MB Financial in Chicago saw its earnings dip thanks mainly to costs associated with its acquisition of Taylor Capital Group.

The $640 million merger between the two Windy City banks was originally set to close in the second quarter, but regulatory issues related to a deposit relationship at Taylor's Cole Taylor Bank delayed the deal. It closed Aug. 18.

The $14.5 billion-asset company reported net income of $6.9 million, a 71.7% year-over-year decrease, with the decline largely driven by $27 million in merger-related expenses.

Earnings per share adjusted for generally accepted accounting principles were $0.08, ten cents below an average of estimates by analysts polled by Bloomberg. Non-GAAP earnings were $0.55, above the $0.44 averaged estimate.

Despite the decline in earnings, the company saw substantial improvements in its revenue streams.

Net interest income increased by 38.8% from last year, to $95.6 million. That number also represents a 40.5% increase since the previous quarter, before completion of the merger. The net interest margin increased by 12 basis points, to 3.78% from a year earlier.

Year-over-year noninterest income increased by 61.8%, to $61 million, post-merger, though on a linked quarter basis noninterest income rose 53.1%. Higher mortgage banking revenues led the improvement in fee income. Such revenues totaled $16.8 million, compared to $177,000 a year earlier. MB has historically not been a major mortgage lender, but it was a significant source of revenue for Taylor. Initially, MB gave Taylor the option to sell the mortgage unit prior to the closing of the acquisition, but a deal to sell the unit never materialized.

Noninterest expenses were $104.5 million, up 35% after the merger.

Loans, excluding those covered by loss-sharing agreements with the Federal Deposit Insurance Corp., were $8.7 billion at the end of the quarter, compared to $5.4 billion in the second quarter. Legacy loans at MB were essentially flat from the previous quarter and were up 2.52% from a year earlier.

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