,204,000	9,087,000
Loans past due 90 days or more and still accruing	18,000
Home equity | Performing
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	297,496,000	326,956,000
Home equity | Non-performing
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	17,222,000	9,087,000
Consumer loans
Contractual aging of the recorded investment in loans
Current	84,591,000	88,854,000
30-59 days, past due	55,000	3,000
60-89 days, past due	2,000	3,000
Loans past due, 90 days or more	3,000	5,000
Total, past due	60,000	11,000
Total loans, excluding covered loans	84,651,000	88,865,000
Total loans	122,853,000		128,470,000
Recorded investment in nonaccrual loans and loans past due ninety days or more and still accruing
Nonaccrual	4,000	9,000
Consumer loans | Performing
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	84,647,000	88,856,000
Consumer loans | Non-performing
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	4,000	9,000
Gross loans, excluding covered loans
Contractual aging of the recorded investment in loans
Current	5,056,759,000	5,226,260,000
30-59 days, past due	22,981,000	17,253,000
60-89 days, past due	12,340,000	10,741,000
Loans past due, 90 days or more	36,603,000	34,197,000
Total, past due	71,924,000	62,191,000
Total loans, excluding covered loans	5,128,683,000	5,288,451,000
Covered loans
Contractual aging of the recorded investment in loans
Current	314,888,000	443,332,000
30-59 days, past due	27,338,000	14,332,000
60-89 days, past due	27,836,000	12,618,000
Loans past due, 90 days or more	126,100,000	192,262,000
Total, past due	181,274,000	219,212,000
Total loans	496,162,000	662,544,000
Loans
Contractual aging of the recorded investment in loans
Current	5,371,647,000	5,669,592,000
30-59 days, past due	50,319,000	31,585,000
60-89 days, past due	40,176,000	23,359,000
Loans past due, 90 days or more	162,703,000	226,459,000
Total, past due	253,198,000	281,403,000
Total loans	5,624,845,000	5,950,995,000
Recorded investment in nonaccrual loans and loans past due ninety days or more and still accruing
Nonaccrual	104,813,000	129,309,000
Loans past due 90 days or more and still accruing	470,000	82,000
Non-covered loans related to FDIC transactions
Contractual aging of the recorded investment in loans
Current	15,594,000	19,656,000
30-59 days, past due	609,000	1,958,000
60-89 days, past due	244,000	283,000
Loans past due, 90 days or more	6,415,000	7,617,000
Total, past due	7,268,000	9,858,000
Total loans	22,862,000	29,514,000
Consumer, residential real estate, home equity, and indirect vehicle loan classes
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	915,208,000	929,176,000
Consumer, residential real estate, home equity, and indirect vehicle loan classes | Performing
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	889,185,000	914,476,000
Consumer, residential real estate, home equity, and indirect vehicle loan classes | Non-performing
Contractual aging of the recorded investment in loans
Total loans, excluding covered loans	$ 26,023,000	$ 14,700,000

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DERIVATIVE FINANCIAL INSTRUMENTS (Details) (USD $)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011
DERIVATIVE FINANCIAL INSTRUMENTS
Net amount payable under interest rate swap			$ 22,000		$ 23,000
Interest rate swap credit risk exposure	28,900,000		28,900,000
Derivative financial instruments
Asset Derivatives, Notional Amount	483,079,000		483,079,000		358,612,000
Asset Derivatives, Estimated Fair Value	30,186,000		30,186,000		26,251,000
Liability Derivatives, Notional Amount	489,058,000		489,058,000		366,283,000
Liability Derivatives, Estimated Fair Value	(30,239,000)		(30,239,000)		(26,624,000)
Amount of gain or (loss) recognized in income on derivatives
Amount of gain or (loss) recognized in income on derivatives	30,000	152,000	106,000	153,000
Stand-alone derivative instruments
Derivative financial instruments
Asset Derivatives, Notional Amount	483,079,000		483,079,000		358,612,000
Asset Derivatives, Estimated Fair Value	30,186,000		30,186,000		26,251,000
Liability Derivatives, Notional Amount	482,142,000		482,142,000		359,079,000
Liability Derivatives, Estimated Fair Value	(30,102,000)		(30,102,000)		(26,309,000)
Amount of gain or (loss) recognized in income on derivatives
Amount of gain or (loss) recognized in income on derivatives	29,000	151,000	142,000	227,000
Interest rate swap contracts | Derivative instruments designated as hedges of fair value
Derivative financial instruments
Liability Derivatives, Notional Amount	6,916,000		6,916,000		7,204,000
Liability Derivatives, Estimated Fair Value	(137,000)		(137,000)		(315,000)
Amount of gain or (loss) recognized in income on derivatives
Amount of gain or (loss) recognized in income on derivatives	1,000	1,000	(36,000)	(74,000)
Interest rate swap contracts | Stand-alone derivative instruments
Derivative financial instruments
Asset Derivatives, Notional Amount	382,865,000		382,865,000		343,132,000
Asset Derivatives, Estimated Fair Value	28,819,000		28,819,000		25,931,000
Liability Derivatives, Notional Amount	383,948,000		383,948,000		344,294,000
Liability Derivatives, Estimated Fair Value	(28,922,000)		(28,922,000)		(26,053,000)
Amount of gain or (loss) recognized in income on derivatives
Amount of gain or (loss) recognized in income on derivatives	6,000	18,000	19,000	108,000
Interest rate options contracts | Stand-alone derivative instruments
Derivative financial instruments
Asset Derivatives, Notional Amount	75,780,000		75,780,000		4,287,000
Asset Derivatives, Estimated Fair Value	159,000		159,000		32,000
Liability Derivatives, Notional Amount	75,780,000		75,780,000		4,287,000
Liability Derivatives, Estimated Fair Value	(159,000)		(159,000)		(32,000)
Foreign exchange contracts | Stand-alone derivative instruments
Derivative financial instruments
Asset Derivatives, Notional Amount	16,714,000		16,714,000		8,567,000
Asset Derivatives, Estimated Fair Value	998,000		998,000		240,000
Liability Derivatives, Notional Amount	16,407,000		16,407,000		8,498,000
Liability Derivatives, Estimated Fair Value	(920,000)		(920,000)		(206,000)
Amount of gain or (loss) recognized in income on derivatives
Amount of gain or (loss) recognized in income on derivatives	14,000	12,000	44,000	(2,000)
Mortgage banking derivatives | Stand-alone derivative instruments
Derivative financial instruments
Asset Derivatives, Notional Amount	7,720,000		7,720,000		2,626,000
Asset Derivatives, Estimated Fair Value	210,000		210,000		48,000
Liability Derivatives, Notional Amount	6,007,000		6,007,000		2,000,000
Liability Derivatives, Estimated Fair Value	(101,000)		(101,000)		(18,000)
Amount of gain or (loss) recognized in income on derivatives
Amount of gain or (loss) recognized in income on derivatives	$ 9,000	$ 121,000	$ 79,000	$ 121,000

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CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
ASSETS
Cash and due from banks	$ 129,326	$ 144,228
Interest earning deposits with banks	327,301	100,337
Total cash and cash equivalents	456,627	244,565
Investment securities:
Securities available for sale, at fair value	1,814,972	1,929,297
Securities held to maturity, at amortized cost ($536,989 and $511,022 fair value at September 30, 2012 and December 31, 2011, respectively)	495,851	499,283
Non-marketable securities - FHLB and FRB stock	57,653	80,832
Total investment securities	2,368,476	2,509,412
Loans held for sale	7,221	4,727
Loans:
Total loans, excluding covered loans	5,128,683	5,288,451
Covered loans	496,162	662,544
Total loans	5,624,845	5,950,995
Less: Allowance for loan loss	121,182	126,798
Net loans	5,503,663	5,824,197
Lease investment, net	113,180	135,490
Premises and equipment, net	214,301	210,705
Cash surrender value of life insurance	127,985	125,309
Goodwill, net	387,069	387,069
Other intangibles, net	25,735	29,494
Other real estate owned, net	42,427	78,452
Other real estate owned related to FDIC transactions	32,607	60,363
FDIC indemnification asset	36,311	80,830
Other assets	147,943	142,459
Total assets	9,463,545	9,833,072
Deposits:
Noninterest bearing	2,011,542	1,885,694
Interest bearing	5,467,805	5,761,913
Total deposits	7,479,347	7,647,607
Short-term borrowings	289,613	219,954
Long-term borrowings	118,798	266,264
Junior subordinated notes issued to capital trusts	152,065	158,538
Accrued expenses and other liabilities	162,892	147,682
Total liabilities	8,202,715	8,440,045
STOCKHOLDERS' EQUITY
Preferred stock, ($0.01 par value, authorized 1,000,000 shares at September 30, 2012 and December 31, 2011; series A, 5% cumulative perpetual, 196,000 shares issued and outstanding at December 31, 2011, $1,000 liquidation value)		194,719
Common stock, ($0.01 par value; authorized 70,000,000 shares at September 30, 2012 and December 31, 2011; issued 54,957,541 shares at September 30, 2012 and 54,824,912 at December 31, 2011)	550	548
Additional paid-in capital	731,679	731,248
Retained earnings	489,426	427,956
Accumulated other comprehensive income	40,985	39,150
Less: 169,476 and 160,419 shares of Treasury stock, at cost, at September 30, 2012 and December 31, 2011, respectively	(3,304)	(3,044)
Controlling interest stockholders' equity	1,259,336	1,390,577
Noncontrolling interest	1,494	2,450
Total stockholders' equity	1,260,830	1,393,027
Total liabilities and stockholders' equity	$ 9,463,545	$ 9,833,072

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LOANS (Details 7) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Purchased credit-impaired loans and non-credit-impaired loans
Covered loans	$ 496,162,000	$ 662,544,000
Estimated receivable amount from the FDIC under the loss-share agreement	33,801,000
Non covered loans	22,862,000
Reimbursable amounts related to covered other real estate owned	2,500,000
Outstanding balances on purchased loans from the FDIC	561,700,000	795,600,000
Carrying amount on loans purchased from the FDIC	519,000,000	692,100,000
Purchased Credit Impaired Loans Receivable
Purchased credit-impaired loans and non-credit-impaired loans
Covered loans	254,181,000
Estimated receivable amount from the FDIC under the loss-share agreement	14,087,000
Non covered loans	3,545,000
Purchased Non-Credit Impaired Loans Receivable
Purchased credit-impaired loans and non-credit-impaired loans
Covered loans	241,981,000
Estimated receivable amount from the FDIC under the loss-share agreement	19,714,000
Non covered loans	19,317,000
Commercial related
Purchased credit-impaired loans and non-credit-impaired loans
Covered loans	31,853,000
Non covered loans	18,911,000
Commercial related | Purchased Credit Impaired Loans Receivable
Purchased credit-impaired loans and non-credit-impaired loans
Covered loans	24,590,000
Non covered loans	3,480,000
Commercial related | Purchased Non-Credit Impaired Loans Receivable
Purchased credit-impaired loans and non-credit-impaired loans
Covered loans	7,263,000
Non covered loans	15,431,000
Commercial loans
Purchased credit-impaired loans and non-credit-impaired loans
Covered loans	27,512,000
Commercial loans | Purchased Credit Impaired Loans Receivable
Purchased credit-impaired loans and non-credit-impaired loans
Covered loans	8,527,000
Commercial loans | Purchased Non-Credit Impaired Loans Receivable
Purchased credit-impaired loans and non-credit-impaired loans
Covered loans	18,985,000
Commercial real estate
Purchased credit-impaired loans and non-credit-impaired loans
Covered loans	269,348,000
Commercial real estate | Purchased Credit Impaired Loans Receivable
Purchased credit-impaired loans and non-credit-impaired loans
Covered loans	108,073,000
Commercial real estate | Purchased Non-Credit Impaired Loans Receivable
Purchased credit-impaired loans and non-credit-impaired loans
Covered loans	161,275,000
Construction real estate
Purchased credit-impaired loans and non-credit-impaired loans
Covered loans	125,515,000
Construction real estate | Purchased Credit Impaired Loans Receivable
Purchased credit-impaired loans and non-credit-impaired loans
Covered loans	108,571,000
Construction real estate | Purchased Non-Credit Impaired Loans Receivable
Purchased credit-impaired loans and non-credit-impaired loans
Covered loans	16,944,000
Other
Purchased credit-impaired loans and non-credit-impaired loans
Covered loans	41,934,000
Non covered loans	3,951,000
Other | Purchased Credit Impaired Loans Receivable
Purchased credit-impaired loans and non-credit-impaired loans
Covered loans	4,420,000
Non covered loans	65,000
Other | Purchased Non-Credit Impaired Loans Receivable
Purchased credit-impaired loans and non-credit-impaired loans
Covered loans	37,514,000
Non covered loans	$ 3,886,000

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (USD $) In Thousands, unless otherwise specified	Total	Preferred Stock	Common Stock	Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Income, Net of Tax	Treasury Stock	Noncontrolling Interest
Balance at Dec. 31, 2010	$ 1,344,786	$ 194,104	$ 546	$ 725,400	$ 402,810	$ 22,233	$ (2,828)	$ 2,521
Increase (Decrease) in Stockholders' Equity
Net income	19,469				19,275			194
Other comprehensive income, net of tax	10,089					10,089
Cash dividends declared on common shares ($0.03 per share)	(1,636)				(1,636)
Dividends and discount accretion on preferred shares	(7,350)	458			(7,808)
Restricted common stock activity, net of tax	(147)		1	(148)	(968)		968
Stock option activity, net of tax	1,273		1	1,181	(14)		105
Issuance of shares of common stock, net of issuance costs	16			16
Repurchase of common shares in connection with employee benefit plans and held in trust for deferred compensation plan	(1,178)			77			(1,255)
Stock-based compensation expense	3,530			3,530
Distributions to noncontrolling interest	(230)							(230)
Balance at Sep. 30, 2011	1,368,622	194,562	548	730,056	411,659	32,322	(3,010)	2,485
Balance at Dec. 31, 2011	1,393,027	194,719	548	731,248	427,956	39,150	(3,044)	2,450
Increase (Decrease) in Stockholders' Equity
Net income	66,546				66,362			184
Other comprehensive income, net of tax	1,835					1,835
Cash dividends declared on common shares ($0.03 per share)	(1,643)				(1,643)
Dividends and discount accretion on preferred shares	(1,988)	1,281			(3,269)
Repurchase of preferred shares and warrant	(197,518)	(196,000)		(1,518)
Restricted common stock activity, net of tax	1,071		2	(722)	17		1,774
Stock option activity, net of tax	(277)			(625)	3		345
Repurchase of common shares in connection with employee benefit plans and held in trust for deferred compensation plan	(1,928)			451			(2,379)
Stock-based compensation expense	3,581			3,581
Additional investment in subsidiary	(1,640)			(736)				(904)
Distributions to noncontrolling interest	(236)							(236)
Balance at Sep. 30, 2012	$ 1,260,830		$ 550	$ 731,679	$ 489,426	$ 40,985	$ (3,304)	$ 1,494

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Details 5) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Dec. 31, 2011
FAIR VALUE OF FINANCIAL INSTRUMENTS
Maximum maturity period of short-term borrowings where carrying value approximates fair value	90 days
Minimum maturity period of short-term borrowings where fair value is based on discounted value of contractual cash flows	90 days
Financial Assets:
Cash and due from banks	$ 129,326	$ 144,228
Interest bearing deposits with banks	327,301	100,337
Investment securities held to maturity	536,989	511,022
Non-marketable securities - FHLB and FRB stock	57,653	80,832
Loans held for sale	7,221	4,727
Financial Liabilities:
Non-interest bearing deposits	2,011,542	1,885,694
Interest bearing deposits	5,467,805	5,761,913
Short-term borrowings	289,613	219,954
Junior subordinated notes issued to capital trusts	152,065	158,538
Quoted Prices in Active Markets for Identical Assets (Level 1)
Financial Assets:
Cash and due from banks	129,326
Interest bearing deposits with banks	327,301
Investment securities available for sale	11,231
Accrued interest receivable	35,233
Financial Liabilities:
Non-interest bearing deposits	2,011,542
Accrued interest payable	3,250
Significant Other Observable Inputs (Level 2)
Financial Assets:
Investment securities available for sale	1,797,623
Investment securities held to maturity	536,989
Loans held for sale	7,221
Derivative financial instruments	30,186
Financial Liabilities:
Derivative financial instruments	30,239
Significant Unobservable Inputs (Level 3)
Financial Assets:
Investment securities available for sale	6,118
Non-marketable securities - FHLB and FRB stock	57,653
Loans, net	5,512,768
Financial Liabilities:
Interest bearing deposits	5,494,724
Short-term borrowings	289,824
Long-term borrowings	123,152
Junior subordinated notes issued to capital trusts	97,028
Carrying Amount
Financial Assets:
Cash and due from banks	129,326	144,228
Interest bearing deposits with banks	327,301	100,337
Investment securities available for sale	1,814,972	1,929,297
Investment securities held to maturity	495,851	499,283
Non-marketable securities - FHLB and FRB stock	57,653	80,832
Loans held for sale	7,221	4,727
Loans, net	5,503,663	5,824,197
Accrued interest receivable	35,233	35,870
Derivative financial instruments	30,186	26,251
Financial Liabilities:
Non-interest bearing deposits	2,011,542	1,885,694
Interest bearing deposits	5,467,805	5,761,913
Short-term borrowings	289,613	219,954
Long-term borrowings	118,798	266,264
Junior subordinated notes issued to capital trusts	152,065	158,538
Accrued interest payable	3,250	4,518
Derivative financial instruments	30,239	26,624
Estimated Fair Value
Financial Assets:
Cash and due from banks	129,326	144,228
Interest bearing deposits with banks	327,301	100,337
Investment securities available for sale	1,814,972	1,929,297
Investment securities held to maturity	536,989	511,022
Non-marketable securities - FHLB and FRB stock	57,653	80,832
Loans held for sale	7,221	4,727
Loans, net	5,512,768	5,734,017
Accrued interest receivable	35,233	35,870
Derivative financial instruments	30,186	26,251
Financial Liabilities:
Non-interest bearing deposits	2,011,542	1,885,694
Interest bearing deposits	5,494,724	5,790,963
Short-term borrowings	289,824	219,983
Long-term borrowings	123,152	279,124
Junior subordinated notes issued to capital trusts	97,028	113,635
Accrued interest payable	3,250	4,518
Derivative financial instruments	$ 30,239	$ 26,624

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EARNINGS PER COMMON SHARE (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
EARNINGS PER COMMON SHARE
Distributed earnings allocated to common stock	$ 547	$ 546	$ 1,643	$ 1,634
Undistributed earnings allocated to common stock	22,585	19,149	64,717	17,621
Net earnings allocated to common stock	23,132	19,695	66,360	19,255
Less: Preferred stock dividends and discount accretion		2,605	3,269	7,808
Net earnings allocated to common stock	23,132	17,090	63,091	11,447
Net earnings allocated to participating securities	1	2	2	20
Net income available to common stockholders	$ 23,133	$ 17,092	$ 63,093	$ 11,467
Weighted average shares outstanding for basic earnings per common share	54,346,827	54,121,156	54,226,241	54,029,023
Dilutive effect of equity awards (in shares)	209,690	202,164	246,376	266,599
Weighted average shares outstanding for diluted earnings per common share	54,556,517	54,323,320	54,472,617	54,295,622
Basic earnings allocated to common stock per common share (in dollars per share)	$ 0.43	$ 0.36	$ 1.22	$ 0.36
Impact of preferred stock dividends on basic earnings per common share (in dollars per share)		$ (0.04)	$ (0.06)	$ (0.15)
Basic earnings per common share (in dollars per share)	$ 0.43	$ 0.32	$ 1.16	$ 0.21
Diluted earnings allocated to common stock per common share (in dollars per share)	$ 0.42	$ 0.36	$ 1.22	$ 0.35
Impact of preferred stock dividends on diluted earnings per common share (in dollars per share)		$ (0.05)	$ (0.06)	$ (0.14)
Diluted earnings per common share (in dollars per share)	$ 0.42	$ 0.31	$ 1.16	$ 0.21

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FAIR VALUE OF FINANCIAL INSTRUMENTS

9 Months Ended

Sep. 30, 2012

FAIR VALUE OF FINANCIAL INSTRUMENTS

FAIR VALUE OF FINANCIAL INSTRUMENTS

NOTE 14.             FAIR VALUE OF FINANCIAL INSTRUMENTS

ASC Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.  A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability.  The price in the principal (or most advantageous) market used to measure the fair value of the asset or liability shall not be adjusted for transaction costs.  An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction.  Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact.

ASC Topic 820 requires the use of valuation techniques that are consistent with the market approach, the income approach and/or the cost approach.  The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities.  The income approach uses valuation techniques to convert expected future amounts, such as cash flows or earnings, to a single present value amount on a discounted basis.  The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost).  Valuation techniques should be consistently applied.  Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability.  Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.  In that regard, ASC Topic 820 establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.  The fair value hierarchy is as follows:

Level 1:  Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2:  Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3:  Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.

In general, fair value is based upon quoted market prices, where available.  If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters.  Valuation adjustments may be made to ensure that financial instruments are recorded at fair value.  These adjustments may include amounts to reflect counterparty credit quality, the Company’s creditworthiness, among other things, as well as unobservable parameters.  Any such valuation adjustments are applied consistently over time.  Our valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values.  While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.  Transfers between levels of the fair value hierarchy are recognized on the actual date of the event or circumstances that caused the transfer, which generally coincides with the Company’s monthly and/or quarterly valuation process.

Financial Instruments Recorded at Fair Value on a Recurring Basis

Securities Available for Sale. The fair values of securities available for sale are determined by quoted prices in active markets, when available, and classified as Level 1.  If quoted market prices are not available, the fair value is determined by a matrix pricing, which is a mathematical technique, widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities and classified as Level 2.  In cases where significant credit valuation adjustments are incorporated into the estimation of fair value, reported amounts are classified as Level 3 inputs.

Loans Held for Sale. Mortgage loans originated and held for sale in the secondary market are carried at fair value.  The fair value of loans held for sale is determined using quoted secondary market prices and classified as level 2.

Assets Held in Trust for Deferred Compensation and Associated Liabilities.Assets held in trust for deferred compensation are recorded at fair value and included in “Other Assets” on the consolidated balance sheets.  These assets are invested in mutual funds and classified as Level 1.  Deferred compensation liabilities, also classified as Level 1, are carried at the fair value of the obligation to the employee, which corresponds to the fair value of the invested assets.

Derivatives.  Currently, we use interest rate swaps to manage our interest rate risk.  The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative and classified as Level 2.  This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including LIBOR rate curves.  We also obtain dealer quotations for these derivatives for comparative purposes to assess the reasonableness of the model valuations.  We also offer other derivatives, including foreign currency forward contracts and interest rate lock commitments, to our customers and offset our exposure from such contracts by purchasing other financial contracts, which are valued using market consensus prices.

The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of September 30, 2012 and December 31, 2011, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):

			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
September 30, 2012
Financial assets
Securities available for sale:
U.S Government sponsored agencies and enterprises	$	42,187	$	—	$	42,187	$	—
States and political subdivisions	668,966		—		668,966		—
Residential mortgage-backed securities	1,021,983		—		1,021,096		887
Commercial mortgage-backed securities	53,979		—		53,979		—
Corporate bonds	16,626		—		11,395		5,231
Equity securities	11,231		11,231		—		—
Loans held for sale	7,221		—		7,221		—
Assets held in trust for deferred compensation	7,802		7,802		—		—
Derivative financial instruments	30,186		—		30,186		—
Financial liabilities
Other liabilities (1)	7,802		7,802		—		—
Derivative financial instruments	30,239		—		30,239		—
December 31, 2011
Financial assets
Securities available for sale:
U.S Government sponsored agencies and enterprises	$	42,401	$	—	$	42,401	$	—
States and political subdivisions	535,660		—		535,660		—
Residential mortgage-backed securities	1,281,806		—		1,280,713		1,093
Commercial mortgage-backed securities	52,685		—		52,685		—
Corporate bonds	5,899		—		—		5,899
Equity securities	10,846		10,846		—		—
Loans held for sale	4,727		—		4,727		—
Assets held in trust for deferred compensation	6,808		6,808		—		—
Derivative financial instruments	26,251		—		26,251		—
Financial liabilities
Other liabilities (1)	6,808		6,808		—		—
Derivative financial instruments	26,624		—		26,624		—

(1) Liabilities associated with assets held in trust for deferred compensation

The significant unobservable inputs used in the Level 3 fair value measurements of the Company’s residential mortgage-backed securities and corporate bonds included in the table above primarily relate to the constant pre-payment rates and credit assumptions used in the discounted cash flows valuation, respectively.  As of September 30, 2012, those constant pre-payment rates ranged from 6% to 12% and the credit assumption averaged a 25% loss.

The Company did not have any transfers between Level 1 and Level 2 of the fair value hierarchy during the nine months ended September 30, 2012.  The Company’s policy for determining transfers between levels occurs at the end of the reporting period when circumstances in the underlying valuation criteria change and result in transfer between levels.

The following table presents additional information about financial assets measured at fair value on a recurring basis for which the Company used significant unobservable inputs (Level 3):

	Nine Months Ended
	September 30,
(in thousands)	2012			2011
Balance, beginning of period	$	6,992		$	7,476
Other comprehensive income	89			42
Principal payments	(846		)	(485		)
Impairment charge	(117		)	—
	$	6,118		$	7,033

Financial Instruments Recorded at Fair Value on a Nonrecurring Basis

The Company may be required, from time to time, to measure certain financial assets and financial liabilities at fair value on a nonrecurring basis in accordance with U.S. GAAP.  These include assets that are measured at the lower of cost or market value that were recognized at fair value below cost at the end of the period.

Impaired Loans.Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired.  Once a loan is identified as individually impaired, management measures impairment in accordance with ASC Topic 310.  The fair value of impaired loans is estimated using one of several methods, including collateral value, market value of similar debt, enterprise value, liquidation value and discounted cash flows.  Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans.  At September 30, 2012, substantially all of the total impaired loans were evaluated based on the fair value of the collateral.  In accordance with ASC Topic 820, impaired loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy.  Collateral values are estimated using Level 3 inputs based on customized discounting criteria.  For a majority of impaired real estate loans, the Company obtains a current external appraisal.  Other valuation techniques are used as well, including internal valuations, comparable property analysis and contractual sales information.

Non-Financial Assets and Non-Financial Liabilities Recorded at Fair Value

The Company has no non-financial assets or non-financial liabilities measured at fair value on a recurring basis.  Certain non-financial assets and non-financial liabilities measured at fair value on a non-recurring basis include foreclosed assets and non-financial long-lived assets.

Other Real Estate and Repossessed Vehicles Owned (Foreclosed Assets).  Foreclosed assets, upon initial recognition, are measured and reported at fair value through a charge-off to the allowance for possible loan losses based upon the fair value of the foreclosed asset.  The fair value of foreclosed assets, upon initial recognition, are estimated using Level 3 inputs based on customized discounting criteria.

Non-Financial Long-Lived Assets.  During the nine months ended September 30, 2012 and 2011, the Company recognized impairments of $758 thousand and $1.0 million, respectively, caused by the decision to close a branch in each of those years.  The fair value of the branches was estimated using Level 3 inputs based on internal appraisals.

Assets measured at fair value on a nonrecurring basis as of September 30, 2012 and December 31, 2011 are included in the table below (in thousands):

	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2012
Financial assets:
Impaired loans	$	66,435	$	—	$	—	$	66,435
Foreclosed assets	75,147		—		—		75,147
December 31, 2011
Financial assets:
Impaired loans	$	96,089	$	—	$	—	$	96,089
Foreclosed assets	138,971		—		—		138,971
Non-financial long-lived assets	2,901		—		—		2,901

The significant unobservable inputs used in the Level 3 fair value measurements of the Company’s impaired loans and foreclosed assets included in the table above primarily relate to internal valuations or analyses.

ASC Topic 825 requires disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis.  The methodologies for estimating the fair value of financial assets and financial liabilities that are measured at fair value on a recurring or non-recurring basis are discussed above.  The estimated fair value approximates carrying value for cash and cash equivalents, accrued interest and the cash surrender value of life insurance policies.  The methodologies for other financial assets and financial liabilities are discussed below:

The following methods and assumptions were used by the Company in estimating the fair values of its other financial instruments:

Cash and due from banks and interest bearing deposits with banks: The carrying amounts reported in the balance sheet approximate fair value.

Securities held to maturity: The fair values of securities held to maturity are determined by quoted prices in active markets, when available.  If quoted market prices are not available, the fair value is determined by a matrix pricing.

Non-marketable securities — FHLB and FRB Stock: The carrying amounts reported in the balance sheet approximate fair value.

Loans: The fair values for loans are estimated using discounted cash flow analyses, using the corporate bond curve adjusted for liquidity for commercial loans and the swap curve adjusted for liquidity for retail loans.

Non-interest bearing deposits: The fair values disclosed are equal to their balance sheet carrying amounts, which represent the amount payable on demand.

Interest bearing deposits: The fair values disclosed for deposits with no defined maturities are equal to their carrying amounts, which represent the amounts payable on demand.  Fair values for certificates of deposit are estimated using a discounted cash flow calculation that applies the Company’s current incremental borrowing rates for similar terms.

Short-term borrowings: The carrying amounts of federal funds purchased, borrowings under repurchase agreements and other short-term borrowings with maturities of 90 days or less approximate their fair values.  The fair value of short-term borrowings greater than 90 days is based on the discounted value of contractual cash flows.

Long-term borrowings: The fair values of the Company’s long-term borrowings (other than deposits) are estimated using discounted cash flow analyses, based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements.

Junior subordinated notes issued to capital trusts: The fair values of the Company’s junior subordinated notes issued to capital trusts are estimated based on the quoted market prices, when available, of the related trust preferred security instruments, or are estimated based on the quoted market prices of comparable trust preferred securities.

Accrued interest:  The carrying amount of accrued interest receivable and payable approximate their fair values.

The estimated fair values of financial instruments are as follows (in thousands):

	September 30, 2012
	Carrying		Estimated		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets:
Cash and due from banks	$	129,326	$	129,326	$	129,326	$	—	$	—
Interest earning deposits with banks	327,301		327,301		327,301		—		—
Investment securities available for sale	1,814,972		1,814,972		11,231		1,797,623		6,118
Investment securities held to maturity	495,851		536,989		—		536,989		—
Non-marketable securities - FHLB and FRB stock	57,653		57,653		—		—		57,653
Loans held for sale	7,221		7,221		—		7,221		—
Loans, net	5,503,663		5,512,768		—		—		5,512,768
Accrued interest receivable	35,233		35,233		35,233		—		—
Derivative financial instruments	30,186		30,186		—		30,186		—
Financial Liabilities:
Non-interest bearing deposits	$	2,011,542	$	2,011,542	$	2,011,542	$	—	$	—
Interest bearing deposits	5,467,805		5,494,724		—		—		5,494,724
Short-term borrowings	289,613		289,824		—		—		289,824
Long-term borrowings	118,798		123,152		—		—		123,152
Junior subordinated notes issued to capital trusts	152,065		97,028		—		—		97,028
Accrued interest payable	3,250		3,250		3,250		—		—
Derivative financial instruments	30,239		30,239		—		30,239		—

	December 31,
	2011
	Carrying		Estimated
	Amount		Fair Value
Financial Assets:
Cash and due from banks	$	144,228	$	144,228
Interest bearing deposits with banks	100,337		100,337
Investment securities available for sale	1,929,297		1,929,297
Investment securities held to maturity	499,283		511,022
Non-marketable securities - FHLB and FRB stock	80,832		80,832
Loans held for sale	4,727		4,727
Loans, net	5,824,197		5,734,017
Accrued interest receivable	35,870		35,870
Derivative financial instruments	26,251		26,251
Financial Liabilities:
Non-interest bearing deposits	$	1,885,694	$	1,885,694
Interest bearing deposits	5,761,913		5,790,963
Short-term borrowings	219,954		219,983
Long-term borrowings	266,264		279,124
Junior subordinated notes issued to capital trusts	158,538		113,635
Accrued interest payable	4,518		4,518
Derivative financial instruments	26,624		26,624

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INVESTMENT SECURITIES (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Available for Sale
Amortized Cost	$ 1,747,648	$ 1,864,995
Gross Unrealized Gains	71,895	65,916
Gross Unrealized Losses	(4,571)	(1,614)
Fair Value	1,814,972	1,929,297
Held to Maturity
Amortized Cost	495,851	499,283
Gross Unrealized Gains	41,138	12,521
Gross Unrealized Losses		(782)
Fair Value	536,989	511,022
Total Available for Sale and Held to Maturity Investment Securities
Amortized Cost	2,243,499	2,364,278
Gross Unrealized Gains	113,033	78,437
Gross Unrealized Losses	(4,571)	(2,396)
Fair Value	2,351,961	2,440,319
U.S. Government sponsored agencies and enterprises
Available for Sale
Amortized Cost	39,233	39,640
Gross Unrealized Gains	2,954	2,761
Fair Value	42,187	42,401
States and political subdivisions
Available for Sale
Amortized Cost	620,489	500,979
Gross Unrealized Gains	48,502	34,922
Gross Unrealized Losses	(25)	(241)
Fair Value	668,966	535,660
Held to Maturity
Amortized Cost	238,211	240,183
Gross Unrealized Gains	21,739	7,489
Gross Unrealized Losses		(8)
Fair Value	259,950	247,664
Residential mortgage-backed securities
Available for Sale
Amortized Cost	1,009,509	1,256,696
Gross Unrealized Gains	17,019	26,483
Gross Unrealized Losses	(4,545)	(1,373)
Fair Value	1,021,983	1,281,806
Held to Maturity
Amortized Cost	257,640	259,100
Gross Unrealized Gains	19,399	5,032
Gross Unrealized Losses		(774)
Fair Value	277,039	263,358
Commercial mortgage-backed securities
Available for Sale
Amortized Cost	51,156	51,324
Gross Unrealized Gains	2,823	1,361
Fair Value	53,979	52,685
Corporate bonds
Available for Sale
Amortized Cost	16,617	5,899
Gross Unrealized Gains	10
Gross Unrealized Losses	(1)
Fair Value	16,626	5,899
Equity securities
Available for Sale
Amortized Cost	10,644	10,457
Gross Unrealized Gains	587	389
Fair Value	$ 11,231	$ 10,846

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EARNINGS PER COMMON SHARE (Tables)

9 Months Ended

Sep. 30, 2012

EARNINGS PER COMMON SHARE

Reconciliation of the number of shares used in the calculation of basic and diluted earnings (loss) per common share, net income available to common stockholders, and earnings per share

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2012		2011			2012			2011
Distributed earnings allocated to common stock	$	547	$	546		$	1,643		$	1,634
Undistributed earnings allocated to common stock	22,585		19,149			64,717			17,621
Net earnings allocated to common stock	23,132		19,695			66,360			19,255
Less: preferred stock dividends and discount accretion	—		2,605			3,269			7,808
Net earnings allocated to common stock	23,132		17,090			63,091			11,447
Net earnings allocated to participating securities	1		2			2			20
Net earnings allocated to common stock and participating securities	$	23,133	$	17,092		$	63,093		$	11,467
Weighted average shares outstanding for basic earnings per common share	54,346,827		54,121,156			54,226,241			54,029,023
Dilutive effect of equity awards	209,690		202,164			246,376			266,599
Weighted average shares outstanding for diluted earnings per common share	54,556,517		54,323,320			54,472,617			54,295,622
Basic earnings allocated to common stock per common share	$	0.43	$	0.36		$	1.22		$	0.36
Impact of preferred stock dividends on basic earnings per common share	—		(0.04		)	(0.06		)	(0.15		)
Basic earnings per common share	0.43		0.32			1.16			0.21
Diluted earnings allocated to common stock per common share	0.42		0.36			1.22			0.35
Impact of preferred stock dividends on diluted earnings per common share	—		(0.05		)	(0.06		)	(0.14		)
Diluted earnings per common share	0.42		0.31			1.16			0.21

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Parenthetical) (USD $)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Cash dividends declared (in dollars per share)	$ 0.03	$ 0.03

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
CONSOLIDATED BALANCE SHEETS
Securities held to maturity, at amortized cost, fair value (in dollars)	$ 536,989	$ 511,022
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, authorized shares	1,000,000	1,000,000
Preferred stock, dividend rate percentage (as a percent)	5.00%	5.00%
Preferred stock, issued shares	0	196,000
Preferred stock, outstanding shares	0	196,000
Preferred stock, liquidation value (in dollars per share)	$ 1,000	$ 1,000
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, authorized shares	70,000,000	70,000,000
Common stock, issued shares	54,957,541	54,824,912
Treasury stock, shares	169,476	160,419

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SHORT-TERM BORROWINGS

9 Months Ended

Sep. 30, 2012

SHORT-TERM BORROWINGS

SHORT-TERM BORROWINGS

NOTE 9.               SHORT-TERM BORROWINGS

Short-term borrowings are summarized as follows as of September 30, 2012 and December 31, 2011 (dollars in thousands):

	September 30,				December 31,
	2012				2011
	Weighted Average Cost		Amount		Weighted Average Cost		Amount
Customer repurchase agreements	0.28	%	$	270,245	0.30	%	$	216,439
Federal Home Loan Bank advances	3.56	%	19,368		3.66	%	3,515
Line of credit	0.00	%	—		0.00	%	—
	0.50	%	$	289,613	0.35	%	$	219,954

Repurchase agreements are agreements in which the Company acquires funds by selling assets to another party under a simultaneous agreement to repurchase the same assets at a specified price and date.  The Company enters into repurchase agreements and also offers a demand deposit account product to customers that sweeps their balances in excess of an agreed upon target amount into overnight repurchase agreements.  All assets sold under agreements to repurchase are recorded on the face of the balance sheet.

The Company had fixed-rate Federal Home Loan Bank advances with maturity dates less than one year totaling $19.4 million at September 30, 2012 and $3.5 million at December 31, 2011.  At September 30, 2012, the Company had fixed rate advances with effective interest rates ranging from 3.26% to 3.98%.  At September 30, 2012, these advances had maturities ranging from April 2013 to July 2013.

On March 9, 2012, the Company entered into a $35.0 million unsecured line of credit with a correspondent bank.  Interest is payable at a rate of one month LIBOR + 2.00%.  As of September 30, 2012, no amount was outstanding.  The line matures on March 8, 2013.

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Document and Entity Information	9 Months Ended
	Sep. 30, 2012	Oct. 29, 2012
Document and Entity Information
Entity Registrant Name	MB FINANCIAL INC /MD
Entity Central Index Key	0001139812
Document Type	10-Q
Document Period End Date	Sep. 30, 2012
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		54,786,857
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q3

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LONG-TERM BORROWINGS

9 Months Ended

Sep. 30, 2012

LONG-TERM BORROWINGS

LONG-TERM BORROWINGS

NOTE 10.             LONG-TERM BORROWINGS

During September 2012, the Company retired a $100.0 million Federal Home Loan Bank advance with an interest rate of 3.85% and recorded prepayment fees of $11.5 million on the early extinguishment of this advance.  The Company had Federal Home Loan Bank advances with original contractual maturities greater than one year of $4.5 million and $144.6 million at September 30, 2012 and December 31, 2011, respectively.  As of September 30, 2012, the advances had fixed terms with effective interest rates, net of discounts, ranging from 3.23% to 5.87%.  At September 30, 2012, the advances had maturities ranging from April 2021 to April 2035.

A collateral pledge agreement exists whereby at all times, the Company must keep on hand, free of all other pledges, liens, and encumbrances, first mortgage loans and home equity loans with unpaid principal balances aggregating no less than 133% for first mortgage loans and 250% for home equity loans of the outstanding advances from the Federal Home Loan Bank.  The Company may also pledge certain investment securities as collateral for advances based on market value.  As of September 30, 2012 and December 31, 2011, the Company had $31.8 million and $197.4 million, respectively, of loans pledged as collateral for long-term Federal Home Loan Bank advances.  Additionally, as of September 30, 2012 and December 31, 2011, the Company had $33.0 million and $33.8 million, respectively, of investment securities pledged as collateral for long-term advances from the Federal Home Loan Bank.  The Company could borrow an additional amount of approximately $532.9 million and $319.4 million from the Federal Home Loan Bank as of September 30, 2012 and December 31, 2011, respectively.

The Company had notes payable to banks totaling $23.8 million and $31.0 million at September 30, 2012 and December 31, 2011, respectively, which as of September 30, 2012, were accruing interest at rates ranging from 2.88% to 12.00%.  Lease investments includes equipment with an amortized cost of $32.7 million and $42.6 million at September 30, 2012 and December 31, 2011, respectively, that is pledged as collateral on these notes.

The Company had a $40.0 million ten-year structured repurchase agreement as of September 30, 2012, which bears interest at a fixed rate borrowing of 4.75% and expires in 2016.

As of September 30, 2012, MB Financial Bank had a $50.0 million outstanding subordinated debt facility.  Interest is payable at a rate of three month LIBOR + 1.70%.  The debt matures on October 1, 2017.

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CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Interest income:
Loans	$ 67,482	$ 78,046	$ 208,380	$ 249,327
Investment securities:
Taxable	7,287	11,699	27,053	29,741
Nontaxable	7,582	4,299	21,624	11,087
Other interest earning accounts	312	244	639	972
Total interest income	82,663	94,288	257,696	291,127
Interest expense:
Deposits	7,374	10,207	24,192	35,312
Short-term borrowings	342	204	910	660
Long-term borrowings and junior subordinated notes	2,872	3,461	9,322	10,127
Total interest expense	10,588	13,872	34,424	46,099
Net interest income	72,075	80,416	223,272	245,028
Provision for credit losses	(13,000)	11,500	(9,900)	112,750
Net interest income after provision for credit losses	85,075	68,916	233,172	132,278
Other income:
Capital markets and international banking fees	1,344	605	2,631	1,107
Commercial deposit and treasury management fees	5,860	6,157	17,545	17,643
Lease financing, net	9,671	6,494	23,963	19,138
Trust and asset management fees	4,428	4,272	13,367	13,158
Card fees	2,385	2,071	6,858	5,921
Loan service fees	1,125	1,706	3,459	5,286
Retail and other deposit service fees	3,792	4,123	10,790	12,373
Brokerage fees	1,185	1,273	3,704	4,307
Net gain on investment securities	281		244	229
Increase in cash surrender value of life insurance	890	1,014	2,677	3,433
Net (losses) gains on sale of assets	(12)		(37)	370
Accretion of FDIC indemnification asset	204	985	901	4,155
Net loss recognized on other real estate owned	(3,938)	(3,118)	(15,968)	(8,135)
Net gain on sale of loans	575	190	1,503	2,241
Other operating income	763	595	3,677	3,429
Total other income	28,553	26,367	75,314	84,655
Other expense:
Salaries and employee benefits	42,083	38,422	122,658	114,012
Occupancy and equipment expense	8,274	9,092	27,032	26,969
Computer services and telecommunication expense	3,777	3,488	11,339	10,503
Advertising and marketing expense	2,025	1,740	6,021	5,207
Professional and legal expense	1,554	1,647	4,470	4,725
Other intangibles amortization expense	1,251	1,414	3,759	4,255
FDIC insurance premiums	1,545	2,272	6,198	9,202
Branch impairment charges	758		758	1,000
Other real estate expense, net	874	1,181	2,541	2,830
Prepayment fees on interest bearing liabilities	12,682		12,682
Other operating expenses	6,342	7,352	17,872	21,497
Total other expense	81,165	66,608	215,330	200,200
Income before income taxes	32,463	28,675	93,156	16,733
Income tax expense (benefit)	9,330	8,978	26,794	(2,542)
Net income	23,133	19,697	66,362	19,275
Dividends and discount accretion on preferred shares		2,605	3,269	7,808
Net income available to common stockholders	$ 23,133	$ 17,092	$ 63,093	$ 11,467
Common share data:
Basic earnings allocated to common stock per common share (in dollars per share)	$ 0.43	$ 0.36	$ 1.22	$ 0.36
Impact of preferred stock dividends on basic earnings per common share (in dollars per share)		$ (0.04)	$ (0.06)	$ (0.15)
Basic earnings per common share (in dollars per share)	$ 0.43	$ 0.32	$ 1.16	$ 0.21
Diluted earnings allocated to common stock per common share (in dollars per share)	$ 0.42	$ 0.36	$ 1.22	$ 0.35
Impact of preferred stock dividends on diluted earnings per common share (in dollars per share)		$ (0.05)	$ (0.06)	$ (0.14)
Diluted earnings per common share (in dollars per share)	$ 0.42	$ 0.31	$ 1.16	$ 0.21
Weighted average common shares outstanding for basic earnings per common share (in shares)	54,346,827	54,121,156	54,226,241	54,029,023
Weighted average common shares outstanding for diluted earnings per common share (in shares)	54,556,517	54,323,320	54,472,617	54,295,622

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LOANS

9 Months Ended

Sep. 30, 2012

LOANS

LOANS

NOTE 4.               LOANS

Loans consist of the following at (in thousands):

	September 30,		December 31,
	2012		2011
Commercial loans	$	1,073,981	$	1,113,123
Commercial loans collateralized by assignment of lease payments	1,219,361		1,208,575
Commercial real estate	1,770,261		1,853,788
Residential real estate	308,866		316,787
Construction real estate	149,872		183,789
Indirect vehicle	206,973		187,481
Home equity	314,718		336,043
Consumer loans	84,651		88,865
Gross loans, excluding covered loans	5,128,683		5,288,451
Covered loans	496,162		662,544
Total loans(1)	$	5,624,845	$	5,950,995

(1)Gross loan balances at September 30, 2012 and December 31, 2011 were net of unearned income, including net deferred loan fees of $955 thousand and $1.0 million, respectively.

Loans are made to individuals as well as commercial and tax exempt entities.  Specific loan terms vary as to interest rate, repayment, and collateral requirements based on the type of loan requested and the credit worthiness of the prospective borrower.  Credit risk tends to be geographically concentrated in that a majority of the loan customers are located in the markets serviced by MB Financial Bank.

The Company’s extension of credit is governed by its Credit Risk Policy which was established to control the quality of the Company’s loans.  These policies and procedures are reviewed and approved by the Board of Directors on a regular basis.

Commercial and Industrial Loans.  Commercial credit is extended primarily to middle market customers.  Such credits typically comprise working capital loans, loans for physical asset expansion, asset acquisition loans and other business loans.  Loans to closely held businesses will generally be guaranteed in full or for a meaningful amount by the businesses’ principal owners.  Commercial loans are made based primarily on the historical and projected cash flow of the borrower and secondarily on the underlying collateral provided by the borrower.  The cash flows of borrowers, however, may not behave as forecasted and collateral securing loans may fluctuate in value due to economic or individual performance factors.  Minimum standards and underwriting guidelines have been established for all commercial loan types.

Lease Loans.  The Company makes lease loans to both investment grade and non-investment grade companies.  Investment grade lessees are companies rated in one of the four highest categories by Moody’s Investor Services or Standard & Poor’s Rating Services or, in the event the related lessee has not received any such rating, where the related lessee would be viewed under the underwriting polices of the Company as an investment grade company. Whether or not companies fall into this category, each lease loan is considered on its individual merit based on financial information available at the time of underwriting.

Commercial Real Estate Loans.  Commercial real estate loans are subject to underwriting standards and processes similar to commercial and industrial loans.  These loans are viewed primarily as cash flow loans and the repayment of these loans is largely dependent on the successful operation of the property.  Loan performance may be adversely affected by factors impacting the general economy or conditions specific to the real estate market such as geographic location and/or property type.

Construction Real Estate Loans.  The Company defines construction loans as loans where the loan proceeds are controlled by the Company and used exclusively for the improvement of real estate in which the Company holds a mortgage.  Due to the inherent risk in this type of loan, they are subject to other industry specific policy guidelines outlined in the Company’s Credit Risk Policy.

Consumer Loans.  The Company originates direct and indirect consumer loans including primarily residential real estate, home equity lines and loans, credit cards, and indirect motorcycle loans using a matrix-based credit analysis as part of the underwriting process.  Each loan type has a separate specified matrix which consists of several factors including debt to income, type of collateral and loan to collateral value, credit history and Company relationship with the borrower.  Indirect loan and credit card underwriting use risk-based pricing in the underwriting process.

The following table presents the contractual aging of the recorded investment in past due loans by class of loans as of September 30, 2012 and December 31, 2011 (in thousands):

			30-59 Days		60-89 Days		Loans past due		Total
	Current		Past Due		Past Due		90 days or more		Past Due		Total
September 30, 2012:
Commercial	$	1,066,782	$	1,720	$	1,781	$	3,698	$	7,199	$	1,073,981
Commercial collateralized by assignment of lease payments	1,206,547		10,654		2,129		31		12,814		1,219,361
Commercial real estate
Healthcare	180,429		—		—		4,738		4,738		185,167
Industrial	416,478		614		1,963		3,622		6,199		422,677
Multifamily	357,826		899		1,576		3,169		5,644		363,470
Retail	392,608		469		375		5,077		5,921		398,529
Office	172,388		287		—		1,125		1,412		173,800
Other	223,397		1,949		693		579		3,221		226,618
Residential real estate	301,660		296		1,910		5,000		7,206		308,866
Construction real estate	146,926		99		—		2,847		2,946		149,872
Indirect vehicle	204,909		1,307		475		282		2,064		206,973
Home equity	302,218		4,632		1,436		6,432		12,500		314,718
Consumer	84,591		55		2		3		60		84,651
Gross loans, excluding covered loans (1)	5,056,759		22,981		12,340		36,603		71,924		5,128,683
Covered loans	314,888		27,338		27,836		126,100		181,274		496,162
Total loans	$	5,371,647	$	50,319	$	40,176	$	162,703	$	253,198	$	5,624,845
Nonperforming loan aging	$	65,968	$	2,720	$	6,409	$	30,186	$	39,315	$	105,283
Non-covered loans related to FDIC transactions (2)	$	15,594	$	609	$	244	$	6,415	$	7,268	$	22,862
December 31, 2011:
Commercial	$	1,105,139	$	2,178	$	188	$	5,618	$	7,984	$	1,113,123
Commercial collateralized by assignment of lease payments	1,202,323		3,409		2,463		380		6,252		1,208,575
Commercial real estate
Healthcare	176,594		—		—		—		—		176,594
Industrial	450,029		1,013		1,700		6,642		9,355		459,384
Multifamily	383,882		2,398		1,845		2,772		7,015		390,897
Retail	421,079		2,376		480		3,624		6,480		427,559
Office	181,960		—		—		1,544		1,544		183,504
Other	214,137		457		595		661		1,713		215,850
Residential real estate	311,256		1,231		767		3,533		5,531		316,787
Construction real estate	180,471		—		—		3,318		3,318		183,789
Indirect vehicle	185,363		1,376		386		356		2,118		187,481
Home equity	325,173		2,812		2,314		5,744		10,870		336,043
Consumer	88,854		3		3		5		11		88,865
Gross loans, excluding covered loans (1)	5,226,260		17,253		10,741		34,197		62,191		5,288,451
Covered loans	443,332		14,332		12,618		192,262		219,212		662,544
Total loans	$	5,669,592	$	31,585	$	23,359	$	226,459	$	281,403	$	5,950,995
Nonperforming loan aging	$	91,752	$	5,916	$	5,142	$	26,581	$	37,639	$	129,391
Non-covered loans related to FDIC transactions (2)	$	19,656	$	1,958	$	283	$	7,617	$	9,858	$	29,514

(1)Includes loans related to the InBank FDIC-assisted transaction completed by MB Financial Bank in 2009.

(2)Loans related to the InBank FDIC-assisted transaction completed by MB Financial Bank in 2009.

The following table presents the recorded investment in nonaccrual loans and loans past due ninety days or more and still accruing by class of loans as of September 30, 2012 and December 31, 2011 (in thousands):

	September 30,				December 31,
	2012				2011
			Loans past due				Loans past due
			90 days or more				90 days or more
	Nonaccrual		and still accruing		Nonaccrual		and still accruing
Commercial	$	21,536	$	36	$	34,813	$	—
Commercial collateralized by assignment of lease payments	1,076		—		2,116		66
Commercial real estate:
Healthcare	4,738		—		6,892		—
Industrial	12,271		410		29,637		—
Multifamily	5,868		—		9,145		—
Retail	18,123		—		15,333		—
Office	2,719		—		2,826		—
Other	11,258		—		12,718		—
Residential real estate	7,368		—		4,300		—
Construction real estate	1,225		—		1,145		—
Indirect vehicles	1,423		6		1,288		16
Home equity	17,204		18		9,087		—
Consumer	4		—		9		—
Total	$	104,813	$	470	$	129,309	$	82

The Company utilizes an internal asset classification system as a means of reporting problem and potential problem loans.  Under the Company’s risk rating system, the Company classifies potential problem and problem loans as “Special Mention,” “Substandard,” and “Doubtful.”  Substandard loans include those characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.  Loans classified as Doubtful have all the weaknesses inherent in those classified Substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.  Loans that do not currently expose the Company to sufficient risk to warrant classification in one of the aforementioned categories, but possess weaknesses that deserve management’s close attention are deemed to be Special Mention.  Risk ratings are updated at least annually and any time the situation warrants.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass-rated loans.  Loans listed as not rated are included in groups of homogeneous loans with similar risk and loss characteristics.  The following tables present the risk category of loans by class of loans based on the most recent analysis performed and the contractual aging as of September 30, 2012 and December 31, 2011 (in thousands):

			Special
	Pass		Mention		Substandard		Doubtful		Total
September 30, 2012:
Commercial	$	973,284	$	41,175	$	58,620	$	902	$	1,073,981
Commercial collateralized by assignment of lease payments	1,209,988		163		9,210		—		1,219,361
Commercial real estate
Healthcare	158,510		21,919		—		4,738		185,167
Industrial	375,869		5,202		41,606		—		422,677
Multifamily	319,097		30,515		13,858		—		363,470
Retail	347,451		21,788		29,290		—		398,529
Office	144,360		6,459		22,981		—		173,800
Other	205,106		5,067		16,445		—		226,618
Construction real estate	131,418		5,814		12,640		—		149,872
Total	$	3,865,083	$	138,102	$	204,650	$	5,640	$	4,213,475
December 31, 2011:
Commercial	$	983,935	$	56,550	$	69,292	$	3,346	$	1,113,123
Commercial collateralized by assignment of lease payments	1,203,933		—		4,642		—		1,208,575
Commercial real estate
Healthcare	169,702		—		—		6,892		176,594
Industrial	370,760		26,294		62,330		—		459,384
Multifamily	328,617		43,256		15,732		3,292		390,897
Retail	384,590		4,031		38,938		—		427,559
Office	159,162		3,924		20,418		—		183,504
Other	183,490		3,822		28,538		—		215,850
Construction real estate	167,907		4,362		11,520		—		183,789
Total	$	3,952,096	$	142,239	$	251,410	$	13,530	$	4,359,275

Approximately $78.8 million and $114.7 million of the substandard and doubtful loans were non-performing as of September 30, 2012 and December 31, 2011, respectively.

For consumer, residential real estate, home equity, and indirect vehicle loan classes, the Company also evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity.  The following table presents the recorded investment in those loan classes based on payment activity as of September 30, 2012 and December 31, 2011 (in thousands):

	Performing		Non-performing		Total
September 30, 2012:
Residential real estate	$	301,498	$	7,368	$	308,866
Indirect vehicles	205,544		1,429		206,973
Home equity	297,496		17,222		314,718
Consumer	84,647		4		84,651
Total	$	889,185	$	26,023	$	915,208
December 31, 2011:
Residential real estate	$	312,487	$	4,300	$	316,787
Indirect vehicles	186,177		1,304		187,481
Home equity	326,956		9,087		336,043
Consumer	88,856		9		88,865
Total	$	914,476	$	14,700	$	929,176

Non-performing loans are those on nonaccrual or past due 90 days or more and still accruing interest.

The following tables present loans individually evaluated for impairment by class of loans as of September 30, 2012 and December 31, 2011 (in thousands):

	September 30, 2012
									Three Months Ended				Nine Months Ended
	Unpaid						Allowance for		Average		Interest		Average		Interest
	Principal		Recorded		Partial		Loan Losses		Recorded		Income		Recorded		Income
	Balance		Investment		Charge-offs		Allocated		Investment		Recognized		Investment		Recognized
With no related allowance recorded:
Commercial	$	30,082	$	10,731	$	19,351	$	—	$	10,224	$	—	$	15,249	$	105
Commercial collateralized by assignment of lease payments	94		94		—		—		263		—		224		2
Commercial real estate:
Healthcare	—		—		—		—		—				—
Industrial	12,778		10,702		2,076		—		11,295		—		17,005		29
Multifamily	1,642		1,642		—		—		884		14		1,519		14
Retail	10,105		9,650		455		—		10,738		—		10,402		—
Office	1,136		1,136		—		—		1,365		—		982		—
Other	4,866		4,866		—		—		5,605		—		6,288		—
Residential real estate	8,460		8,085		375		—		8,474		—		7,634		—
Construction real estate	1,147		1,147		—		—		1,150		—		771		—
Indirect vehicles	—		—		—		—		—		—		—		—
Home equity	10,280		10,280		—		—		10,338		—		11,130		—
Consumer	248		248		—		—		248		—		243		—
With an allowance recorded:
Commercial	10,810		10,806		4		2,570		11,295		—		6,950		—
Commercial collateralized by assignment of lease payments	1,074		1,074		—		180		932		16		1,270		66
Commercial real estate:
Healthcare	10,942		4,738		6,204		1,386		4,738		—		5,211		—
Industrial	2,633		1,569		1,064		320		1,445		—		1,972		—
Multifamily	6,398		5,055		1,343		1,302		5,079		16		5,562		78
Retail	9,706		8,704		1,002		2,474		9,288		—		8,279		—
Office	1,590		1,583		7		323		1,642		—		2,054		—
Other	6,535		6,392		143		1,762		6,574		4		6,691		12
Residential real estate	3,224		3,042		182		401		3,229		—		1,084		—
Construction real estate	3,605		1,225		2,380		582		1,332		—		4,242		—
Indirect vehicles	—		—		—		—		—		—		—		—
Home equity	—		—		—		—		—		—		1,826		—
Consumer	—		—		—		—		—		—		—		—
Total	$	137,355	$	102,769	$	34,586	$	11,300	$	106,138	$	50	$	116,588	$	306

	December 31, 2011
	Unpaid						Allowance for		Average		Interest
	Principal		Recorded		Partial		Loan Losses		Recorded		Income
	Balance		Investment		Charge-offs		Allocated		Investment		Recognized
With no related allowance recorded:
Commercial	$	47,784	$	28,774	$	19,010	$	—	$	22,952	$	211
Commercial collateralized by assignment of lease payments	107		107		—		—		696		32
Commercial real estate:
Healthcare	—		—		—		—		1,818		—
Industrial	35,338		25,865		9,473		—		37,436		64
Multifamily	1,975		1,975		—		—		10,641		164
Retail	23,656		23,652		4		—		26,783		—
Office	779		779		—		—		5,755		—
Other	6,901		6,901		—		—		16,303		—
Residential real estate	7,157		7,157		—		—		6,580		—
Construction real estate	—		—		—		—		56,846		—
Indirect vehicles	—		—		—		—		—		—
Home equity	11,297		11,297		—		—		7,309		—
Consumer	241		241		—		—		122		—
With an allowance recorded:
Commercial	10,016		6,038		3,978		1,711		10,025		80
Commercial collateralized by assignment of lease payments	2,077		2,077		—		390		475		71
Commercial real estate:
Healthcare	11,750		6,892		4,858		1,560		292		—
Industrial	7,739		3,773		3,966		680		7,780		—
Multifamily	14,387		7,720		6,667		1,757		10,614		208
Retail	11,232		10,672		560		2,394		9,688		—
Office	2,330		2,047		283		77		4,586		—
Other	5,979		5,816		163		1,514		10,489		2
Residential real estate	—		—		—		—		—		—
Construction real estate	3,519		1,145		2,374		721		20,259		—
Indirect vehicles	—		—		—		—		—		—
Home equity	—		—		—		—		—		—
Consumer	—		—		—		—		355		5
Total	$	204,264	$	152,928	$	51,336	$	10,804	$	267,804	$	837

Impaired loans included accruing restructured loans of $17.9 million and $38.0 million that have been modified and are performing in accordance with those modified terms as of September 30, 2012 and December 31, 2011, respectively.  In addition, impaired loans included $27.1 million and $42.5 million of non-performing, restructured loans as of September 30, 2012 and December 31, 2011, respectively.

Loans may be restructured in an effort to maximize collections from financially distressed borrowers.  We use various restructuring techniques, including, but not limited to, deferral of past due interest or principal, implementing an A/B note structure, redeeming past due taxes, reduction of interest rates, extending maturities and modification of amortization schedules. Residential real estate loans are restructured in an effort to minimize losses while allowing borrowers to remain in their primary residences when possible.  Programs that we offer to residential real estate borrowers include the Home Affordable Refinance Program (“HARP”) and a restructuring program similar to the Home Affordable Modification Program (“HAMP”) for first mortgage borrowers as well as the Second Lien Modification Program (“2MP”) and similar programs for home equity borrowers in keeping with the restructuring techniques discussed above.

Periodically, the Company will restructure a note into two separate notes (A/B structure), charging off the entire B portion of the note.  The A note is structured with appropriate loan-to-value and cash flow coverage ratios that provide for a high likelihood of repayment.  The A note is classified as a non-performing note until the borrower has displayed a historical payment performance for a reasonable time prior to and subsequent to the restructuring.  A period of sustained repayment for at least six months generally is required to return the note to accrual status provided that management has determined that the performance is reasonably expected to continue.  The A note will be classified as a restructured note (either performing or nonperforming) through the calendar year of the restructuring that the historical payment performance has been established.

A loan classified as a troubled debt restructuring will no longer be included in the troubled debt restructuring disclosures in the years after the restructuring if the loan is not impaired based on the terms specified by the restructuring agreement and the interest rate specified in the restructuring agreement represents a market rate at the time of modification.  The specified interest rate is considered a market rate when the interest rate is equal or greater than the rate the Company is willing to accept at the time of restructuring for a new loan with comparable risk.  If there are concerns that the borrower would not be able to meet the modified terms of the loan, the loan would continue to be included in the troubled debt restructuring disclosures.

Impairment analyses on commercial-related loans classified as troubled debt restructurings are performed in conjunction with the normal allowance for loan loss process.  See Note 1 of the notes to our audited consolidated financial statement contained in our Annual Report on Form 10-K for the year ended December 31, 2011 for additional information.  Consumer loans classified as troubled debt restructurings are aggregated in two pools that share common risk characteristics, home equity and residential real estate loans, when impairment is measured on a quarterly basis based on historical default factors and loss given defaults.

The following tables present loans that have been restructured during the three and nine months ended September 30, 2012 (dollars in thousands):

	Three Months Ended
	September 30, 2012
	Number	Pre-Modification		Post-Modification
	of	Recorded		Recorded		Charge-offs and
	Loans	Investment		Investment		Specific Reserves
Performing:
Home equity	7	$	401	$	325	$	76
Total	7	$	401	$	325	$	76
Non-Performing:
Commercial collateralized by assignment of lease payments	1	$	202	$	202	$	168
Commercial real estate:
Retail	1	202		202		200
Residential real estate	7	173		68		105
Home equity	5	347		232		115
Total	14	$	924	$	704	$	588

	Nine Months Ended
	September 30, 2012
	Number	Pre-Modification		Post-Modification
	of	Recorded		Recorded		Charge-offs and
	Loans	Investment		Investment		Specific Reserves
Performing:
Commercial real estate:
Multifamily	1	$	155	$	155	$	—
Retail	1	236		236		—
Residential real estate	2	808		808		—
Home equity	38	6,009		5,933		76
Total	42	$	7,208	$	7,132	$	76
Non-Performing:
Commercial	4	$	292	$	292	$	96
Commercial collateralized by assignment of lease payments	1	202		202		168
Commercial real estate:
Multifamily	1	149		149		40
Retail	4	923		923		232
Other	1	157		157		50
Residential real estate	13	637		401		236
Home equity	34	5,324		4,899		425
Total	58	$	7,684	$	7,023	$	1,247

Of the troubled debt restructurings entered into during the past twelve months, $305 thousand subsequently defaulted during the nine months ended September 30, 2012.  Performing troubled debt restructurings are considered to have defaulted when they become 90 days or more past due post restructuring.

The following table presents the activity in the allowance for credit losses, balance in allowance for credit losses and recorded investment in loans by portfolio segment and based on impairment method as of September 30, 2012 and 2011 (in thousands):

				Commercial
				collateralized by
				assignment of			Commercial			Residential			Construction			Indirect			Home						Unfunded
	Commercial			lease payments			real estate			real estate			real estate			vehicles			equity			Consumer			Commitments			Total
September 30, 2012:
Allowance for credit losses:
Three Months Ended
Beginning balance	$	20,789		$	7,490		$	68,713		$	3,592		$	10,586		$	1,941		$	7,617		$	1,028		$	7,084		$	128,840
Transfer to (from) allowance for unfunded credit commitments	—			—			—			—			—			—			—			—			—			—
Charge-offs	(75		)	—			(2,994		)	(474		)	(71		)	(433		)	(1,209		)	(332		)	—			(5,588		)
Recoveries	306			111			12,893			8			752			224			303			77			—			14,674
Provision	1,181			(149		)	(12,253		)	738			(393		)	288			370			558			(3,340		)	(13,000		)
Ending balance	$	22,201		$	7,452		$	66,359		$	3,864		$	10,874		$	2,020		$	7,081		$	1,331		$	3,744		$	124,926
Nine Months Ended
Beginning balance	$	21,106		$	7,561		$	68,695		$	3,935		$	15,639		$	1,834		$	7,333		$	695		$	9,177		$	135,975
Transfer to (from) allowance for unfunded credit commitments	—			—			—			—			1,132			—			—			—			(1,132		)	—
Charge-offs	(2,065		)	(1,720		)	(8,412		)	(1,876		)	(3,951		)	(1,636		)	(3,157		)	(864		)	—			(23,681		)
Recoveries	2,730			460			16,116			230			1,458			835			423			280			—			22,532
Provision	430			1,151			(10,040		)	1,575			(3,404		)	987			2,482			1,220			(4,301		)	(9,900		)
Ending balance	$	22,201		$	7,452		$	66,359		$	3,864		$	10,874		$	2,020		$	7,081		$	1,331		$	3,744		$	124,926
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	2,570		$	180		$	7,567		$	401		$	582		$	—		$	—		$	—		$	1,726		$	13,026
Collectively evaluated for impairment	19,345			7,272			56,851			3,144			10,292			2,020			7,081			1,331			2,018			109,354
Acquired and accounted for under ASC 310-30 (1)	286			—			1,941			319			—			—			—			—			—			2,546
Total ending allowance balance	$	22,201		$	7,452		$	66,359		$	3,864		$	10,874		$	2,020		$	7,081		$	1,331		$	3,744		$	124,926
Loans:
Individually evaluated for impairment	$	21,537		$	1,168		$	56,037		$	11,127		$	2,372		$	—		$	10,280		$	248		$	—		$	102,769
Collectively evaluated for impairment	1,033,534			1,218,193			1,714,224			293,787			147,500			206,973			304,438			84,403			—			5,003,052
Acquired and accounted for under ASC 310-30 (1)	78,275			—			269,348			7,116			125,515			—			568			38,202			—			519,024
Total ending loans balance	$	1,133,346		$	1,219,361		$	2,039,609		$	312,030		$	275,387		$	206,973		$	315,286		$	122,853		$	—		$	5,624,845
September 30, 2011:
Allowance for credit losses:
Three Months Ended
Beginning balance	$	20,550		$	6,442		$	67,260		$	3,593		$	21,861		$	3,709		$	5,955		$	687		$	17,050		$	147,107
Transfer to (from) allowance for unfunded credit commitments	—			—			5,516			—			—			—			—			—			(5,516		)	—
Charge-offs	(3,497		)	—			(7,815		)	(141		)	(6,008		)	(611		)	(1,605		)	(475		)	—			(20,152		)
Recoveries	1,413			5			739			7			681			327			151			83			—			3,406
Provision	(950		)	191			7,920			322			(140		)	(1,115		)	3,231			324			1,717			11,500
Ending balance	$	17,516		$	6,638		$	73,620		$	3,781		$	16,394		$	2,310		$	7,732		$	619		$	13,251		$	141,861
Nine Months Ended
Beginning balance	$	28,747		$	6,424		$	105,875		$	5,104		$	37,215		$	3,157		$	5,062		$	633		$	—		$	192,217
Reclassification to allowance for unfunded credit commitments	(464		)	—			(7,989		)	—			(8,597		)	—			—			—			17,050			—
Transfer to (from) allowance for unfunded credit commitments	—			—			5,516			—			—			—			—			—			(5,516		)	—
Charge-offs	(14,639		)	(93		)	(92,840		)	(11,783		)	(45,928		)	(1,882		)	(9,005		)	(1,363		)				(177,533		)
Recoveries	4,736			224			2,585			40			5,071			1,021			218			532			—			14,427
Provision	(864		)	83			60,473			10,420			28,633			14			11,457			817			1,717			112,750
Ending balance	$	17,516		$	6,638		$	73,620		$	3,781		$	16,394		$	2,310		$	7,732		$	619		$	13,251		$	141,861
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	2,544		$	83		$	6,326		$	—		$	2,463		$	—		$	—		$	—		$	13,251		$	24,667
Collectively evaluated for impairment	14,972			6,555			67,137			3,781			13,931			2,310			7,732			619			—			117,037
Acquired and accounted for under ASC 310-30 (1)	—			—			157			—			—			—			—			—			—			157
Total ending allowance balance	$	17,516		$	6,638		$	73,620		$	3,781		$	16,394		$	2,310		$	7,732		$	619		$	13,251		$	141,861
Loans:
Individually evaluated for impairment	$	37,069		$	631		$	106,728		$	5,842		$	2,913		$	—		$	8,602		$	241		$	—		$	162,026
Collectively evaluated for impairment	982,672			1,066,560			1,738,165			303,776			207,293			189,032			340,333			75,785			—			4,903,616
Acquired and accounted for under ASC 310-30 (1)	119,986			—			348,738			11,710			214,316			—			902			52,444			—			748,096
Total ending loans balance	$	1,139,727		$	1,067,191		$	2,193,631		$	321,328		$	424,522		$	189,032		$	349,837		$	128,470		$	—		$	5,813,738

(1)   Loans acquired in FDIC-assisted transactions and accounted for under ASC Subtopic 310-30 “Receivables — Loans and Debt Securities Acquired with Deteriorated Credit Quality.”

Recoveries of $14.7 million were recorded in the three months ended September 30, 2012, prompting a negative provision for credit losses of $13.0 million.  The provision for credit losses was $11.5 million for the three months ended September 30, 2011.  The results for the nine months ended September 30, 2011 include a provision for credit losses of approximately $50 million in connection with the sale during the quarter ended June 30, 2011 of loans with an aggregate carrying amount of $281.6 million prior to the transfer to loans held for sale, including $156.3 million in non-performing loans.  The sale resulted in charge-offs of approximately $87.6 million, which impacted all loan types.

Purchased loans acquired in a business combination, including loans purchased in our FDIC-assisted transactions, are recorded at estimated fair value on their purchase date without a carryover of the related allowance for loan losses.  Purchased credit-impaired loans are loans that have evidence of credit deterioration since origination and it is probable at the date of acquisition that the Company will not collect all contractually required principal and interest payments.  Evidence of credit quality deterioration as of the purchase date may include factors such as past due and non-accrual status.  The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition 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.  Subsequent decreases to the expected cash flows will generally result in a provision for loan losses.  Subsequent increases in cash flows result in a reduction of the remaining portion of any allowance for loan losses previously established and/or a reclassification of the difference from non-accretable to accretable with a positive impact on interest income prospectively.

During the three and nine months ended September 30, 2012 there was a provision for credit losses of $658 thousand and $5.7 million, respectively, and net charge-offs of $422 thousand and $4.0 million, respectively, in relation to nine pools of purchased loans with a total carrying amount of $230.8 million as of September 30, 2012.  There was $2.5 million in allowance for loan losses related to these purchased loans at September 30, 2012 and $827 thousand at December 31, 2011.  The provision for credit losses and accompanying charge-offs are included in the table above.

Changes in the accretable yield for loans acquired in FDIC-assisted transactions and accounted for under ASC 310-30 were as follows for the three and nine months ended September 30, 2012 and 2011 (in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
Balance at beginning of period	$	9,411		$	28,298		$	18,703		$	44,103
Accretion	(3,406		)	(7,854		)	(12,812		)	(25,193		)
Other	403			(600		)	517			934
Balance at end of period	$	6,408		$	19,844		$	6,408		$	19,844

In our FDIC-assisted transactions, the fair value of purchased credit-impaired loans, on the acquisition date, was determined based on assigned risk ratings, expected cash flows and the fair value of loan collateral.  The fair value of loans that were not credit-impaired was determined based on estimates of losses on defaults and other market factors.  Due to the loss-share agreements with the FDIC, MB Financial Bank recorded a receivable (FDIC indemnification asset) from the FDIC equal to the present value of the corresponding reimbursement percentages on the estimated losses embedded in the loan portfolio.

When cash flow estimates are adjusted downward for a particular loan pool, the FDIC indemnification asset is increased.  An allowance for loan losses is established for the impairment of the loans.  A provision for loan losses is recognized for the difference between the increase in the FDIC indemnification asset and the decrease in cash flows.

When cash flow estimates are adjusted upward for a particular loan pool, the FDIC indemnification asset is decreased.  The difference between the decrease in the FDIC indemnification asset and the increase in cash flows is accreted over the estimated life of the loan pool.

When cash flow estimates are adjusted downward for covered foreclosed real estate, the FDIC indemnification asset is increased.  A charge is recognized for the difference between the increase in the FDIC indemnification asset and the decrease in cash flows.

When cash flow estimates are adjusted upward for covered foreclosed real estate, the FDIC indemnification asset is decreased.  Any write-down after the transfer to covered foreclosed real estate is reversed.

In both scenarios, the clawback liability (the amount the FDIC requires MB Financial Bank to pay back if certain thresholds are met) will increase or decrease accordingly.

The carrying amount of covered loans and other purchased non-covered loans at September 30, 2012 consisted of purchased credit-impaired loans and non-credit-impaired loans as shown in the following table (in thousands):

	Purchased Credit-Impaired Loans		Purchased Non- Credit-Impaired Loans		Total
Covered loans:
Commercial related (1)	$	24,590	$	7,263	$	31,853
Commercial	8,527		18,985		27,512
Commercial real estate	108,073		161,275		269,348
Construction real estate	108,571		16,944		125,515
Other	4,420		37,514		41,934
Total covered loans	$	254,181	$	241,981	$	496,162
Estimated receivable amount from the FDIC under the loss-share agreement (2)	$	14,087	$	19,714	$	33,801
Non covered loans:
Commercial related (3)	$	3,480	$	15,431	$	18,911
Other	65		3,886		3,951
Total non-covered loans	$	3,545	$	19,317	$	22,862

(1)Covered commercial related loans include commercial, commercial real estate and construction real estate loans acquired in connection with the Heritage Community Bank (“Heritage”) and Benchmark Bank (“Benchmark”) FDIC-assisted transactions.

(2)Estimated reimbursable amounts from the FDIC under the loss-share agreement exclude $2.5 million in reimbursable amounts related to covered other real estate owned.

(3)Non covered commercial related loans include commercial, commercial real estate and construction real estate for InBank.

Outstanding balances on purchased loans from the FDIC were $561.7 million and $795.6 million as of September 30, 2012 and December 31, 2011, respectively.  The related carrying amount on loans purchased from the FDIC was $519.0 million and $692.1 million as of September 30, 2012 and December 31, 2011, respectively.

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INVESTMENT SECURITIES

9 Months Ended

Sep. 30, 2012

INVESTMENT SECURITIES

INVESTMENT SECURITIES

NOTE 3.               INVESTMENT SECURITIES

Carrying amounts and fair values of investment securities are summarized as follows (in thousands):

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
September 30, 2012:
Available for Sale
U.S. Government sponsored agencies and enterprises	$	39,233	$	2,954	$	—		$	42,187
States and political subdivisions	620,489		48,502		(25		)	668,966
Residential mortgage-backed securities	1,009,509		17,019		(4,545		)	1,021,983
Commercial mortgage-backed securities	51,156		2,823		—			53,979
Corporate bonds	16,617		10		(1		)	16,626
Equity securities	10,644		587		—			11,231
	1,747,648		71,895		(4,571		)	1,814,972
Held to Maturity
States and political subdivisions	238,211		21,739		—			259,950
Residential mortgage-backed securities	257,640		19,399		—			277,039
	495,851		41,138		—			536,989
Total	$	2,243,499	$	113,033	$	(4,571	)	$	2,351,961
December 31, 2011:
Available for Sale
U.S. Government sponsored agencies and enterprises	$	39,640	$	2,761	$	—		$	42,401
States and political subdivisions	500,979		34,922		(241		)	535,660
Residential mortgage-backed securities	1,256,696		26,483		(1,373		)	1,281,806
Commercial mortgage-backed securities	51,324		1,361		—			52,685
Corporate bonds	5,899		—		—			5,899
Equity securities	10,457		389		—			10,846
	1,864,995		65,916		(1,614		)	1,929,297
Held to Maturity
States and political subdivisions	240,183		7,489		(8		)	247,664
Residential mortgage-backed securities	259,100		5,032		(774		)	263,358
	499,283		12,521		(782		)	511,022
Total	$	2,364,278	$	78,437	$	(2,396	)	$	2,440,319

Unrealized losses on investment securities and the fair value of the related securities at September 30, 2012 are as follows (in thousands):

	Less Than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
Available for Sale
States and political subdivisions	$	9,379	$	(25	)	$	—	$	—		$	9,379	$	(25	)
Residential mortgage-backed securities	225,827		(4,105		)	31,573		(440		)	257,400		(4,545		)
Corporate bonds	5,260		(1		)	—		—			5,260		(1		)
Total	$	240,466	$	(4,131	)	$	31,573	$	(440	)	$	272,039	$	(4,571	)

The total number of security positions in the investment portfolio in an unrealized loss position at September 30, 2012 was 34.  Declines in the fair value of available for sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses to the extent the impairment is related to credit losses. The amount of the impairment related to other factors is recognized in other comprehensive income.  In estimating other-than-temporary impairment losses, management considers, among other things, (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, and (iii) whether or not the Company is more likely than not to sell the security before recovery of its cost basis.

As of September 30, 2012, management does not have the intent to sell any of the securities in the table above and believes that it is more likely than not that the Company will not have to sell any such securities before a recovery of cost.  The fair value is expected to recover as the bonds approach their maturity date or repricing date or if market yields for such investments decline. Accordingly, as of September 30, 2012, management believes the impairments detailed in the table above are temporary.

Net gains recognized on investment securities available for sale are summarized as follows (in thousands):

	Three Months Ended					Nine Months Ended
	September  30,					September  30,
	2012			2011		2012			2011
Realized gains	$	282		$	—	$	472		$	232
Realized losses	(1		)	—		(4		)	(3		)
Impairment charges	—			—		(224		)	—
Net gains	$	281		$	—	$	244		$	229

The amortized cost and fair value of investment securities as of September 30, 2012 by contractual maturity are shown below.  Maturities may differ from contractual maturities in mortgage-backed securities because the mortgages underlying the securities may be called or repaid without any penalties.  Therefore, mortgage-backed securities are not included in the maturity categories in the following maturity summary.

	Amortized		Fair
(In thousands)	Cost		Value
Available for sale:
Due in one year or less	$	26,437	$	26,857
Due after one year through five years	226,619		246,211
Due after five years through ten years	106,351		118,585
Due after ten years	316,932		336,126
Equity securities	10,644		11,231
Residential and commercial mortgage-backed securities	1,060,665		1,075,962
	1,747,648		1,814,972
Held to maturity:
Due after one year through five years	1,301		1,400
Due after five years through ten years	10,573		11,331
Due after ten years	226,337		247,219
Residential mortgage-backed securities	257,640		277,039
	495,851		536,989
Total	$	2,243,499	$	2,351,961

Investment securities available for sale with carrying amounts of $1.1 billion and $924.9 million at September 30, 2012 and December 31, 2011, respectively, were pledged as collateral on public deposits and for other purposes as required or permitted by law.

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COMMON AND PREFERRED STOCK

9 Months Ended

Sep. 30, 2012

COMMON AND PREFERRED STOCK

COMMON AND PREFERRED STOCK

NOTE 15.             COMMON AND PREFERRED STOCK

The Series A Preferred Stock was issued on December 5, 2008 as part of the Troubled Asset Relief Program (“TARP”) Capital Purchase Program of the United States Department of the Treasury (“Treasury”).  The Series A Preferred Stock qualified as Tier 1 capital and provided for cumulative dividends on the liquidation preference amount on a quarterly basis at a rate of 5% per annum for the first five years, and 9% per annum thereafter.  Concurrent with issuing the Series A Preferred Stock, the Company issued to the Treasury a ten year warrant (the “Warrant”) to purchase 1,012,048 shares (subsequently reduced to 506,024 shares, as described below) of the Company’s Common Stock at an exercise price of $29.05 per share.

On September 17, 2009, the Company completed a public offering of its common stock by issuing 12,578,125 shares of common stock for aggregate gross proceeds of $201.3 million.  The net proceeds to the Company after deducting underwriting discounts and commissions and offering expenses were approximately $190.9 million.  With the proceeds from this offering and the proceeds received by the Company from issuances pursuant to its Dividend Reinvestment and Stock Purchase Plan, the Company received aggregate gross proceeds from “Qualified Equity Offerings” in excess of the $196.0 million aggregate liquidation preference amount of the Series A Preferred Stock.  As a result, the number of shares of the Company’s common stock underlying the Warrant was reduced by 50%, from 1,012,048 shares to 506,024 shares.

On March 14, 2012, the Company repurchased all $196.0 million of the Series A Preferred Stock.  On May 2, 2012, the Company repurchased the Warrant in full for approximately $1.5 million.

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JUNIOR SUBORDINATED NOTES ISSUED TO CAPITAL TRUSTS

9 Months Ended

Sep. 30, 2012

JUNIOR SUBORDINATED NOTES ISSUED TO CAPITAL TRUSTS

JUNIOR SUBORDINATED NOTES ISSUED TO CAPITAL TRUSTS

NOTE 11.             JUNIOR SUBORDINATED NOTES ISSUED TO CAPITAL TRUSTS

The Company has established statutory trusts for the sole purpose of issuing trust preferred securities and related trust common securities.  The proceeds from such issuances were used by the trusts to purchase junior subordinated notes of the Company, which are the sole assets of each trust.  Concurrently with the issuance of the trust preferred securities, the Company issued guarantees for the benefit of the holders of the trust preferred securities.  The Company’s outstanding trust preferred securities currently qualify, and are treated by the Company, as Tier 1 regulatory capital.  The Company owns all of the common securities of each trust.  The trust preferred securities issued by each trust rank equally with the common securities in right of payment, except that if an event of default under the indenture governing the notes has occurred and is continuing, the preferred securities will rank senior to the common securities in right of payment.

The table below summarizes the outstanding junior subordinated notes and the related trust preferred securities issued by each trust as of September 30, 2012 (in thousands):

	Coal City	MB Financial	MB Financial	MB Financial
	Capital Trust I	Capital Trust II	Capital Trust III	Capital Trust IV
Junior Subordinated Notes:
Principal balance	$25,774	$36,083	$10,310	$20,619
Annual interest rate	3-mo LIBOR +1.80%	3-mo LIBOR +1.40%	3-mo LIBOR +1.50%	3-mo LIBOR +1.52%
Stated maturity date	September 1, 2028	September 15, 2035	September 23, 2036	September 15, 2036
Call date	September 1, 2008	December 15, 2010	September 23, 2011	September 15, 2011
Trust Preferred Securities:
Face Value	$25,000	$35,000	$10,000	$20,000
Annual distribution rate	3-mo LIBOR +1.80%	3-mo LIBOR +1.40%	3-mo LIBOR +1.50%	3-mo LIBOR +1.52%
Issuance date	July 1998	August 2005	July 2006	August 2006
Distribution dates (1)	Quarterly	Quarterly	Quarterly	Quarterly

	MB Financial	MB Financial	FOBB
	Capital Trust V	Capital Trust VI	Statutory Trust III (2)
Junior Subordinated Notes:
Principal balance	$30,928	$23,196	$5,155
Annual interest rate	3-mo LIBOR +1.30%	3-mo LIBOR +1.30%	3-mo LIBOR +2.80%
Stated maturity date	December 15, 2037	October 30, 2037	January 23, 2034
Call date	December 15, 2012	October 30, 2012	January 23, 2009
Trust Preferred Securities:
Face Value	$30,000	$22,500	$5,000
Annual distribution rate	3-mo LIBOR +1.30%	3-mo LIBOR +1.30%	3-mo LIBOR +2.80%
Issuance date	September 2007	October 2007	December 2003
Distribution dates (1)	Quarterly	Quarterly	Quarterly

(1)All distributions are cumulative and paid in cash.

(2)FOBB Statutory Trust III was established by First Oak Brook Bancshares, Inc. (“FOBB”) prior to the Company’s acquisition of FOBB, and the junior subordinated note issued by FOBB to FOBB Statutory Trust III was assumed by the Company upon completion of the acquisition.

The trust preferred securities are subject to mandatory redemption, in whole or in part, upon repayment of the junior subordinated notes at the stated maturity date or upon redemption on a date no earlier than the call dates noted in the table above.  Prior to these respective redemption dates, the junior subordinated notes may be redeemed by the Company (in which case the trust preferred securities would also be redeemed) after the occurrence of certain events that would have a negative tax effect on the Company or the trusts, would cause the trust preferred securities to no longer qualify as Tier 1 capital, or would result in a trust being treated as an investment company.  Each trust’s ability to pay amounts due on the trust preferred securities is solely dependent upon the Company making payment on the related junior subordinated notes.  The Company’s obligation under the junior subordinated notes and other relevant trust agreements, in aggregate, constitute a full and unconditional guarantee by the Company of each trust’s obligations under the trust preferred securities issued by each trust.  The Company has the right to defer payment of interest on the notes and, therefore, distributions on the trust preferred securities, for up to five years, but not beyond the stated maturity date in the table above.  During any such deferral period the Company may not pay cash dividends on its stock and generally may not repurchase its stock.

During the third quarter of 2012, the Company redeemed the $6.2 million of junior subordinated notes issued to FOBB Statutory Trust I, which resulted in the redemption of the trust preferred securities issued by FOBB Statutory Trust I.  The junior subordinated note had a rate of 10.60% and a maturity date of September 7, 2030.  The Company assumed this obligation upon the completion of the acquisition of FOBB.

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STOCK-BASED COMPENSATION

9 Months Ended

Sep. 30, 2012

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

NOTE 7.               STOCK-BASED COMPENSATION

ASC Topic 718 requires that the grant date fair value of equity awards to employees be recognized as compensation expense over the period during which an employee is required to provide service in exchange for such award.

The following table summarizes the impact of the Company’s share-based payment plans in the financial statements for the periods shown (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Total cost of share-based payment plans during the period	$	1,080	$	1,451	$	3,581	$	3,530
Amount of related income tax benefit recognized in income	$	430	$	607	$	1,431	$	1,449

The Company adopted the Omnibus Incentive Plan (the “Omnibus Plan”) in 1997.  In June 2011, the Company’s stockholders approved an amendment and restatement of the Omnibus Plan to add 2,300,000 authorized shares for a total of 8,300,000 shares of common stock for issuance to directors, officers, and employees of the Company or any of its subsidiaries.  Equity grants under the Omnibus Plan can be in the form of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, and other stock-based awards.  Shares awarded in the form of restricted stock, restricted stock units, performance shares, performance units, or other stock-based awards generally will reduce the shares available under the Omnibus Plan on a 2-for-1 basis.  As of September 30, 2012, there were 2,195,608 shares available for future grants.

Annual equity-based incentive awards are typically granted to selected officers and employees mid-year.  Options are granted with an exercise price equal to no less than the market price of the Company’s shares at the date of grant; those option awards generally vest over four years of service and have 10-year contractual terms.  Equity awards may also be granted at other times throughout the year in connection with the recruitment and retention of officers and employees.  Restricted shares granted to officers and employees typically vest over a two to four year period.  Directors currently may elect, in lieu of cash, to receive up to 70% of their fees in stock options with a five-year term which are fully vested on the grant date (provided that the director may not sell the underlying shares for at least six months after the grant date), and up to 100% of their fees in restricted stock, which vests one year after the grant date.

The following table summarizes stock options outstanding for the nine months ended September 30, 2012:

					Weighted
					Average
			Weighted		Remaining	Aggregate
			Average		Contractual	Intrinsic
	Number of		Exercise		Term	Value
	Options		Price		(In Years)	(in thousands)
Options outstanding as of December 31, 2011	2,935,810		$	27.64
Granted	240,569		20.42
Exercised	(207,571	)	20.79
Expired or cancelled	(172,043	)	31.32
Forfeited	(24,986	)	20.04
Options outstanding as of September 30, 2012	2,771,779		$	27.36	4.91	$	1,419
Options exercisable as of September 30, 2012	2,095,162		$	30.20	3.73	$	324

The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model based on certain assumptions.  Expected volatility is based on historical volatility and the expectations of future volatility of Company shares.  The risk free interest rate for periods within the contractual term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.  The expected life of options is estimated based on historical employee behavior and represents the period of time that options granted are expected to remain outstanding.

The following assumptions were used for options granted during the nine months ended September 30, 2012:

	September 30,
	2012
Risk-free interest rate	1.03		%
Expected volatility of Company’s stock	27.40		%
Expected dividend yield	2.00		%
Expected life of options	5.7 years
Weighted average fair value per option of options granted during the period	$	4.30

The total intrinsic value of options exercised during the nine months ended September 30, 2012 and 2011 was $203 thousand and $314 thousand, respectively.

The following is a summary of changes in restricted shares and units for the nine months ended September 30, 2012:

	Number of Shares		Weighted Average Grant Date Fair Value
Shares and Units Outstanding at December 31, 2011	664,502		$	14.37
Granted	295,681		20.68
Vested	(294,660	)	10.86
Forfeited	(13,377	)	16.65
Shares and Units Outstanding at September 30, 2012	652,146		$	18.78

During the nine months ended September 30, 2012, the Company issued 65,333 performance-based restricted stock units which entitle recipients to shares of common stock at the end of a three year vesting period.  Recipients will earn shares, totaling between 0% and 175% of the number of units issued, based on the Company’s total stockholder return relative to a specified peer group of financial institutions over the three year period.  The performance-based restricted stock units are included in the preceding table as if the recipients earned shares equal to 100% of the units issued.  A Monte Carlo simulation model was used to value the performance-based restricted stock units at the time of issuance.

The Company issued 92,717 shares, 66,193 shares and 164,401 shares of market-based restricted stock in 2011, 2010 and 2009, respectively.  The market component of the vesting terms for each award requires that, for ten consecutive trading days, the closing price of the Company’s stock be at least $27.00 for awards issued in 2011, $25.80 for awards issued in 2010 and $18.14 for awards issued in 2009.  The market components for awards issued in 2011 and 2010 have not been satisfied as of September 30, 2012.  The market component for awards issued in 2009 has been satisfied; therefore, the 2009 awards vested in full in 2012, on the third anniversary of the grant date.  A Monte Carlo simulation model was used to value the market-based restricted stock awards at the time of issuance.

Effective January 1, 2010, the Company began issuing shares of common stock under the Omnibus Plan as Salary Stock, classified as other stock-based awards, to certain executive officers.  This stock is fully vested as of the grant date and the related expense is included in salaries and employee benefits on the Consolidated Statements of Operations.  Holders of Salary Stock have all of the rights of a stockholder, including the right to vote the shares and the right to receive any dividends that may be paid thereon.  As a condition of receiving the Salary Stock, the holders entered into agreements with the Company providing that they may not sell or otherwise transfer the shares of Salary Stock for two years, except in the event of disability or death.  During the nine months ended September 30, 2012, the Company issued 13,647 shares of Salary Stock at a weighted average issuance price of $20.16.

As of September 30, 2012, there was $11.0 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements (including share option and nonvested share awards) granted under the Omnibus Plan.  At September 30, 2012, the weighted-average period over which the unrecognized compensation expense is expected to be recognized was approximately 2.9 years.

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COMMON AND PREFERRED STOCK (Details) (USD $)	1 Months Ended		9 Months Ended	1 Months Ended
	May 31, 2012	Sep. 30, 2009	Sep. 30, 2012	Mar. 31, 2012 Series A Preferred Stock	Dec. 31, 2008 Series A Preferred Stock	Sep. 30, 2009 Common Stock	Dec. 31, 2008 Common Stock	Sep. 17, 2009 Common Stock	Dec. 05, 2008 Common Stock
Common and preferred stock
Series A Preferred Stock, cumulative dividends rate for the first five years (as a percent)					5.00%
Series A Preferred Stock, cumulative dividends rate after five years (as a percent)					9.00%
Warrants, term							10 years
Warrants to purchase the Company's common stock, initially authorized (in shares)									1,012,048
Warrants to purchase the Company's common stock, as adjusted (in shares)								506,024
Warrants, exercise price (in dollars per share)									$ 29.05
Common stock issued (in shares)						12,578,125
Gross proceeds from public offering of common stock						$ 201,300,000
Proceeds from public offering of common stock, net of underwriting discounts, commissions and offering expenses						190,900,000
Aggregate gross proceeds from "Qualified Equity Offerings"		196,000,000
Percentage of reduction in number of common shares to be purchased under the warrant								50.00%
Shares repurchased				196,000,000
Repurchase of warrant	$ 1,500,000		$ 1,518,000

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GOODWILL AND INTANGIBLES

9 Months Ended

Sep. 30, 2012

GOODWILL AND INTANGIBLES

GOODWILL AND INTANGIBLES

NOTE 5.               GOODWILL AND INTANGIBLES

The excess of the cost of an acquisition over the fair value of the net assets acquired consists of goodwill, and core deposit and client relationship intangibles.  Under ASC Topic 350, goodwill is subject to at least annual assessments for impairment by applying a fair value based test.  The Company reviews goodwill and other intangible assets to determine potential impairment annually, or more frequently if events and circumstances indicate that the asset might be impaired, by comparing the carrying value of the asset with the anticipated future cash flows.

The Company’s annual assessment date is as of December 31.  No impairment losses were recognized during the nine months ended September 30, 2012 or 2011.  Goodwill is tested for impairment at the reporting unit level.  All of our goodwill is allocated to MB Financial, Inc., which is the Company’s only applicable reporting unit for purposes of testing goodwill impairment.  The carrying amount of goodwill was $387.1 million at September 30, 2012 and December 31, 2011.

The Company has other intangible assets consisting of core deposit and client relationship intangibles that had, as of September 30, 2012, a remaining weighted average amortization period of approximately five years.

The following table presents the changes during the nine months ended September 30, 2012 in the carrying amount of core deposit and client relationship intangibles, gross carrying amount, accumulated amortization, and net book value as of September 30, 2012 (in thousands):

	September 30,
	2012
Balance at beginning of period	$	29,494
Amortization expense	(3,759		)
Balance at end of period	$	25,735
Gross carrying amount	$	71,560
Accumulated amortization	(45,825		)
Net book value	$	25,735

The following presents the estimated future amortization expense of other intangible assets (in thousands):

	Amount
Year ending December 31,
2012	$	1,251
2013	4,530
2014	3,514
2015	3,090
2016	2,747
Thereafter	10,603
	$	25,735

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NEW AUTHORITATIVE ACCOUNTING GUIDANCE

9 Months Ended

Sep. 30, 2012

NEW AUTHORITATIVE ACCOUNTING GUIDANCE

NEW AUTHORITATIVE ACCOUNTING GUIDANCE

NOTE 6.               NEW AUTHORITATIVE ACCOUNTING GUIDANCE

ASC Topic 860 “Transfers and Servicing.”  New authoritative accounting guidance under ASC Topic 860, “Transfers and Servicing” amended prior guidance on the accounting for repurchase agreements and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity.  The new authoritative guidance removes from the assessment of effective control the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee and the collateral maintenance implementation guidance related to that criterion.  The new guidance does not change any other existing criteria applicable to the assessment of effective control.  The Company adopted this new authoritative guidance on January 1, 2012, and it did not have an impact on the Company’s statements of operations and financial condition.

ASC Topic 820 “Fair Value Measurement.”  New authoritative accounting guidance under ASC Topic 820, “Fair Value Measurement” amended prior guidance to achieve common fair value measurement and disclosure requirements in U.S. GAAP and International Financial Reporting Standards.  The new authoritative guidance clarifies the highest and best use and valuation premise, measuring the fair value of an instrument classified in a reporting entity’s shareholders’ equity, measuring the fair value of financial instruments that are managed within a portfolio, and the application of premiums and discounts in a fair value measurement. The new authoritative guidance also requires additional disclosures about fair value measurements. The Company adopted this new authoritative guidance on January 1, 2012, and it did not have an impact on the Company’s statements of operations and financial condition.  See Note 14 for the additional disclosures required by this new authoritative guidance.

ASC Topic 220 “Comprehensive Income.”  New authoritative accounting guidance under ASC Topic 220, “Comprehensive Income” amended prior guidance to increase the prominence of items reported in other comprehensive income.  The new guidance requires that all changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  The new guidance does not change the items that must be reported in other comprehensive income.  The Company adopted this new authoritative guidance on January 1, 2012, and it did not have an impact on the Company’s statements of operations and financial condition.  See the Consolidated Statements of Comprehensive Income included in the Consolidated Financial Statements.

ASC Topic 350 “Intangibles — Goodwill and Other.”  New authoritative accounting guidance under ASC Topic 350, “Intangibles — Goodwill and Other” amended prior guidance to allow an entity to use a qualitative approach to test goodwill for impairment.  The new guidance permits an entity to first assess qualitative factors to determine whether it is more likely than not (having a likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount as basis for determining whether it is necessary to perform the two-step goodwill impairment test.    The Company adopted this new authoritative guidance on January 1, 2012, and it did not have an impact on the Company’s statements of operations and financial condition.

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DEPOSITS

9 Months Ended

Sep. 30, 2012

DEPOSITS

DEPOSITS

NOTE 8.               DEPOSITS

The following table sets forth the composition of our deposits at the dates indicated (dollars in thousands):

	September 30,				December 31,
	2012				2011
	Amount		Percent		Amount		Percent
Demand deposit accounts, noninterest bearing	$	2,011,542	27	%	$	1,885,694	25	%
NOW and money market accounts	2,682,608		36	%	2,645,334		34	%
Savings accounts	797,741		10	%	753,610		10	%
Certificates of deposit	1,632,370		22	%	1,925,608		25	%
Brokered deposit accounts	355,086		5	%	437,361		6	%
Total	$	7,479,347	100	%	$	7,647,607	100	%

During 2012, the Company prepaid brokered certificates of deposit and recorded expense of $1.2 million related to the prepayment.

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

9 Months Ended

Sep. 30, 2012

FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial assets and financial liabilities measured at fair value on a recurring basis

			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
September 30, 2012
Financial assets
Securities available for sale:
U.S Government sponsored agencies and enterprises	$	42,187	$	—	$	42,187	$	—
States and political subdivisions	668,966		—		668,966		—
Residential mortgage-backed securities	1,021,983		—		1,021,096		887
Commercial mortgage-backed securities	53,979		—		53,979		—
Corporate bonds	16,626		—		11,395		5,231
Equity securities	11,231		11,231		—		—
Loans held for sale	7,221		—		7,221		—
Assets held in trust for deferred compensation	7,802		7,802		—		—
Derivative financial instruments	30,186		—		30,186		—
Financial liabilities
Other liabilities (1)	7,802		7,802		—		—
Derivative financial instruments	30,239		—		30,239		—
December 31, 2011
Financial assets
Securities available for sale:
U.S Government sponsored agencies and enterprises	$	42,401	$	—	$	42,401	$	—
States and political subdivisions	535,660		—		535,660		—
Residential mortgage-backed securities	1,281,806		—		1,280,713		1,093
Commercial mortgage-backed securities	52,685		—		52,685		—
Corporate bonds	5,899		—		—		5,899
Equity securities	10,846		10,846		—		—
Loans held for sale	4,727		—		4,727		—
Assets held in trust for deferred compensation	6,808		6,808		—		—
Derivative financial instruments	26,251		—		26,251		—
Financial liabilities
Other liabilities (1)	6,808		6,808		—		—
Derivative financial instruments	26,624		—		26,624		—

(1) Liabilities associated with assets held in trust for deferred compensation

Financial assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3)

	Nine Months Ended
	September 30,
(in thousands)	2012			2011
Balance, beginning of period	$	6,992		$	7,476
Other comprehensive income	89			42
Principal payments	(846		)	(485		)
Impairment charge	(117		)	—
	$	6,118		$	7,033

Assets measured at fair value on a nonrecurring basis

	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2012
Financial assets:
Impaired loans	$	66,435	$	—	$	—	$	66,435
Foreclosed assets	75,147		—		—		75,147
December 31, 2011
Financial assets:
Impaired loans	$	96,089	$	—	$	—	$	96,089
Foreclosed assets	138,971		—		—		138,971
Non-financial long-lived assets	2,901		—		—		2,901

Estimated fair values of financial instruments

	September 30, 2012
	Carrying		Estimated		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets:
Cash and due from banks	$	129,326	$	129,326	$	129,326	$	—	$	—
Interest earning deposits with banks	327,301		327,301		327,301		—		—
Investment securities available for sale	1,814,972		1,814,972		11,231		1,797,623		6,118
Investment securities held to maturity	495,851		536,989		—		536,989		—
Non-marketable securities - FHLB and FRB stock	57,653		57,653		—		—		57,653
Loans held for sale	7,221		7,221		—		7,221		—
Loans, net	5,503,663		5,512,768		—		—		5,512,768
Accrued interest receivable	35,233		35,233		35,233		—		—
Derivative financial instruments	30,186		30,186		—		30,186		—
Financial Liabilities:
Non-interest bearing deposits	$	2,011,542	$	2,011,542	$	2,011,542	$	—	$	—
Interest bearing deposits	5,467,805		5,494,724		—		—		5,494,724
Short-term borrowings	289,613		289,824		—		—		289,824
Long-term borrowings	118,798		123,152		—		—		123,152
Junior subordinated notes issued to capital trusts	152,065		97,028		—		—		97,028
Accrued interest payable	3,250		3,250		3,250		—		—
Derivative financial instruments	30,239		30,239		—		30,239		—

	December 31,
	2011
	Carrying		Estimated
	Amount		Fair Value
Financial Assets:
Cash and due from banks	$	144,228	$	144,228
Interest bearing deposits with banks	100,337		100,337
Investment securities available for sale	1,929,297		1,929,297
Investment securities held to maturity	499,283		511,022
Non-marketable securities - FHLB and FRB stock	80,832		80,832
Loans held for sale	4,727		4,727
Loans, net	5,824,197		5,734,017
Accrued interest receivable	35,870		35,870
Derivative financial instruments	26,251		26,251
Financial Liabilities:
Non-interest bearing deposits	$	1,885,694	$	1,885,694
Interest bearing deposits	5,761,913		5,790,963
Short-term borrowings	219,954		219,983
Long-term borrowings	266,264		279,124
Junior subordinated notes issued to capital trusts	158,538		113,635
Accrued interest payable	4,518		4,518
Derivative financial instruments	26,624		26,624

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JUNIOR SUBORDINATED NOTES ISSUED TO CAPITAL TRUSTS (Details) (USD $)			9 Months Ended							3 Months Ended	9 Months Ended
	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2012 Junior Subordinated Notes Maximum	Sep. 30, 2012 Coal City Capital Trust I Junior Subordinated Notes	Sep. 30, 2012 MB Financial Capital Trust II Junior Subordinated Notes	Sep. 30, 2012 MB Financial Capital Trust III Junior Subordinated Notes	Sep. 30, 2012 MB Financial Capital Trust IV Junior Subordinated Notes	Sep. 30, 2012 MB Financial Capital Trust V Junior Subordinated Notes	Sep. 30, 2012 MB Financial Capital Trust VI Junior Subordinated Notes	Sep. 30, 2012 FOBB Statutory Trust I Junior Subordinated Notes	Sep. 30, 2012 FOBB Statutory Trust I Junior Subordinated Notes	Sep. 30, 2012 FOBB Statutory Trust III Junior Subordinated Notes
Outstanding junior subordinated notes
Principal balance	$ 152,065,000	$ 158,538,000		$ 25,774,000	$ 36,083,000	$ 10,310,000	$ 20,619,000	$ 30,928,000	$ 23,196,000			$ 5,155,000
Description of annual interest rate basis				three month LIBOR	three month LIBOR	three month LIBOR	three month LIBOR	three month LIBOR	three month LIBOR			three month LIBOR
Annual interest rate, basis spread (as a percent)				1.80%	1.40%	1.50%	1.52%	1.30%	1.30%			2.80%
Annual interest rate (as a percent)											10.60%
Period for deferment of payment of interest on notes			5 years
Principal amount of debt redeemed										$ 6,200,000

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COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2012

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

NOTE 13.             COMMITMENTS AND CONTINGENCIES

Commitments: The Company is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers.  These financial instruments include commitments to extend credit, standby letters of credit and commercial letters of credit.  Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets.

The Company’s exposure to credit loss is represented by the contractual amount of these commitments.  The Company follows the same credit policies in making commitments as it does for on-balance-sheet instruments.

At September 30, 2012 and December 31, 2011, the following financial instruments were outstanding, the contractual amounts of which represent off-balance sheet credit risk (in thousands):

	Contractual Amount
	September 30,		December 31,
	2012		2011
Commitments to extend credit:
Home equity lines	$	253,216	$	275,357
Other commitments	826,411		741,815
Letters of credit:
Standby	63,275		67,720
Commercial	6,067		818

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Commitments generally have fixed expiration dates or other termination clauses and may require a payment of a fee.  The commitments for home equity lines of credit may expire without being drawn upon.  Therefore, the total commitment amounts do not necessarily represent future cash requirements.  The amount of collateral obtained, if it is deemed necessary by the Company, is based on management’s credit evaluation of the customer.

The Company, in the normal course of its business, regularly offers standby and commercial letters of credit to its customers.  Standby and commercial letters of credit are a conditional but irrevocable form of guarantee.  Under letters of credit, the Company typically guarantees payment to a third party beneficiary upon the default of payment or nonperformance by the customer and upon receipt of complying documentation from that beneficiary.

Both standby and commercial letters of credit may be issued for any length of time, but normally do not exceed a period of five years.  These letters of credit may also be extended or amended from time to time depending on the bank customer’s needs.  As of September 30, 2012, the maximum remaining term for any standby letters of credit was December 31, 2017.  A fee is charged to the customer and is recognized as income over the life of the letter of credit, unless considered non-rebatable under the terms of a letter of credit application.

At September 30, 2012, the aggregate contractual amount of these letters of credit, which represents the maximum potential amount of future payments that the Company would be obligated to pay, decreased $804 thousand to $69.3 million from $68.5 million at December 31, 2011.  Of the $69.3 million in commitments outstanding at September 30, 2012, approximately $52.6 million of the letters of credit have been issued or renewed since December 31, 2011.

Letters of credit issued on behalf of customers may be done on either a secured, partially secured or an unsecured basis.  If a letter credit is secured or partially secured, the collateral can take various forms including bank accounts, investments, fixed assets, inventory, accounts receivable or real estate, among other things.  The Company takes the same care in making credit decisions and obtaining collateral when it issues letters of credit on behalf of its customers, as it does when making other types of loans.

As of September 30, 2012, the Company had approximately $2.5 million in capital expenditure commitments outstanding which relate to various projects to renovate existing branches.

Concentrations of credit risk:  The majority of the loans, commitments to extend credit and standby letters of credit have been granted to customers in the Company’s market area.  The distribution of commitments to extend credit approximates the distribution of loans outstanding.  Standby letters of credit are granted primarily to commercial borrowers.

Contingencies: In the normal course of business, the Company is involved in various legal proceedings.  In the opinion of management, any liability resulting from pending proceedings would not be expected to have a material adverse effect on the Company’s consolidated financial statements.

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LOANS (Tables)

9 Months Ended

Sep. 30, 2012

LOANS

Schedule of composition of loans

	September 30,		December 31,
	2012		2011
Commercial loans	$	1,073,981	$	1,113,123
Commercial loans collateralized by assignment of lease payments	1,219,361		1,208,575
Commercial real estate	1,770,261		1,853,788
Residential real estate	308,866		316,787
Construction real estate	149,872		183,789
Indirect vehicle	206,973		187,481
Home equity	314,718		336,043
Consumer loans	84,651		88,865
Gross loans, excluding covered loans	5,128,683		5,288,451
Covered loans	496,162		662,544
Total loans(1)	$	5,624,845	$	5,950,995

(1)Gross loan balances at September 30, 2012 and December 31, 2011 were net of unearned income, including net deferred loan fees of $955 thousand and $1.0 million, respectively.

Contractual aging of the recorded investment in past due loans by class of loans

			30-59 Days		60-89 Days		Loans past due		Total
	Current		Past Due		Past Due		90 days or more		Past Due		Total
September 30, 2012:
Commercial	$	1,066,782	$	1,720	$	1,781	$	3,698	$	7,199	$	1,073,981
Commercial collateralized by assignment of lease payments	1,206,547		10,654		2,129		31		12,814		1,219,361
Commercial real estate
Healthcare	180,429		—		—		4,738		4,738		185,167
Industrial	416,478		614		1,963		3,622		6,199		422,677
Multifamily	357,826		899		1,576		3,169		5,644		363,470
Retail	392,608		469		375		5,077		5,921		398,529
Office	172,388		287		—		1,125		1,412		173,800
Other	223,397		1,949		693		579		3,221		226,618
Residential real estate	301,660		296		1,910		5,000		7,206		308,866
Construction real estate	146,926		99		—		2,847		2,946		149,872
Indirect vehicle	204,909		1,307		475		282		2,064		206,973
Home equity	302,218		4,632		1,436		6,432		12,500		314,718
Consumer	84,591		55		2		3		60		84,651
Gross loans, excluding covered loans (1)	5,056,759		22,981		12,340		36,603		71,924		5,128,683
Covered loans	314,888		27,338		27,836		126,100		181,274		496,162
Total loans	$	5,371,647	$	50,319	$	40,176	$	162,703	$	253,198	$	5,624,845
Nonperforming loan aging	$	65,968	$	2,720	$	6,409	$	30,186	$	39,315	$	105,283
Non-covered loans related to FDIC transactions (2)	$	15,594	$	609	$	244	$	6,415	$	7,268	$	22,862
December 31, 2011:
Commercial	$	1,105,139	$	2,178	$	188	$	5,618	$	7,984	$	1,113,123
Commercial collateralized by assignment of lease payments	1,202,323		3,409		2,463		380		6,252		1,208,575
Commercial real estate
Healthcare	176,594		—		—		—		—		176,594
Industrial	450,029		1,013		1,700		6,642		9,355		459,384
Multifamily	383,882		2,398		1,845		2,772		7,015		390,897
Retail	421,079		2,376		480		3,624		6,480		427,559
Office	181,960		—		—		1,544		1,544		183,504
Other	214,137		457		595		661		1,713		215,850
Residential real estate	311,256		1,231		767		3,533		5,531		316,787
Construction real estate	180,471		—		—		3,318		3,318		183,789
Indirect vehicle	185,363		1,376		386		356		2,118		187,481
Home equity	325,173		2,812		2,314		5,744		10,870		336,043
Consumer	88,854		3		3		5		11		88,865
Gross loans, excluding covered loans (1)	5,226,260		17,253		10,741		34,197		62,191		5,288,451
Covered loans	443,332		14,332		12,618		192,262		219,212		662,544
Total loans	$	5,669,592	$	31,585	$	23,359	$	226,459	$	281,403	$	5,950,995
Nonperforming loan aging	$	91,752	$	5,916	$	5,142	$	26,581	$	37,639	$	129,391
Non-covered loans related to FDIC transactions (2)	$	19,656	$	1,958	$	283	$	7,617	$	9,858	$	29,514

(1)Includes loans related to the InBank FDIC-assisted transaction completed by MB Financial Bank in 2009.

(2)Loans related to the InBank FDIC-assisted transaction completed by MB Financial Bank in 2009.

Recorded investment in nonaccrual loans and loans past due ninety days or more and still accruing by class of loans

	September 30,				December 31,
	2012				2011
			Loans past due				Loans past due
			90 days or more				90 days or more
	Nonaccrual		and still accruing		Nonaccrual		and still accruing
Commercial	$	21,536	$	36	$	34,813	$	—
Commercial collateralized by assignment of lease payments	1,076		—		2,116		66
Commercial real estate:
Healthcare	4,738		—		6,892		—
Industrial	12,271		410		29,637		—
Multifamily	5,868		—		9,145		—
Retail	18,123		—		15,333		—
Office	2,719		—		2,826		—
Other	11,258		—		12,718		—
Residential real estate	7,368		—		4,300		—
Construction real estate	1,225		—		1,145		—
Indirect vehicles	1,423		6		1,288		16
Home equity	17,204		18		9,087		—
Consumer	4		—		9		—
Total	$	104,813	$	470	$	129,309	$	82

Risk category of loans by class of loans

			Special
	Pass		Mention		Substandard		Doubtful		Total
September 30, 2012:
Commercial	$	973,284	$	41,175	$	58,620	$	902	$	1,073,981
Commercial collateralized by assignment of lease payments	1,209,988		163		9,210		—		1,219,361
Commercial real estate
Healthcare	158,510		21,919		—		4,738		185,167
Industrial	375,869		5,202		41,606		—		422,677
Multifamily	319,097		30,515		13,858		—		363,470
Retail	347,451		21,788		29,290		—		398,529
Office	144,360		6,459		22,981		—		173,800
Other	205,106		5,067		16,445		—		226,618
Construction real estate	131,418		5,814		12,640		—		149,872
Total	$	3,865,083	$	138,102	$	204,650	$	5,640	$	4,213,475
December 31, 2011:
Commercial	$	983,935	$	56,550	$	69,292	$	3,346	$	1,113,123
Commercial collateralized by assignment of lease payments	1,203,933		—		4,642		—		1,208,575
Commercial real estate
Healthcare	169,702		—		—		6,892		176,594
Industrial	370,760		26,294		62,330		—		459,384
Multifamily	328,617		43,256		15,732		3,292		390,897
Retail	384,590		4,031		38,938		—		427,559
Office	159,162		3,924		20,418		—		183,504
Other	183,490		3,822		28,538		—		215,850
Construction real estate	167,907		4,362		11,520		—		183,789
Total	$	3,952,096	$	142,239	$	251,410	$	13,530	$	4,359,275

Recorded investment in loan classes based on payment activity

	Performing		Non-performing		Total
September 30, 2012:
Residential real estate	$	301,498	$	7,368	$	308,866
Indirect vehicles	205,544		1,429		206,973
Home equity	297,496		17,222		314,718
Consumer	84,647		4		84,651
Total	$	889,185	$	26,023	$	915,208
December 31, 2011:
Residential real estate	$	312,487	$	4,300	$	316,787
Indirect vehicles	186,177		1,304		187,481
Home equity	326,956		9,087		336,043
Consumer	88,856		9		88,865
Total	$	914,476	$	14,700	$	929,176

Loans individually evaluated for impairment by class of loans

	September 30, 2012
									Three Months Ended				Nine Months Ended
	Unpaid						Allowance for		Average		Interest		Average		Interest
	Principal		Recorded		Partial		Loan Losses		Recorded		Income		Recorded		Income
	Balance		Investment		Charge-offs		Allocated		Investment		Recognized		Investment		Recognized
With no related allowance recorded:
Commercial	$	30,082	$	10,731	$	19,351	$	—	$	10,224	$	—	$	15,249	$	105
Commercial collateralized by assignment of lease payments	94		94		—		—		263		—		224		2
Commercial real estate:
Healthcare	—		—		—		—		—				—
Industrial	12,778		10,702		2,076		—		11,295		—		17,005		29
Multifamily	1,642		1,642		—		—		884		14		1,519		14
Retail	10,105		9,650		455		—		10,738		—		10,402		—
Office	1,136		1,136		—		—		1,365		—		982		—
Other	4,866		4,866		—		—		5,605		—		6,288		—
Residential real estate	8,460		8,085		375		—		8,474		—		7,634		—
Construction real estate	1,147		1,147		—		—		1,150		—		771		—
Indirect vehicles	—		—		—		—		—		—		—		—
Home equity	10,280		10,280		—		—		10,338		—		11,130		—
Consumer	248		248		—		—		248		—		243		—
With an allowance recorded:
Commercial	10,810		10,806		4		2,570		11,295		—		6,950		—
Commercial collateralized by assignment of lease payments	1,074		1,074		—		180		932		16		1,270		66
Commercial real estate:
Healthcare	10,942		4,738		6,204		1,386		4,738		—		5,211		—
Industrial	2,633		1,569		1,064		320		1,445		—		1,972		—
Multifamily	6,398		5,055		1,343		1,302		5,079		16		5,562		78
Retail	9,706		8,704		1,002		2,474		9,288		—		8,279		—
Office	1,590		1,583		7		323		1,642		—		2,054		—
Other	6,535		6,392		143		1,762		6,574		4		6,691		12
Residential real estate	3,224		3,042		182		401		3,229		—		1,084		—
Construction real estate	3,605		1,225		2,380		582		1,332		—		4,242		—
Indirect vehicles	—		—		—		—		—		—		—		—
Home equity	—		—		—		—		—		—		1,826		—
Consumer	—		—		—		—		—		—		—		—
Total	$	137,355	$	102,769	$	34,586	$	11,300	$	106,138	$	50	$	116,588	$	306

	December 31, 2011
	Unpaid						Allowance for		Average		Interest
	Principal		Recorded		Partial		Loan Losses		Recorded		Income
	Balance		Investment		Charge-offs		Allocated		Investment		Recognized
With no related allowance recorded:
Commercial	$	47,784	$	28,774	$	19,010	$	—	$	22,952	$	211
Commercial collateralized by assignment of lease payments	107		107		—		—		696		32
Commercial real estate:
Healthcare	—		—		—		—		1,818		—
Industrial	35,338		25,865		9,473		—		37,436		64
Multifamily	1,975		1,975		—		—		10,641		164
Retail	23,656		23,652		4		—		26,783		—
Office	779		779		—		—		5,755		—
Other	6,901		6,901		—		—		16,303		—
Residential real estate	7,157		7,157		—		—		6,580		—
Construction real estate	—		—		—		—		56,846		—
Indirect vehicles	—		—		—		—		—		—
Home equity	11,297		11,297		—		—		7,309		—
Consumer	241		241		—		—		122		—
With an allowance recorded:
Commercial	10,016		6,038		3,978		1,711		10,025		80
Commercial collateralized by assignment of lease payments	2,077		2,077		—		390		475		71
Commercial real estate:
Healthcare	11,750		6,892		4,858		1,560		292		—
Industrial	7,739		3,773		3,966		680		7,780		—
Multifamily	14,387		7,720		6,667		1,757		10,614		208
Retail	11,232		10,672		560		2,394		9,688		—
Office	2,330		2,047		283		77		4,586		—
Other	5,979		5,816		163		1,514		10,489		2
Residential real estate	—		—		—		—		—		—
Construction real estate	3,519		1,145		2,374		721		20,259		—
Indirect vehicles	—		—		—		—		—		—
Home equity	—		—		—		—		—		—
Consumer	—		—		—		—		355		5
Total	$	204,264	$	152,928	$	51,336	$	10,804	$	267,804	$	837

Schedule of loans that have been restructured classified as performing and non-performing

	Three Months Ended
	September 30, 2012
	Number	Pre-Modification		Post-Modification
	of	Recorded		Recorded		Charge-offs and
	Loans	Investment		Investment		Specific Reserves
Performing:
Home equity	7	$	401	$	325	$	76
Total	7	$	401	$	325	$	76
Non-Performing:
Commercial collateralized by assignment of lease payments	1	$	202	$	202	$	168
Commercial real estate:
Retail	1	202		202		200
Residential real estate	7	173		68		105
Home equity	5	347		232		115
Total	14	$	924	$	704	$	588

	Nine Months Ended
	September 30, 2012
	Number	Pre-Modification		Post-Modification
	of	Recorded		Recorded		Charge-offs and
	Loans	Investment		Investment		Specific Reserves
Performing:
Commercial real estate:
Multifamily	1	$	155	$	155	$	—
Retail	1	236		236		—
Residential real estate	2	808		808		—
Home equity	38	6,009		5,933		76
Total	42	$	7,208	$	7,132	$	76
Non-Performing:
Commercial	4	$	292	$	292	$	96
Commercial collateralized by assignment of lease payments	1	202		202		168
Commercial real estate:
Multifamily	1	149		149		40
Retail	4	923		923		232
Other	1	157		157		50
Residential real estate	13	637		401		236
Home equity	34	5,324		4,899		425
Total	58	$	7,684	$	7,023	$	1,247

Allowance activity for loan losses by portfolio segment based on impairment method

				Commercial
				collateralized by
				assignment of			Commercial			Residential			Construction			Indirect			Home						Unfunded
	Commercial			lease payments			real estate			real estate			real estate			vehicles			equity			Consumer			Commitments			Total
September 30, 2012:
Allowance for credit losses:
Three Months Ended
Beginning balance	$	20,789		$	7,490		$	68,713		$	3,592		$	10,586		$	1,941		$	7,617		$	1,028		$	7,084		$	128,840
Transfer to (from) allowance for unfunded credit commitments	—			—			—			—			—			—			—			—			—			—
Charge-offs	(75		)	—			(2,994		)	(474		)	(71		)	(433		)	(1,209		)	(332		)	—			(5,588		)
Recoveries	306			111			12,893			8			752			224			303			77			—			14,674
Provision	1,181			(149		)	(12,253		)	738			(393		)	288			370			558			(3,340		)	(13,000		)
Ending balance	$	22,201		$	7,452		$	66,359		$	3,864		$	10,874		$	2,020		$	7,081		$	1,331		$	3,744		$	124,926
Nine Months Ended
Beginning balance	$	21,106		$	7,561		$	68,695		$	3,935		$	15,639		$	1,834		$	7,333		$	695		$	9,177		$	135,975
Transfer to (from) allowance for unfunded credit commitments	—			—			—			—			1,132			—			—			—			(1,132		)	—
Charge-offs	(2,065		)	(1,720		)	(8,412		)	(1,876		)	(3,951		)	(1,636		)	(3,157		)	(864		)	—			(23,681		)
Recoveries	2,730			460			16,116			230			1,458			835			423			280			—			22,532
Provision	430			1,151			(10,040		)	1,575			(3,404		)	987			2,482			1,220			(4,301		)	(9,900		)
Ending balance	$	22,201		$	7,452		$	66,359		$	3,864		$	10,874		$	2,020		$	7,081		$	1,331		$	3,744		$	124,926
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	2,570		$	180		$	7,567		$	401		$	582		$	—		$	—		$	—		$	1,726		$	13,026
Collectively evaluated for impairment	19,345			7,272			56,851			3,144			10,292			2,020			7,081			1,331			2,018			109,354
Acquired and accounted for under ASC 310-30 (1)	286			—			1,941			319			—			—			—			—			—			2,546
Total ending allowance balance	$	22,201		$	7,452		$	66,359		$	3,864		$	10,874		$	2,020		$	7,081		$	1,331		$	3,744		$	124,926
Loans:
Individually evaluated for impairment	$	21,537		$	1,168		$	56,037		$	11,127		$	2,372		$	—		$	10,280		$	248		$	—		$	102,769
Collectively evaluated for impairment	1,033,534			1,218,193			1,714,224			293,787			147,500			206,973			304,438			84,403			—			5,003,052
Acquired and accounted for under ASC 310-30 (1)	78,275			—			269,348			7,116			125,515			—			568			38,202			—			519,024
Total ending loans balance	$	1,133,346		$	1,219,361		$	2,039,609		$	312,030		$	275,387		$	206,973		$	315,286		$	122,853		$	—		$	5,624,845
September 30, 2011:
Allowance for credit losses:
Three Months Ended
Beginning balance	$	20,550		$	6,442		$	67,260		$	3,593		$	21,861		$	3,709		$	5,955		$	687		$	17,050		$	147,107
Transfer to (from) allowance for unfunded credit commitments	—			—			5,516			—			—			—			—			—			(5,516		)	—
Charge-offs	(3,497		)	—			(7,815		)	(141		)	(6,008		)	(611		)	(1,605		)	(475		)	—			(20,152		)
Recoveries	1,413			5			739			7			681			327			151			83			—			3,406
Provision	(950		)	191			7,920			322			(140		)	(1,115		)	3,231			324			1,717			11,500
Ending balance	$	17,516		$	6,638		$	73,620		$	3,781		$	16,394		$	2,310		$	7,732		$	619		$	13,251		$	141,861
Nine Months Ended
Beginning balance	$	28,747		$	6,424		$	105,875		$	5,104		$	37,215		$	3,157		$	5,062		$	633		$	—		$	192,217
Reclassification to allowance for unfunded credit commitments	(464		)	—			(7,989		)	—			(8,597		)	—			—			—			17,050			—
Transfer to (from) allowance for unfunded credit commitments	—			—			5,516			—			—			—			—			—			(5,516		)	—
Charge-offs	(14,639		)	(93		)	(92,840		)	(11,783		)	(45,928		)	(1,882		)	(9,005		)	(1,363		)				(177,533		)
Recoveries	4,736			224			2,585			40			5,071			1,021			218			532			—			14,427
Provision	(864		)	83			60,473			10,420			28,633			14			11,457			817			1,717			112,750
Ending balance	$	17,516		$	6,638		$	73,620		$	3,781		$	16,394		$	2,310		$	7,732		$	619		$	13,251		$	141,861
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	2,544		$	83		$	6,326		$	—		$	2,463		$	—		$	—		$	—		$	13,251		$	24,667
Collectively evaluated for impairment	14,972			6,555			67,137			3,781			13,931			2,310			7,732			619			—			117,037
Acquired and accounted for under ASC 310-30 (1)	—			—			157			—			—			—			—			—			—			157
Total ending allowance balance	$	17,516		$	6,638		$	73,620		$	3,781		$	16,394		$	2,310		$	7,732		$	619		$	13,251		$	141,861
Loans:
Individually evaluated for impairment	$	37,069		$	631		$	106,728		$	5,842		$	2,913		$	—		$	8,602		$	241		$	—		$	162,026
Collectively evaluated for impairment	982,672			1,066,560			1,738,165			303,776			207,293			189,032			340,333			75,785			—			4,903,616
Acquired and accounted for under ASC 310-30 (1)	119,986			—			348,738			11,710			214,316			—			902			52,444			—			748,096
Total ending loans balance	$	1,139,727		$	1,067,191		$	2,193,631		$	321,328		$	424,522		$	189,032		$	349,837		$	128,470		$	—		$	5,813,738

(1)   Loans acquired in FDIC-assisted transactions and accounted for under ASC Subtopic 310-30 “Receivables — Loans and Debt Securities Acquired with Deteriorated Credit Quality.”

Changes in the accretable yield for purchased credit-impaired loans

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
Balance at beginning of period	$	9,411		$	28,298		$	18,703		$	44,103
Accretion	(3,406		)	(7,854		)	(12,812		)	(25,193		)
Other	403			(600		)	517			934
Balance at end of period	$	6,408		$	19,844		$	6,408		$	19,844

Purchased loans disclosures

	Purchased Credit-Impaired Loans		Purchased Non- Credit-Impaired Loans		Total
Covered loans:
Commercial related (1)	$	24,590	$	7,263	$	31,853
Commercial	8,527		18,985		27,512
Commercial real estate	108,073		161,275		269,348
Construction real estate	108,571		16,944		125,515
Other	4,420		37,514		41,934
Total covered loans	$	254,181	$	241,981	$	496,162
Estimated receivable amount from the FDIC under the loss-share agreement (2)	$	14,087	$	19,714	$	33,801
Non covered loans:
Commercial related (3)	$	3,480	$	15,431	$	18,911
Other	65		3,886		3,951
Total non-covered loans	$	3,545	$	19,317	$	22,862

(1)Covered commercial related loans include commercial, commercial real estate and construction real estate loans acquired in connection with the Heritage Community Bank (“Heritage”) and Benchmark Bank (“Benchmark”) FDIC-assisted transactions.

(2)Estimated reimbursable amounts from the FDIC under the loss-share agreement exclude $2.5 million in reimbursable amounts related to covered other real estate owned.

(3)Non covered commercial related loans include commercial, commercial real estate and construction real estate for InBank.

XML

SHORT-TERM BORROWINGS (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Jun. 30, 2012	Mar. 09, 2012	Dec. 31, 2011
Short-term borrowings
Weighted Average Cost (as a percent)	0.50%			0.35%
Short-term borrowings, Amount	289,613			219,954
Minimum
Short-term borrowings
Effective interest rate for fixed rate advance (as a percent)	3.26%
Maximum
Short-term borrowings
Effective interest rate for fixed rate advance (as a percent)	3.98%
Customer repurchase agreements
Short-term borrowings
Weighted Average Cost (as a percent)	0.28%			0.30%
Short-term borrowings, Amount	270,245			216,439
Federal Home Loan Bank advances
Short-term borrowings
Weighted Average Cost (as a percent)	3.56%			3.66%
Short-term borrowings, Amount	19,368			3,515
Line of credit
Short-term borrowings
Weighted Average Cost (as a percent)	0.00%			0.00%
Short-term borrowings, Amount		$ 35,000	$ 35,000
Description of interest rate basis	one month LIBOR
Interest rate, basis spread (as a percent)	2.00%

XML

LOANS (Details 3) (USD $)	3 Months Ended	9 Months Ended	12 Months Ended
	Sep. 30, 2012	Sep. 30, 2012	Dec. 31, 2011
Loans individually evaluated for impairment by class of loans
Unpaid Principal Balance	$ 137,355,000	$ 137,355,000	$ 204,264,000
Recorded Investment	102,769,000	102,769,000	152,928,000
Partial Charge-Offs	34,586,000	34,586,000	51,336,000
Allowance for Loan Losses Allocated	11,300,000	11,300,000	10,804,000
Average Recorded Investment	106,138,000	116,588,000	267,804,000
Interest Income Recognized	50,000	306,000	837,000
Performing
Loans individually evaluated for impairment by class of loans
Restructured loans	17,900,000	17,900,000	38,000,000
Non-performing
Loans individually evaluated for impairment by class of loans
Restructured loans	27,100,000	27,100,000	42,500,000
Impaired loans | Commercial loans
Loans individually evaluated for impairment by class of loans
Unpaid principal balance with no related allowance recorded	30,082,000	30,082,000	47,784,000
Unpaid principal balance with related allowance recorded	10,810,000	10,810,000	10,016,000
Recorded Investment with no related allowance recorded	10,731,000	10,731,000	28,774,000
Recorded Investment with related allowance recorded	10,806,000	10,806,000	6,038,000
Partial Charge-Offs with no related allowance recorded	19,351,000	19,351,000	19,010,000
Partial Charge-Offs with related allowance recorded	4,000	4,000	3,978,000
Allowance for Loan Losses Allocated with related allowance recorded	2,570,000	2,570,000	1,711,000
Average Recorded Investment with no related allowance recorded	10,224,000	15,249,000	22,952,000
Average Recorded Investment with related allowance recorded	11,295,000	6,950,000	10,025,000
Interest Income Recognized with no related allowance recorded		105,000	211,000
Interest Income Recognized with related allowance recorded			80,000
Impaired loans | Commercial loans collateralized by assignment of lease payments
Loans individually evaluated for impairment by class of loans
Unpaid principal balance with no related allowance recorded	94,000	94,000	107,000
Unpaid principal balance with related allowance recorded	1,074,000	1,074,000	2,077,000
Recorded Investment with no related allowance recorded	94,000	94,000	107,000
Recorded Investment with related allowance recorded	1,074,000	1,074,000	2,077,000
Allowance for Loan Losses Allocated with related allowance recorded	180,000	180,000	390,000
Average Recorded Investment with no related allowance recorded	263,000	224,000	696,000
Average Recorded Investment with related allowance recorded	932,000	1,270,000	475,000
Interest Income Recognized with no related allowance recorded		2,000	32,000
Interest Income Recognized with related allowance recorded	16,000	66,000	71,000
Impaired loans | Healthcare
Loans individually evaluated for impairment by class of loans
Unpaid principal balance with related allowance recorded	10,942,000	10,942,000	11,750,000
Recorded Investment with related allowance recorded	4,738,000	4,738,000	6,892,000
Partial Charge-Offs with related allowance recorded	6,204,000	6,204,000	4,858,000
Allowance for Loan Losses Allocated with related allowance recorded	1,386,000	1,386,000	1,560,000
Average Recorded Investment with no related allowance recorded			1,818,000
Average Recorded Investment with related allowance recorded	4,738,000	5,211,000	292,000
Impaired loans | Industrial
Loans individually evaluated for impairment by class of loans
Unpaid principal balance with no related allowance recorded	12,778,000	12,778,000	35,338,000
Unpaid principal balance with related allowance recorded	2,633,000	2,633,000	7,739,000
Recorded Investment with no related allowance recorded	10,702,000	10,702,000	25,865,000
Recorded Investment with related allowance recorded	1,569,000	1,569,000	3,773,000
Partial Charge-Offs with no related allowance recorded	2,076,000	2,076,000	9,473,000
Partial Charge-Offs with related allowance recorded	1,064,000	1,064,000	3,966,000
Allowance for Loan Losses Allocated with related allowance recorded	320,000	320,000	680,000
Average Recorded Investment with no related allowance recorded	11,295,000	17,005,000	37,436,000
Average Recorded Investment with related allowance recorded	1,445,000	1,972,000	7,780,000
Interest Income Recognized with no related allowance recorded		29,000	64,000
Impaired loans | Multifamily
Loans individually evaluated for impairment by class of loans
Unpaid principal balance with no related allowance recorded	1,642,000	1,642,000	1,975,000
Unpaid principal balance with related allowance recorded	6,398,000	6,398,000	14,387,000
Recorded Investment with no related allowance recorded	1,642,000	1,642,000	1,975,000
Recorded Investment with related allowance recorded	5,055,000	5,055,000	7,720,000
Partial Charge-Offs with related allowance recorded	1,343,000	1,343,000	6,667,000
Allowance for Loan Losses Allocated with related allowance recorded	1,302,000	1,302,000	1,757,000
Average Recorded Investment with no related allowance recorded	884,000	1,519,000	10,641,000
Average Recorded Investment with related allowance recorded	5,079,000	5,562,000	10,614,000
Interest Income Recognized with no related allowance recorded	14,000	14,000	164,000
Interest Income Recognized with related allowance recorded	16,000	78,000	208,000
Impaired loans | Retail
Loans individually evaluated for impairment by class of loans
Unpaid principal balance with no related allowance recorded	10,105,000	10,105,000	23,656,000
Unpaid principal balance with related allowance recorded	9,706,000	9,706,000	11,232,000
Recorded Investment with no related allowance recorded	9,650,000	9,650,000	23,652,000
Recorded Investment with related allowance recorded	8,704,000	8,704,000	10,672,000
Partial Charge-Offs with no related allowance recorded	455,000	455,000	4,000
Partial Charge-Offs with related allowance recorded	1,002,000	1,002,000	560,000
Allowance for Loan Losses Allocated with related allowance recorded	2,474,000	2,474,000	2,394,000
Average Recorded Investment with no related allowance recorded	10,738,000	10,402,000	26,783,000
Average Recorded Investment with related allowance recorded	9,288,000	8,279,000	9,688,000
Impaired loans | Office
Loans individually evaluated for impairment by class of loans
Unpaid principal balance with no related allowance recorded	1,136,000	1,136,000	779,000
Unpaid principal balance with related allowance recorded	1,590,000	1,590,000	2,330,000
Recorded Investment with no related allowance recorded	1,136,000	1,136,000	779,000
Recorded Investment with related allowance recorded	1,583,000	1,583,000	2,047,000
Partial Charge-Offs with related allowance recorded	7,000	7,000	283,000
Allowance for Loan Losses Allocated with related allowance recorded	323,000	323,000	77,000
Average Recorded Investment with no related allowance recorded	1,365,000	982,000	5,755,000
Average Recorded Investment with related allowance recorded	1,642,000	2,054,000	4,586,000
Impaired loans | Other.
Loans individually evaluated for impairment by class of loans
Unpaid principal balance with no related allowance recorded	4,866,000	4,866,000	6,901,000
Unpaid principal balance with related allowance recorded	6,535,000	6,535,000	5,979,000
Recorded Investment with no related allowance recorded	4,866,000	4,866,000	6,901,000
Recorded Investment with related allowance recorded	6,392,000	6,392,000	5,816,000
Partial Charge-Offs with related allowance recorded	143,000	143,000	163,000
Allowance for Loan Losses Allocated with related allowance recorded	1,762,000	1,762,000	1,514,000
Average Recorded Investment with no related allowance recorded	5,605,000	6,288,000	16,303,000
Average Recorded Investment with related allowance recorded	6,574,000	6,691,000	10,489,000
Interest Income Recognized with related allowance recorded	4,000	12,000	2,000
Impaired loans | Residential real estate
Loans individually evaluated for impairment by class of loans
Unpaid principal balance with no related allowance recorded	8,460,000	8,460,000	7,157,000
Unpaid principal balance with related allowance recorded	3,224,000	3,224,000
Recorded Investment with no related allowance recorded	8,085,000	8,085,000	7,157,000
Recorded Investment with related allowance recorded	3,042,000	3,042,000
Partial Charge-Offs with no related allowance recorded	375,000	375,000
Partial Charge-Offs with related allowance recorded	182,000	182,000
Allowance for Loan Losses Allocated with related allowance recorded	401,000	401,000
Average Recorded Investment with no related allowance recorded	8,474,000	7,634,000	6,580,000
Average Recorded Investment with related allowance recorded	3,229,000	1,084,000
Impaired loans | Construction real estate
Loans individually evaluated for impairment by class of loans
Unpaid principal balance with no related allowance recorded	1,147,000	1,147,000
Unpaid principal balance with related allowance recorded	3,605,000	3,605,000	3,519,000
Recorded Investment with no related allowance recorded	1,147,000	1,147,000
Recorded Investment with related allowance recorded	1,225,000	1,225,000	1,145,000
Partial Charge-Offs with related allowance recorded	2,380,000	2,380,000	2,374,000
Allowance for Loan Losses Allocated with related allowance recorded	582,000	582,000	721,000
Average Recorded Investment with no related allowance recorded	1,150,000	771,000	56,846,000
Average Recorded Investment with related allowance recorded	1,332,000	4,242,000	20,259,000
Impaired loans | Home equity
Loans individually evaluated for impairment by class of loans
Unpaid principal balance with no related allowance recorded	10,280,000	10,280,000	11,297,000
Recorded Investment with no related allowance recorded	10,280,000	10,280,000	11,297,000
Average Recorded Investment with no related allowance recorded	10,338,000	11,130,000	7,309,000
Average Recorded Investment with related allowance recorded		1,826,000
Impaired loans | Consumer loans
Loans individually evaluated for impairment by class of loans
Unpaid principal balance with no related allowance recorded	248,000	248,000	241,000
Recorded Investment with no related allowance recorded	248,000	248,000	241,000
Average Recorded Investment with no related allowance recorded	248,000	243,000	122,000
Average Recorded Investment with related allowance recorded			355,000
Interest Income Recognized with related allowance recorded			$ 5,000

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Net income	$ 23,133	$ 19,697	$ 66,362	$ 19,275
Unrealized holding gains on investment securities, net of tax	2,118	5,000	1,981	10,226
Reclassification adjustments for gains included in net income, net of tax	(168)		(146)	(137)
Other comprehensive income, net of tax	1,950	5,000	1,835	10,089
Comprehensive income	$ 25,083	$ 24,697	$ 68,197	$ 29,364

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EARNINGS PER COMMON SHARE

9 Months Ended

Sep. 30, 2012

EARNINGS PER COMMON SHARE

EARNINGS PER COMMON SHARE

NOTE 2.               EARNINGS PER COMMON SHARE

Earnings per common share is computed using the two-class method.  Basic earnings per common share is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding during the applicable period, excluding outstanding participating securities.  Participating securities include non-vested restricted stock awards and restricted stock units, though no actual shares of common stock related to restricted stock units are issued until the settlement of such units, to the extent holders of these securities receive non-forfeitable dividends or dividend equivalents at the same rate as holders of the Company’s common stock.  Diluted earnings per common share is computed using the weighted-average number of shares determined for the basic earnings per common share computation plus the dilutive effect of stock compensation using the treasury stock method.

The following table presents a reconciliation of the number of shares used in the calculation of basic and diluted earnings per common share (amounts in thousands, except common share data).

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2012		2011			2012			2011
Distributed earnings allocated to common stock	$	547	$	546		$	1,643		$	1,634
Undistributed earnings allocated to common stock	22,585		19,149			64,717			17,621
Net earnings allocated to common stock	23,132		19,695			66,360			19,255
Less: preferred stock dividends and discount accretion	—		2,605			3,269			7,808
Net earnings allocated to common stock	23,132		17,090			63,091			11,447
Net earnings allocated to participating securities	1		2			2			20
Net earnings allocated to common stock and participating securities	$	23,133	$	17,092		$	63,093		$	11,467
Weighted average shares outstanding for basic earnings per common share	54,346,827		54,121,156			54,226,241			54,029,023
Dilutive effect of equity awards	209,690		202,164			246,376			266,599
Weighted average shares outstanding for diluted earnings per common share	54,556,517		54,323,320			54,472,617			54,295,622
Basic earnings allocated to common stock per common share	$	0.43	$	0.36		$	1.22		$	0.36
Impact of preferred stock dividends on basic earnings per common share	—		(0.04		)	(0.06		)	(0.15		)
Basic earnings per common share	0.43		0.32			1.16			0.21
Diluted earnings allocated to common stock per common share	0.42		0.36			1.22			0.35
Impact of preferred stock dividends on diluted earnings per common share	—		(0.05		)	(0.06		)	(0.14		)
Diluted earnings per common share	0.42		0.31			1.16			0.21

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Details 4) (Nonrecurring basis, USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Total Fair Value
Financial Assets:
Impaired loans	$ 66,435	$ 96,089
Foreclosed assets	75,147	138,971
Non-financial long-lived assets		2,901
Significant Unobservable Inputs (Level 3)
Financial Assets:
Impaired loans	66,435	96,089
Foreclosed assets	75,147	138,971
Non-financial long-lived assets		$ 2,901

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GOODWILL AND INTANGIBLES (Tables)

9 Months Ended

Sep. 30, 2012

GOODWILL AND INTANGIBLES

Changes in the carrying amount of core deposit and client relationship intangibles

	September 30,
	2012
Balance at beginning of period	$	29,494
Amortization expense	(3,759		)
Balance at end of period	$	25,735
Gross carrying amount	$	71,560
Accumulated amortization	(45,825		)
Net book value	$	25,735

Estimated future amortization expense of other intangible assets

	Amount
Year ending December 31,
2012	$	1,251
2013	4,530
2014	3,514
2015	3,090
2016	2,747
Thereafter	10,603
	$	25,735

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INVESTMENT SECURITIES (Details 3) (USD $)	3 Months Ended	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011
Net (losses) gains recognized on investment securities available for sale
Realized gains	$ 282,000	$ 472,000	$ 232,000
Realized losses	(1,000)	(4,000)	(3,000)
Impairment charges		(224,000)
Net (losses) gains	281,000	244,000	229,000
Amortized Cost, Available for sale
Due in one year or less	26,437,000	26,437,000
Due after one year through five years	226,619,000	226,619,000
Due after five years through ten years	106,351,000	106,351,000
Due after ten years	316,932,000	316,932,000
Amortized Cost	1,747,648,000	1,747,648,000		1,864,995,000
Fair Value, Available for sale
Due in one year or less	26,857,000	26,857,000
Due after one year through five years	246,211,000	246,211,000
Due after five years through ten years	118,585,000	118,585,000
Due after ten years	336,126,000	336,126,000
Fair Value	1,814,972,000	1,814,972,000		1,929,297,000
Amortized Cost, Held to maturity
Due after one year through five years	1,301,000	1,301,000
Due after five years through ten years	10,573,000	10,573,000
Due after ten years	226,337,000	226,337,000
Amortized Cost	495,851,000	495,851,000		499,283,000
Fair value, Held to maturity
Due after one year through five years	1,400,000	1,400,000
Due after five years through ten years	11,331,000	11,331,000
Due after ten years	247,219,000	247,219,000
Fair Value	536,989,000	536,989,000		511,022,000
Total Available for Sale and Held to Maturity Investment Securities
Amortized Cost	2,243,499,000	2,243,499,000		2,364,278,000
Fair Value	2,351,961,000	2,351,961,000		2,440,319,000
Carrying amounts of investment securities available for sale pledged as collateral	1,100,000,000	1,100,000,000		924,900,000
Equity securities
Amortized Cost, Available for sale
Amortized Cost	10,644,000	10,644,000		10,457,000
Fair Value, Available for sale
Fair Value	11,231,000	11,231,000		10,846,000
Residential and commercial mortgage-backed securities
Amortized Cost, Available for sale
Amortized Cost	1,060,665,000	1,060,665,000
Fair Value, Available for sale
Fair Value	1,075,962,000	1,075,962,000
Residential mortgage-backed securities
Amortized Cost, Available for sale
Amortized Cost	1,009,509,000	1,009,509,000		1,256,696,000
Fair Value, Available for sale
Fair Value	1,021,983,000	1,021,983,000		1,281,806,000
Amortized Cost, Held to maturity
Amortized Cost	257,640,000	257,640,000		259,100,000
Fair value, Held to maturity
Fair Value	$ 277,039,000	$ 277,039,000		$ 263,358,000

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DERIVATIVE FINANCIAL INSTRUMENTS

9 Months Ended

Sep. 30, 2012

DERIVATIVE FINANCIAL INSTRUMENTS

DERIVATIVE FINANCIAL INSTRUMENTS

NOTE 12.             DERIVATIVE FINANCIAL INSTRUMENTS

The Company offers various derivatives, including interest rate swaps and foreign currency forward contracts, to our customers which can mitigate our exposure to market risk through the execution of off-setting positions with inter-bank dealer counterparties.  This also permits the Company to offer customized risk management solutions to our customers.  These customer accommodations and any offsetting financial contracts are treated as stand-alone derivative instruments which do not qualify for hedge accounting.

Interest rate swap and foreign currency forward contracts involve the risk of dealing with counterparties and their ability to meet contractual terms.  The net amount payable or receivable under interest rate swaps is accrued as an adjustment to interest income.  The net amount payable for September 30, 2012 was approximately $22 thousand, and the net amount payable for December 31, 2011 was approximately $23 thousand.  The Company’s credit exposure on interest rate swaps is limited to the Company’s net favorable value and interest payments of all swaps to each counterparty.  In such cases, collateral is generally required from the counterparties involved if the net value of the swaps exceeds a nominal amount.  At September 30, 2012, the Company’s credit exposure relating to interest rate swaps was approximately $28.9 million, which is secured by the underlying collateral on customer loans.

The Company also enters into mortgage banking derivatives which are designated as stand-alone derivatives.  These derivatives include interest rate lock commitments provided to customers to fund certain mortgage loans to be sold into the secondary market and forward commitments for the future delivery of such loans. It is the Company’s practice to enter into forward commitments for the future delivery of residential mortgage loans when interest rate lock commitments are entered into in order to economically hedge the effect of future changes in interest rates on its commitments to fund the loans as well as on its portfolio of mortgage loans held-for-sale.

The Company had fair value commercial loan interest rate swaps, to hedge its interest rate risk, with an aggregate notional amount of $6.9 million at September 30, 2012.  For fair value hedges, the changes in fair values of both the hedging derivative and the hedged item were recorded in current earnings as other income and other expense.

The Company’s derivative financial instruments are summarized below as of September 30, 2012 and December 31, 2011 (in thousands):

	Asset Derivatives								Liability Derivatives
	September 30, 2012				December 31, 2011				September 30, 2012					December 31, 2011
	Notional		Estimated		Notional		Estimated		Notional		Estimated			Notional		Estimated
	Amount		Fair Value		Amount		Fair Value		Amount		Fair Value			Amount		Fair Value
Derivative instruments designated as hedges of fair value:
Interest rate swap contracts (1)	$	—	$	—	$	—	$	—	$	6,916	$	(137	)	$	7,204	$	(315	)
Stand-alone derivative instruments (2)
Interest rate swap contracts	382,865		28,819		343,132		25,931		383,948		(28,922		)	344,294		(26,053		)
Interest rate options contracts	75,780		159		4,287		32		75,780		(159		)	4,287		(32		)
Foreign exchange contracts	16,714		998		8,567		240		16,407		(920		)	8,498		(206		)
Mortgage banking derivatives	7,720		210		2,626		48		6,007		(101		)	2,000		(18		)
Total stand-alone derivative instruments	483,079		30,186		358,612		26,251		482,142		(30,102		)	359,079		(26,309		)
Total	$	483,079	$	30,186	$	358,612	$	26,251	$	489,058	$	(30,239	)	$	366,283	$	(26,624	)

(1) Hedged fixed-rate commercial real estate loans

(2) These portfolio swaps are not designated as hedging instruments under ASC Topic 815.

Amounts included in the other income in the consolidated statements of operations related to derivative financial instruments were as follows (dollars in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2012		2011		2012			2011
Derivative instruments designated as hedges of fair value:
Interest rate swap contracts	$	1	$	1	$	(36	)	$	(74	)
Stand-alone derivative instruments:
Interest rate swap contracts	6		18		19			108
Interest rate options contracts	—		—		—			—
Foreign exchange contracts	14		12		44			(2		)
Mortgage banking derivatives	9		121		79			121
Total stand-alone derivative instruments	29		151		142			227
Total	$	30	$	152	$	106		$	153

Methods and assumptions used by the Company in estimating the fair value of its interest rate swaps are discussed in Note 14 below.