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 "we," "our" and "us" refer to MB Financial, Inc. and its wholly owned subsidiaries, unless we indicate otherwise.

Overview

The profitability of our operations depends primarily on our net interest income after provision for loan losses, which is the difference between interest earned on interest earning assets and interest paid on interest bearing liabilities less provision for loan losses. The provision for loan 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. Additionally, our net income is affected by other income and other expenses. The provision for loan losses reflects the amount that we believe is adequate to cover potential credit losses in our loan portfolio. Non-interest income or other income consists of loan service fees, deposit service fees, net lease financing income, brokerage fees, asset management and trust fees, net gains on the sale of investment securities available for sale, increase in cash surrender value of life insurance, net gains on sale of other assets, merchant card processing fees and other operating income. Other expenses include salaries and employee benefits, occupancy and equipment expense, computer services expense, advertising and marketing expense, professional and legal expense, brokerage fee expense, telecommunication expense, other intangibles amortization expense, merchant card processing expense, charitable contributions, FDIC insurance expense, and other operating expenses.

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 growth in the number of loan and deposit accounts through both acquisitions and core banking business growth. Growth in operations affects other expenses primarily as a result of additional employees, branch facilities and promotional marketing expense. Growth 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.

The Company had a net loss available to common shareholders of $30.6 million for the first quarter of 2009, compared to net income available to common shareholders of $5.8 million for the first quarter of 2008. The decrease in earnings was primarily due to a $67.2 million increase in provision for loan losses. Our 2009 first quarter results generated an annualized return on average assets of (1.30%) and an annualized return on average common equity of (14.01%), compared to 0.30% and 2.66%, respectively, for the same period in 2008. Fully diluted earnings per common share for the first quarter of 2009 were ($0.87) compared to $0.17 per common share in the 2008 first quarter.

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 is 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

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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 March 31, 2009, the aggregate residual value of the equipment leased under our direct finance, leveraged, and operating leases totaled $47.1 million. See Note 1 and Note 7 of the notes to our December 31, 2008 audited consolidated financial statements for additional information.

Income Tax Accounting. In June 2006, the FASB issued FASB interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109" (FIN 48). FIN 48 clarifies the accounting for income taxes by prescribing the minimum recognition threshold that a tax position must meet to be recognized in the financial statements. FIN 48 also provides guidance on measurement, recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As of March 31, 2009, the Company had $8.1 million 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 FIN 48 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 March 31, 2009, the Company had $1.1 million 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 income.

Fair Value of Assets and Liabilities. On January 1, 2008, the Company adopted SFAS 157 which defines fair value as the price that would be received to sell the financial asset or paid to transfer the 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.

At March 31, 2009, $1.1 billion of investment securities, or 12.4 percent of total assets, were recorded at fair value on a recurring basis. All but one of these financial instruments used valuation methodologies involving market-based or market-derived information, collectively Level 1 and 2 measurements, to measure fair value. One investment security with a fair value of $1.6 million at March 31, 2009, used significant unobservable inputs that are supported by little or no market activity (Level 3) to measure fair value. At March 31, 2009, $27.9 million, or less than one percent of total liabilities, consisted of financial instruments recorded at fair value on a recurring basis.

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At March 31, 2009, $157.6 million of assets, or 1.7 percent of total assets, were recorded at fair value on a nonrecurring basis. These assets were measured using Level 2 and Level 3 measurements. The assets valued using Level 3 measurements consisted of impaired loans, other real estate and repossessed vehicles owned, and other intangible assets. At March 31, 2009, no liabilities were measured at fair value on a nonrecurring basis.

See Note 14 to the consolidated financial statements for a complete discussion on the Company's use of fair valuation of assets and liabilities and the related measurement techniques.

Results of Operations

First Quarter Results

The Company had a net loss available to common shareholders of $30.6 million for the first quarter of 2009, compared to net income available to common shareholders of $5.8 million for the first quarter of 2008. The results for the first quarter of 2009 generated an annualized return on average assets of (1.30%) and an annualized return on average common equity of (14.01%), compared to 0.30% and 2.66%, respectively, for the same period in 2008.

Net interest income was $56.0 million for the three months ended March 31, 2009, an increase of $2.6 million, or 4.8% from $53.5 million for the comparable period in 2008. See "Net Interest Margin" section below for further analysis.

Provision for loan losses was $89.7 million in the first quarter of 2009 as compared to $22.5 million in first quarter of 2008. Net charge-offs were $54.4 million in the quarter ended March 31, 2009 compared to $8.9 million in the quarter ended March 31, 2008. The increase in our provision for loan losses was primarily due to the increases in non-performing loans and net charge-offs, and the migration of performing loans from lower risk ratings to higher risk ratings during the first quarter of 2009. The migration of performing loans to higher risk ratings was primarily due to worsening macroeconomic factors, declines in the values of collateral and deteriorating business environment during the first quarter of 2009. Also factoring into our provision was our loan growth over the past twelve months.

Additionally, the underlying value of collateral on impaired loans deteriorated during the fourth quarter of 2008 and the first quarter of 2009. Overall, the business environment has been adverse for many households and businesses in the United States, including the Chicago metropolitan area. The business environment began to significantly deteriorate beginning in the third quarter of 2008 as a result of significant job losses and housing foreclosures. Single family homes, condominiums, retail property, manufacturing property, and vacant land all experienced a significant decrease in demand due to the worsening economic environment during the past several quarters. As a result, significant declines in the values of single family homes and other properties occurred and required higher reserves on impaired loans, potential problem loans and increased reserves based on the macroeconomic environment.

See "Asset Quality" below for further analysis of the allowance for loan losses.

Other Income (in thousands):
                                           Three Months Ended
                                          March 31,  March 31,    Increase/  Percentage
                                             2009       2008      (Decrease)   Change
Other income:
      Loan service fees                   $    1,843 $    2,470   $    (627)      (25%)
      Deposit service fees                     6,399      6,530        (131)       (2%)
      Lease financing, net                     4,319      3,867          452        12%
      Brokerage fees                           1,078        985           93         9%
      Trust and asset management fees          2,815      2,220          595        27%
      Net gain on sale of investment
      securities                               9,694      1,105        8,589       777%
      Increase in cash surrender value of
      life insurance                             456      1,606      (1,150)      (72%)
      Net gain (loss) on sale of other
      assets                                       1      (306)          307     (100%)
      Merchant card processing                 4,279      4,530        (251)       (6%)
      Other operating income                   1,800      1,530          270        18%
Total other income                        $   32,684 $   24,537   $    8,147        33%

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Other income increased for the first quarter of 2009 compared to the first quarter of 2008, primarily due to an increase in gain on sale of investment securities. Given the current low interest rate environment, we realized a portion of our unrealized securities gains and intend to use the proceeds over the next quarter to reduce wholesale funding and better position our balance sheet for a rising rate environment. Loan service fees decreased, primarily due to a decrease in letter of credit and prepayment fees. Net lease financing increased, primarily due to higher residual realizations during the first quarter of 2009 compared to the first quarter of 2008. Trust and asset management fees increased primarily due to our Cedar Hill acquisition during the second quarter of 2008. The decrease in cash surrender value of life insurance was primarily due to a decrease in overall interest rates from the first quarter of 2008 to the first quarter of 2009, and a $436 thousand death benefit on a bank owned life insurance policy that we recognized during the first quarter of 2008.

Other Expense (in thousands):
                                                        Three Months Ended
                                                       March 31,   March 31,    Increase/  Percentage
                                                         2009        2008       (Decrease)   Change
Other expense:
      Salaries and employee benefits                  $    27,016 $    26,810   $      206         1%
      Occupancy and equipment expense                       7,700       7,525          175         2%
      Computer services expense                             2,287       1,737          550        32%
      Advertising and marketing expense                     1,314       1,290           24         2%
      Professional and legal expense                          969         306          663       217%
      Brokerage fee expense                                   393         419         (26)       (6%)
      Telecommunication expense                               751         762         (11)       (1%)
      Other intangibles amortization expense                  878         815           63         8%
      Merchant card processing                              3,890       4,105        (215)       (5%)
      FDIC insurance premiums                               2,668         162        2,506     1,547%
      Other operating expenses                              5,194       4,293          901        21%
Total other expense                                   $    53,060 $    48,224   $    4,836        10%

Other expense increased primarily due to an increase in FDIC insurance premium expense. This was a result of our FDIC credits being fully utilized during the fourth quarter of 2008 combined with the FDIC generally increasing its assessment rates for all institutions for the first quarter of 2009. Additionally, the acquisition of Heritage Community Bank increased operating expenses during the first quarter of 2009 as follows: $275 thousand related to salaries and benefits, $225 thousand related to nonrecurring computer conversion expense and $100 thousand related to occupancy expense.

In February 2009, the FDIC issued final rules to change the risk-based assessment system and set assessment rates for Risk Category I institutions to begin in the second quarter of 2009. Effective April 1, 2009, for Risk Category I institutions with assets of less than $10 billion, the methodology for establishing assessment rates for large institutions will determine the initial base assessment rate using a combination of weighted-average CAMELS component ratings and certain financial ratios. The new initial base assessment rates for Risk Category I institutions will range from 12 to 16 basis points, on an annualized basis, and from 7 to 24 basis points after the effect of potential base-rate adjustments, in each case depending upon various factors. Additionally, the FDIC issued an interim rule that may result in a 20 basis point emergency special assessment on June 30, 2009 with the potential for additional emergency special assessments of up to 10 basis points at the end of any calendar quarter thereafter. The Company cannot provide any assurance as to the ultimate amount or timing of any such emergency special assessments, should such special assessments occur, as such special assessments are dependent upon a variety of factors which are beyond the Company's control.

The Company had an income tax benefit of $25.9 million for the three months ended March 31, 2009 compared to income tax expense of $1.4 million for the same period in 2008. During the three months ended March 31, 2009, our taxable income significantly decreased compared to the same period in 2008, primarily due to our results of operations during the three months ended March 31, 2009.

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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 March 31,
                                                   2009                                2008
                                        Average               Yield /      Average                 Yield /
                                        Balance     Interest   Rate        Balance      Interest    Rate
Interest Earning Assets:
  Loans, excluding covered assets
  (1) (2) (3)                         $  6,195,247  $  80,003   5.24%    $  5,680,086  $    93,785   6.64%
  Loans, excluding covered assets,
  exempt from federal income taxes
  (4)                                       80,464      1,327    6.60           7,560          141    7.38
  Covered assets                            54,693        628    4.66               -            -       -
  Taxable investment securities            944,603     10,316    4.37         819,845        9,971    4.86
  Investment securities exempt from
  federal income taxes (4)                 412,251      5,962    5.78         401,207        5,774    5.69
  Federal funds sold                             -          -       -          15,220           95    2.47
  Other interest bearing deposits          195,104        130    0.27          15,387          106    2.77
     Total interest earning assets       7,882,362  $  98,366    5.06       6,939,305   $  109,872    6.37
  Non-interest earning assets              909,913                            925,512
     Total assets                     $  8,792,275                       $  7,864,817

Interest Bearing Liabilities:
  Deposits:
     NOW and money market deposit
     accounts                         $  1,519,499  $   3,948   1.05%    $  1,234,965  $     6,603   2.15%
     Savings deposits                      393,667        314    0.32         388,956          443    0.46
     Time deposits                       3,681,034     29,317    3.23       3,018,204       33,803    4.50
  Short-term borrowings                    532,875      1,546    1.18         939,746        7,867    3.37
  Long-term borrowings and junior
  subordinated notes                       536,189      4,662    3.48         461,053        5,623    4.82
     Total interest bearing
     liabilities                         6,663,264  $  39,787    2.42       6,042,924   $   54,339    3.62
  Non-interest bearing deposits            960,167                            839,386
  Other non-interest bearing
  liabilities                               91,222                            103,451
  Stockholders' equity                   1,077,622                            879,056
     Total liabilities and
     stockholders' equity             $  8,792,275                       $  7,864,817
     Net interest income/interest
     rate spread (5)                                $  58,579   2.64%                   $   55,533   2.75%
     Taxable equivalent adjustment                      2,551                                2,070
     net interest income, as
     reported                                       $  56,028                           $   53,463
     Net interest margin (6)                                    2.88%                                3.10%
     Tax equivalent effect                                      0.13%                                0.12%
     Net interest margin on a fully
     tax equivalent basis (6)                                   3.01%                                3.22%

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

(2) Interest income includes amortization of deferred loan origination fees of $1.3 million and $2.0 million for the three months ended March 31, 2009 and 2008, 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 was $56.0 million for the three months ended March 31, 2009, an increase of $2.6 million, or 4.8% from $53.5 million for the comparable period in 2008. The growth in net interest income reflects a $943.1 million, or 13.6% increase in average interest earning assets, and a $620.3 million, or 10.3%, increase in average interest bearing liabilities. This was partially offset by approximately 21 basis points of margin compression. The increase in average interest earning assets and the increase in average interest bearing liabilities was primarily due to organic growth. The net interest margin, expressed on a fully tax equivalent basis, was 3.01% for the first quarter of 2009 and 3.22% for the first quarter of 2008. Our non-performing loans negatively impacted the net interest margin during the first quarter of 2009 and the first quarter of 2008 by approximately 16 basis points, and 5 basis points, respectively. Additionally, our liquidity position, due to our higher cash balance during the first quarter of 2009 compared to the first quarter of 2008, negatively impacted the net interest margin during the first quarter of 2009 by approximately 7 basis points.

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Volume and Rate Analysis of Net Interest Income

The following table presents the extent to which changes in volume and interest rates of interest earning assets and interest bearing liabilities have affected our interest income and interest expense during the periods indicated. Information is provided in each category with respect to (i) changes attributable to changes in volume (changes in volume multiplied by prior period rate), (ii) changes attributable to changes in rates (changes in rates multiplied by prior period volume) and (iii) change attributable to a combination of changes in rate and volume (change in rates multiplied by the changes in volume) (in thousands). Changes attributable to the combined impact of volume and rate have been allocated proportionately to the changes due to volume and the changes due to rate.

                                                   Three Months Ended
                                        March 31, 2009 Compared to March 31, 2008
                                          Change         Change
                                          Due to         Due to          Total
                                          Volume          Rate          Change
  Interest Earning Assets:
    Loans, excluding covered assets       $    7,493    $   (21,275)  $   (13,782)
    Loans, excluding covered assets,
    exempt from federal income taxes
    (1)                                        1,203            (17)         1,186
    Covered assets                               628               -           628
    Taxable investments securities             1,366         (1,021)           345
. . .