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 (losses) 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, FDIC insurance premiums, 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 net income available to common shareholders of $1.7 million for the second quarter of 2009, compared to net income available to common shareholders of $22.0 million for the second quarter of 2008. The decrease in earnings was primarily due to a $14.9 million increase in provision for loan losses and a $6.5 million increase in FDIC insurance premiums. Our 2009 second quarter results generated an annualized return on average assets of 0.20% and an annualized return on average common equity of 0.81%, compared to 1.08% and 10.11%, respectively, for the same period in 2008. Fully diluted earnings per common share for the second quarter of 2009 were $0.05 compared to $0.63 per common share in the 2008 second 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 quantitative factors which could affect probable credit losses. Because current economic conditions can change and future events are inherently difficult to

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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 June 30, 2009, the aggregate residual value of the equipment leased under our direct finance, leveraged, and operating leases totaled $48.9 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 June 30, 2009, the Company had $8.2 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 June 30, 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.

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

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

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

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Results of Operations

Second Quarter Results

The Company had net income available to common shareholders of $1.7 million for the second quarter of 2009, compared to net income available to common shareholders of $22.0 million for the second quarter of 2008. The results for the second quarter of 2009 generated an annualized return on average assets of 0.20% and an annualized return on average common equity of 0.81%, compared to 1.08% and 10.11%, respectively, for the same period in 2008.

Net interest income was $59.4 million for the three months ended June 30, 2009, an increase of $3.3 million, or 5.9% from $56.1 million for the comparable period in 2008. See "Net Interest Margin" section below for further analysis.

Provision for loan losses was $27.1 million in the second quarter of 2009 as compared to $12.2 million in second quarter of 2008. Net charge-offs were $25.0 million in the quarter ended June 30, 2009 compared to $8.4 million in the quarter ended June 30, 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 second 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 2009. Also factoring into our provision was our loan growth over the past twelve months.

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Additionally, the underlying value of collateral on impaired loans deteriorated during the fourth quarter of 2008 and the first six months of 2009. Overall, the business environment has been adverse for many households and businesses in the United States, including those in 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
                                          June 30,  June 30,    Increase/  Percentage
                                            2009      2008      (Decrease)   Change
Other income:
      Loan service fees                   $   1,782 $   2,475    $   (693)      (28%)
      Deposit service fees                    6,978     6,889           89         1%
      Lease financing, net                    4,473     3,969          504        13%
      Brokerage fees                          1,252     1,187           65         5%
      Trust and asset management fees         3,262     3,589        (327)       (9%)
      Net gain on sale of investment
      securities                              4,093         1        4,092        N/M
      Increase in cash surrender value of
      life insurance                            670     1,128        (458)      (41%)
      Net gain (loss) on sale of other
      assets                                   (38)        50         (88)     (176%)
      Merchant card processing                4,152     4,644        (492)      (11%)
      Other operating income                  2,458     1,635          823        50%
Total other income                        $  29,082 $  25,567    $   3,515        14%

Other income increased for the second quarter of 2009 compared to the second quarter of 2008, primarily due to an increase in gain on sale of investment securities. Loan service fees decreased, primarily due to a decrease in letter of credit and prepayment fees. Net lease financing increased, primarily due to higher residual realizations during the second quarter of 2009 compared to 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 second quarter of 2008 to the second quarter of 2009. Merchant card processing income decreased primarily due to a decrease in transactions processed during the quarter ended June 30, 2009 compared to the same period in 2008. The majority of the decrease in merchant card processing income was offset by a reduction in merchant card processing expense. Other operating income increased primarily due to an increase in market value of assets held in trust for deferred compensation during the second quarter of 2009 compared to the second quarter of 2008.

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Other Expense (in thousands):

                                           Three Months Ended
                                           June 30,   June 30,    Increase / Percentage
                                             2009       2008      (Decrease)   Change

Other expense:
  Salaries and employee benefits           $  29,322  $  29,163     $    159         1%
  Occupancy and equipment expense              7,170      6,967          203         3%
  Computer services expense                    2,013      1,843          170         9%
  Advertising and marketing expense              892      1,448        (556)      (38%)
  Professional and legal expense               1,120        803          317        39%
  Brokerage fee expense                          575        470          105        22%
  Telecommunication expense                      747        774         (27)       (3%)
  Other intangibles amortization expense         997        913           84         9%
  Merchant card processing                     3,803      4,256        (453)      (11%)
  FDIC insurance premiums                      6,789        235        6,554     2,789%
  Other operating expenses                     5,038      5,254        (216)       (4%)
Total other expenses                       $  58,466  $  52,126    $   6,340        12%

Other expense increased primarily due to an increase in FDIC insurance premium expense, as general insurance assessment rates increased and the FDIC imposed a special premium on all insured depository institutions based on assets as of June 30, 2009. The FDIC rule pursuant to which this special premium was assessed provides that up to two additional special premiums may be imposed on all depository institutions based on their assets as of September 30, 2009 and December 31, 2009. Merchant card processing expense decreased primarily due to a decrease in transactions processed during the quarter ended June 30, 2009 compared to the same period in 2008.

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.

The Company had an income tax benefit of $1.4 million for the three months ended June 30, 2009 compared to an income tax benefit of $4.7 million for the same period in 2008. The decrease in income tax benefit was primarily due to a $7.3 million adjustment in the second quarter of 2008 due to the removal of valuation allowances on state net operating loss carryforwards and an adjustment of state tax contingency reserves. During the second quarter of 2008, the Company determined that based on legislation passed by the state of Illinois, that it was more likely than not that deferred tax assets would be realized in future years and the valuation reserve was removed.

Year-To-Date Results

The Company had a net loss available to common shareholders of $28.9 million for the first six months of 2009, compared to net income available to common shareholders of $27.8 million for the first six months of 2008. The results for the first six months of 2009 generated an annualized return on average assets of (0.55%) and an annualized return on average common equity of (6.70%), compared to 0.70% and 6.38%, respectively, for the same period in 2008.

Net interest income was $115.4 million for the six months ended June 30, 2009, an increase of $5.9 million, or 5.4% from $109.5 million for the comparable period in 2008. See "Net Interest Margin" section below for further analysis.

Provision for loan losses was $116.8 million in the first six months of 2009 as compared to $34.7 million in the first six months of 2008. Net charge-offs were $79.4 million in the six months ended June 30, 2009 compared to $17.3 million in the six months ended June 30, 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

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higher risk ratings during the six months ended June 30, 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 six months ended June 30, 2009. Also factoring into our provision was our loan growth over the past six months.

Additionally, the underlying value of collateral on impaired loans deteriorated during the fourth quarter of 2008 and the first six months of 2009. Overall, the business environment has been adverse for many households and businesses in the United States, including those in 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):

                                           Six Months Ended
                                          June 30,  June 30,    Increase/  Percentage
                                            2009      2008      (Decrease)   Change
Other income:
      Loan service fees                   $   3,625 $   4,945   $  (1,320)      (27%)
      Deposit service fees                   13,377    13,419         (42)       (0%)
      Lease financing, net                    8,792     7,836          956        12%
      Brokerage fees                          2,330     2,172          158         7%
      Trust and asset management fees         6,077     5,809          268         5%
      Net gain on sale of investment
      securities                             13,787     1,106       12,681     1,147%
      Increase in cash surrender value of
      life insurance                          1,126     2,734      (1,608)      (59%)
      Net loss on sale of other assets         (37)     (256)          219      (86%)
      Merchant card processing                8,431     9,174        (743)       (8%)
      Other operating income                  4,258     3,165        1,093        35%
Total other income                        $  61,766 $  50,104    $  11,662        23%

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

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Other Expense (in thousands):

                                               Six Months Ended
                                              June 30,   June 30,    Increase/  Percentage
                                                2009       2008      (Decrease)   Change
Other expense:
      Salaries and employee benefits         $   56,338 $   55,973     $    365         1%
      Occupancy and equipment expense            14,870     14,492          378         3%
      Computer services expense                   4,300      3,580          720        20%
      Advertising and marketing expense           2,206      2,738        (532)      (19%)
      Professional and legal expense              2,089      1,109          980        88%
      Brokerage fee expense                         968        889           79         9%
      Telecommunication expense                   1,498      1,536         (38)       (2%)
      Other intangibles amortization expense      1,875      1,728          147         9%
      Merchant card processing                    7,693      8,361        (668)       (8%)
      FDIC insurance premiums                     9,457        397        9,060     2,282%
      Other operating expenses                   10,232      9,547          685         7%
Total other expense                          $  111,526 $  100,350    $  11,176        11%

Other expense increased for the six months ended June 30, 2009 compared to the six months ended June 30, 2008, primarily due to an increase in FDIC insurance premiums expense. This was due to our FDIC credits being fully utilized during the fourth quarter of 2008 combined with the FDIC increasing its assessment rate and imposing a special premium during the six months ended June 30, 2009 as discussed above. Professional and legal expense increased primarily due to loan collection costs during the six months ended June 30, 2009.

The Company had an income tax benefit of $27.4 million for the first six months ended June 30, 2009 compared to income tax benefit of $3.3 million for the same period in 2008. During the first six months ended June 30, 2009, our taxable income significantly decreased compared to the same period in 2008, primarily due to our results of operations during the six months ended June 30, 2009. During the six months ended June 30, 2008, the Company determined that based on legislation passed by the state of Illinois relating to the Company's tax strategy, that it was more likely than not that deferred tax assets would be realized in future years and the valuation reserve was removed.

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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
. . .