SOURCE: MAF Bancorp, Inc.

January 29, 2007 07:00 ET

MAF Bancorp Reports Fourth Quarter Earnings of $.27 Per Diluted Share

Exclusive of Balance Sheet Restructuring and Certain Tax Charges, Diluted EPS Totals $.75 per Share for the Fourth Quarter and $2.99 for 2006

CLARENDON HILLS, IL -- (MARKET WIRE) -- January 29, 2007 -- MAF Bancorp, Inc. (NASDAQ: MAFB) reported net income for the quarter ended December 31, 2006 of $9.1 million, or $.27 per diluted share, compared to net income of $27.1 million, or $.83 per diluted share in last year's fourth quarter. Net income for the current quarter was reduced by $12.1 million, or $.36 per diluted share, due to the previously announced balance sheet restructuring. In addition, the current period's results were reduced by certain tax charges of $4.0 million, or $.12 per diluted share, primarily relating to reserves established in connection with uncertainties arising from a recent tax authority audit. Excluding these balance sheet restructuring charges and tax charges, 2006 fourth quarter net income would have been $25.2 million, or $.75 per diluted share.

Net income for the year ended December 31, 2006 was $84.6 million or $2.51 per diluted share compared to $103.4 million or $3.13 per diluted share for 2005. Excluding the balance sheet restructuring and certain tax charges, 2006 net income would have been $100.7 million, or $2.99 per diluted share.

Allen Koranda, Chairman of the Board and Chief Executive Officer, commented, "The restructuring better positions our balance sheet during this difficult interest rate environment. It will improve our net interest income and net interest margin, without increasing interest rate risk. Despite these positive effects, we expect the inverted yield curve and housing market conditions will challenge financial results in 2007. Our focus is on continuing to grow our higher-yielding asset categories, particularly through our business banking operation where we are encouraged with our recent results. Our conservative approach of developing this business through organic growth has been successful over the past few years, with solid growth rates in both loan and deposit balances and excellent credit quality experience."

Balance Sheet Restructuring

The balance sheet restructuring plan, which we announced on December 27, 2006, involved selling lower-yielding mortgage loans ($220 million) and investments ($531 million) and repaying higher cost borrowings ($502 million), with the balance of the proceeds invested in shorter-term investment securities to provide liquidity. These funds will be available for reinvestment in higher-yielding assets as the Company continues its strategy of increasing the concentration of business and home equity loans in its portfolio.

We recorded restructuring charges in the fourth quarter of $19.9 million, or $12.1 million on an after-tax basis, equal to $.36 per diluted share. The pre-tax charge included a $12.9 million other-than-temporary impairment on securities, a $4.2 million lower of cost or market adjustment on loans held for sale and $2.8 million relating to prepayment of borrowings. Total restructuring charges were less than originally estimated primarily due to lower prepayment charges recorded in connection with the repayment of borrowings. The Company currently expects that the balance sheet restructuring will contribute $9.8 million, or $.18 per diluted share, to net interest income in 2007.

While the charges relating to the restructuring have been fully reflected in the fourth quarter income statement, the resulting shrinkage in the Company's balance sheet from the restructuring was not yet reflected at December 31, 2006. The December repayment of borrowings was primarily funded from short-term Federal Home Loan Bank borrowings, which were repaid in early January with proceeds from the sale of investment and mortgage-backed securities that were part of the restructuring.

For a reconciliation of 2006 actual results to adjusted results discussed in this press release that exclude the balance sheet restructuring and certain tax charges, see "Reconciliation of GAAP to Non-GAAP Financial Measures" included later herein.

               Net Interest Income and Net Interest Margin
                               Three Months Ended          Year Ended
                                  December 31,            December 31,
                            -----------  ---------  -----------  ---------
                                2006        2005        2006        2005
                            -----------  ---------  -----------  ---------
Net interest margin                2.35%      2.69         2.52%      2.88
Interest rate spread               2.09       2.44         2.24       2.65
Net interest income (000's) $    60,136     64,018  $   259,629    264,759

Average assets:
Yield on interest-earning
 assets                            5.89%      5.38         5.77%      5.21
  Yield on loans receivable        6.25       5.69         6.10       5.44
  Yield on mortgage-backed
   securities                      4.58       4.37         4.58       4.23
Average interest-earning
 assets (000's)             $10,222,229  9,505,190  $10,317,994  9,193,692

Average liabilities:
Cost of interest-bearing
 liabilities                       3.80%      2.94         3.53%      2.56
  Cost of deposits                 3.32       2.30         2.97       1.94
  Cost of borrowed funds           4.72       4.10         4.55       3.77
  Cost of junior
   subordinated debt               6.94       5.54         6.73       5.39
Average interest-bearing
 liabilities (000's)        $ 9,498,166  8,671,094  $ 9,506,348  8,360,019

Net Interest Margin: 4th Quarter 2006 v. 3rd Quarter 2006. The net interest margin declined 17 basis points during the quarter primarily due to the cost of interest-bearing liabilities continuing to increase at a faster pace than the yield on interest-earning assets. In addition, the Bank was running higher levels of short-term liquidity as residential mortgage volumes continued to weaken and the balance sheet restructuring strategy was under consideration. Continuing the trend of recent quarters, the cost of interest-bearing liabilities in the current period was impacted by competitive pressures on core deposit pricing and a continued change in our mix of deposits due to consumers shifting deposits into higher-yielding accounts. While we expect the balance sheet restructuring will add 20-25 basis points to net interest margin compared to the fourth quarter of 2006 and also expect to see some benefit from mortgage loan repricings during the year, we expect further margin expansion will be difficult as a result of the continued rise in deposit funding costs and the prolonged nature of the inverted yield curve environment.

Net Interest Margin: 4th Quarter 2006 v. 4th Quarter 2005. Comparing the current quarter to the fourth quarter of 2005, net interest margin declined by 34 basis points. The rise in short-term interest rates, a flattening and inverted yield curve environment, lower dividend yield on our investment in Federal Home Loan Bank of Chicago stock, higher deposit pricing driven by increased deposit pricing competition and a continued shift of funds out of lower cost core deposits into higher-rate certificates of deposit and money market accounts, have all negatively impacted our net interest margin over the past year. During the year, we repurchased 1.9 million shares of stock using borrowed funds, which positively impacted earnings per share results but had the effect of reducing net interest margin. We also increased our investments in bank-owned life insurance (earnings from which are classified as non-interest income) and in real estate held for development in the last twelve months which negatively impacts net interest margin.

Loan Portfolio Composition(1)

                       12/31/06            9/30/06           12/31/05
                  -----------------  -----------------  -----------------
                                  (Dollars in thousands)

One- to
 four-family      $4,012,468   53.9% $4,407,154   56.2% $4,256,913   59.0%
Home equity
 lines of credit   1,211,037   16.2   1,250,136   15.9   1,282,154   17.8
Home equity and
 consumer loans       96,471    1.3     103,528    1.3      70,162    1.0
Multi-family         801,866   10.8     800,624   10.2     698,659    9.7
Commercial real
 estate              628,957    8.4     614,952    7.8     492,307    6.8
Construction         194,254    2.6     181,932    2.3     109,691    1.5
Land                 304,685    4.1     299,377    3.8     171,580    2.4
Commercial
 business loans      198,853    2.7     194,759    2.5     129,771    1.8
                  ----------  -----  ----------  -----  ----------  -----
  Total loans
   receivable,
   net            $7,448,591  100.0% $7,852,462  100.0% $7,211,237  100.0%
                  ==========  =====  ==========  =====  ==========  =====

(1) Certain loan reclassifications have been made for December 31, 2005 to
    conform to current period classification.

To further our strategy of shifting our loan portfolio mix into higher-yielding loan categories, during 2006 we limited balance sheet growth in lower-yielding one- to four-family residential loans by selling more of our originations. One- to four-family loan balances declined by nearly $400 million during the current quarter (about half of which related to the balance sheet restructuring), to 53.9% of total loans at December 31, 2006, compared to 59.0% a year earlier. Multi-family, commercial real estate, construction, land and commercial business loans increased to 28.6% of total loans at year-end compared to 22.2% a year ago.

                            Non-Interest Income

                                     Three Months Ended    Year Ended
                                        December 31,      December 31,
                                      -------  -------  -------  -------
                                       2006     2005     2006     2005
                                      -------  -------  -------  -------
Total non-interest income (000's)     $ 9,683   24,141  $75,918   81,176
Total non-interest income, exclusive
 of balance sheet restructuring
 charges(000's)                        26,773   24,141   93,008   81,176
Non-interest income, exclusive of
 balance sheet restructuring charges
 / total revenue(1)                      30.8%    27.4     26.4%    23.5

(1) Total revenue equals net interest income plus non-interest income
    exclusive of balance sheet restructuring charges.

Pre-tax restructuring charges included in non-interest income for the fourth quarter were $17.1 million. This included a $4.2 million lower of cost or market adjustment on loans transferred to held for sale and $12.9 million of other-than-temporary impairment charges on investment and mortgage-backed securities identified for sale. Exclusive of these charges, non-interest income increased by 10.9% compared to the fourth quarter of 2005. The increases are primarily the result of higher gains on sale of loans and loan servicing rights, higher deposit service fee income, and increased income from bank-owned life insurance investments. Non-interest income for 2006 was up by 14.6% from 2005, exclusive of the impact of restructuring charges.


Residential Mortgage Originations, Sales and Servicing

                           Three Months Ended            Year Ended
                              December 31,              December 31,
                        ------------------------  ------------------------
                            2006         2005         2006         2005
                        -----------  ------------ -----------  ------------
                                      (Dollars in thousands)
1-4 Family Originations
 and Purchases
  Fixed-rate            $   167,352       159,512 $   632,762       674,882
  Adjustable rate           179,301       353,523     932,336     1,363,816
                        -----------  ------------ -----------  ------------
    Total               $   346,653       513,035 $ 1,565,098     2,038,698
                        ===========  ============ ===========  ============

  Fixed-rate %                   48%           31          40%           33
  Adjustable rate %              52            69          60            67
  Refinance %                    42            33          33            31

Loan Sales
  One- to four-family
   fixed-rate           $   153,972       166,778 $   638,903       661,641
  One- to four-family
   adjustable rate          134,276             -     525,186        24,839
                        -----------  ------------ -----------  ------------
    Total one- to
     four-family            288,248       166,778   1,164,089       686,480
 Home equity loans and
  lines of credit            21,235        11,698     114,538       139,270
                        -----------  ------------ -----------  ------------
    Total loans sold    $   309,483       178,476 $ 1,278,627       825,750
                        ===========  ============ ===========  ============

Gain on sale of one- to
 four - family
 mortgages                    3,541         1,575      11,204         7,100
Lower of cost or market
 adjustment on loans
 transferred to held
 for sale                    (4,156)            -      (4,156)            -
Gain on sale of home
 equity loans and lines
 of credit                      430           266       1,745         3,575
                        -----------  ------------ -----------  ------------
  Total loan sale
   gains (losses)       $      (185)        1,841 $     8,793        10,675
                        ===========  ============ ===========  ============
Margin on one- to four
 -family loan sales
 (exclusive of lower of
 cost or market
 adjustment)                   1.23%          .94         .96%         1.03

Loan Servicing
Gain on sale of
 mortgage servicing
 rights                 $     3,600         2,400 $     3,600         2,400
Loan servicing fee
 income                 $       861           443 $     3,409         2,261
Valuation recovery on
 mortgage servicing
 rights                           -            46           -           171
Capitalized mortgage
 servicing rights as a
 percentage of loans
 serviced for others            .65%          .69         .65%          .69

Despite lower one- to four-family mortgage loan volume for the fourth quarter and year ended December 31, 2006 compared to the prior year, our strategy to sell more of our loan originations resulted in a 73% increase in one- to four-family loan sale volume in the current quarter compared to the fourth quarter of 2005, and a 70% increase on a year-over-year basis. Loan sale gains, exclusive of the lower of cost or market adjustment to loans held for sale (included in the balance sheet restructuring charge), were $3.5 million, up 125% from last year's fourth quarter. Margins on loan sales improved in the current quarter due to increased margins realized on ALT-A mortgage sales and selling more loans on a servicing-released basis. Higher sales volume of equity lines of credit during the current quarter also impacted loan sales gains.

During the fourth quarter, the Company completed a sale of mortgage servicing rights on approximately $963 million of loans, or 27% of its one- to four-family mortgage loans serviced for others portfolio, at a pre-tax gain of $3.6 million. The loan servicing rights were sold to take advantage of an increase in servicing values and represented primarily single service customers. The Company had a similar transaction in last year's fourth quarter, selling servicing rights on approximately $750 million of loans for a pre-tax gain of $2.4 million.

Loan servicing income increased for both the quarter and the year ended December 31, 2006 compared to prior year periods. This was primarily due to continued growth in the loans serviced for others portfolio and lower mortgage servicing rights amortization expense as loan prepayments have slowed in the servicing portfolio. Loan servicing fee income is expected to decline in 2007 due to the impact of the loan servicing rights sale and the current conditions in the mortgage market.

Deposit Account Service Fees
                                    Three Months Ended    Year Ended
                                        December 31,      December 31,
                                       2006     2005     2006     2005
                                      -------  -------  -------  -------
Deposit account service
 charges (000's)                      $10,592    9,436  $41,837   35,193
Deposit account service fees / total
 revenue exclusive of balance sheet
 restructuring charges                   12.2%    10.7     11.9%    10.2
Number of checking accounts
 (period end)                         266,200  252,200  266,200  252,200

We experienced a 12.3% increase in deposit account service charges for the current three-month period compared to last year's fourth quarter and an 18.9% increase during 2006 compared to 2005. The growth reflects increases in debit card activity and higher consumer overdraft activity due in part to allowing overdrafts at ATMs. The expansion of the deposit base relating to the February 2006 EFC acquisition also increased overall service fees.

Real Estate Development Operations
                                    Three Months Ended    Year Ended
                                        December 31,      December 31,
                                       2006     2005     2006     2005
                                      -------  -------  -------  -------
Real estate development income
 (loss) - total (000's)               $  (306)   2,762  $   785    2,928
Residential lot sale closings               -      123       86      123
Pending lot sales (period end)             33       85       33       85
Real estate held for development
 or sale (period end) (000's)         $83,049   50,066  $83,049   50,066

As previously reported, the loss in real estate development in the fourth quarter of 2006 resulted from the Company's decision not to exercise an expiring option to purchase a parcel of real estate in Plainfield, IL, which resulted in a write-off of an earnest money deposit and other costs. The slow real estate sales market and the considerable investment the Company has in the Springbank development in Plainfield led to this decision. There were no lot sales in Springbank during the fourth quarter, and 33 lots were under contract at December 31, 2006. The Company currently expects that lot sales in 2007 will be negatively impacted by the slowdown in the real estate market as the increase in inventory of existing homes for sale and uncertain outlook for new home sales has reduced current builder demand for new lots.

The increase in the balance of investment in real estate held for development or sale as compared to a year ago relates primarily to additional land purchases and development cost expenditures related to Springbank.

                         Non-Interest Expense

                                    Three Months Ended     Year Ended
                                        December 31,       December 31,
                                       2006     2005      2006     2005
                                      -------  -------   -------  -------
Total non-interest expense (000's)    $49,593   44,936  $198,070  186,074
Total non-interest expense, exclusive
 of balance sheet restructuring
 charges (000's)                       46,780   44,936   195,257  186,074
Non-interest expense to average
 assets exclusive of balance sheet
 restructuring charges                   1.66%    1.74      1.73%    1.86
Efficiency ratio (1)                    56.16    52.41     56.07    54.31

(1) The efficiency ratio is calculated by dividing non-interest expense
    exclusive of restructuring charges by the sum of net interest income
    and non-interest income exclusive of restructuring charges and net
    gain/(loss) on sale and write-down of mortgage-backed and investment
    securities, mortgage servicing rights and fixed assets.

Total non-interest expense in the current quarter increased $4.7 million compared to the fourth quarter of 2005. The current quarter includes $2.8 million of charges related to the prepayment of $502 million of borrowings as part of the balance sheet restructuring. Compensation and benefits increased by $1.6 million, or 7.0%, due to normal annual salary increases and increased employee headcount, partly due to our acquisition of EFC Bancorp in February 2006.

The Company is focused on controlling non-interest expenses in this difficult operating environment. Non-interest expense exclusive of restructuring charges grew at only 4.1% for the quarter and 4.9% for the year ended December 31, 2006 compared to the same periods a year ago, despite additional headcount and occupancy costs arising from the acquisition of EFC Bancorp and opening two denovo branches in late 2005. These efforts to carefully monitor and control non-interest expense levels will continue across all business lines in 2007.

Non-interest expense totaled $198.1 million in 2006 including the prepayment charges noted above. This compared to $186.1 million reported for 2005. Compensation and benefits expense increased by 5.8% during 2006 while occupancy and equipment costs increased by 8.2% over this same period. The increase in these categories is primarily due to the impact of the EFC transaction and normal salary increases. Amortization of core deposit intangibles increased as a result of the EFC acquisition. Lower advertising expenses were due to lower promotional campaign activity in 2006 compared to last year. Professional expense decreased $2.0 million primarily due to lower consulting fees. In 2005 we incurred consulting fees related to various process improvements including an automated work flow system for the mortgage loan division and Sarbanes-Oxley and Bank Secrecy anti-money laundering compliance costs.

Income Tax Expense

Income tax expense totaled $9.8 million in the current quarter, equal to an effective income tax rate of 51.7%, compared to 35.0% reported for the fourth quarter of 2005. The increase in income taxes and the effective tax rate in the current quarter primarily results from $4.0 million of charges taken to adjust tax reserves due to uncertainties arising from a proposed assessment made in a recent tax authority audit of prior year tax returns, as well as for other potential tax liabilities and uncertainties. The Company disagrees with the proposed tax assessment and intends to defend its tax filing positions. Exclusive of these fourth quarter charges and the balance sheet restructuring charges, the Company's effective tax rate for the current quarter would have been 35.0%.

Income tax expense totaled $49.0 million in 2006, equal to an effective income tax rate of 36.7%, compared to $54.5 million or 34.5% reported for 2005. The increase in the effective tax rate compared to the prior year period was primarily attributable to certain tax charges recorded in the fourth quarter.

                             Asset Quality

                                        12/31/06      9/30/06     12/31/05
                                       ----------   ----------   ----------
                                              (Dollars in thousands)
Non-performing loans (NPL)             $   66,486       48,492       31,160
Non-performing assets (NPA)                70,428       52,326       31,949
NPL / total loans                             .89%         .62          .43
NPA / total assets                            .63          .46          .30
Allowance for loan losses (ALL)        $   39,931       40,402       36,495
ALL / total loans                             .54          .51%         .51
ALL / NPL                                    60.1         83.3        117.1
Provision for loan losses
 (quarter ended)                            1,350          900        1,500
Net charge-offs (quarter ended)             1,821          896        1,340

The increase in non-performing loans in the current quarter primarily relates to our residential loan portfolio. Also contributing to the increase in non-performing loans at December 31, 2006 is $5.6 million related to one loan on a commercial office building that resulted from the Bank advancing funds under a standby letter of credit in December as previously disclosed. During the quarter, the Bank recorded an additional $200,000 charge-off related to this loan. The loan is expected to be repaid in the first quarter of 2007. At December 31, 2006, loans secured by one- to four-family residential real estate comprised 83.5% of non-performing loans compared to 88.7% at September 30, 2006 and 93.1% at December 31, 2005.

Most of the charge-offs in the quarter were related to the residential loan portfolio, primarily home equity lines of credit. We have taken steps over the past year to enhance our residential portfolio risk management which has led to tightened underwriting standards for some of the nontraditional mortgage products we introduced over the past several years. We have also been selling more of the loans we originate of certain product types that we believe have higher risk of loss as part of our risk management strategies. The provision for loan losses in the current quarter reflects the level of charge-offs, offset by the $404 million shrinkage in the loan portfolio, which includes $220 million of loans transferred to loans held for sale as part of the restructuring, as well as the increase in non-performing loans and portfolio delinquencies, adverse housing market conditions and the shift in the mix of the portfolio.


                        Balance Sheet & Capital

                                       12/31/06      9/30/06     12/31/05
                                       ----------   ----------   ----------
                                             (Dollars in thousands)
Assets:
Total assets                           11,120,499   11,464,799   10,487,504
Loans receivable, net of allowance for
 loan losses                            7,408,660    7,812,060    7,174,742
Mortgage-backed securities              1,407,796    1,436,544    1,556,570
Investment securities                     529,998      530,405      475,152

Liabilities and Equity:
Total liabilities                      10,048,354   10,405,647    9,509,325
Deposits                                7,018,010    6,876,975    6,197,503
Borrowed funds                          2,773,192    3,275,369    3,057,669
Junior subordinated debentures             67,011       67,011       67,011
Stockholders' equity                    1,072,145    1,059,152      978,179


Deposit Composition

                    12/31/06             9/30/06             12/31/05
                    --------            --------             --------
                        Weighted             Weighted             Weighted
                        Average              Average              Average
               Amount     Rate      Amount     Rate      Amount     Rate
             ---------- --------  ---------- --------  ---------- --------
                                  (Dollars in thousands)

Commercial
 checking    $  300,624        -% $  303,777        -%  $ 258,632        -%
Non-interest
 bearing
 checking       303,480        -     294,087        -     291,462        -
Interest-
 bearing
 checking       739,149     1.03     723,667     1.08     816,387      .98
Commercial
 money market   105,783     4.03      82,225     3.95      60,064     3.07
Money market    900,959     3.84     721,278     3.36     615,280     2.34
Passbook      1,113,980     0.71   1,165,252      .72   1,268,680      .60
             ---------- --------  ---------- --------  ---------- --------
  Core
   deposits  $3,463,975     1.57   3,290,286     1.33   3,310,505      .96
             ---------- --------  ---------- --------  ---------- --------

Certificates
 of deposit   3,554,317     4.72   3,587,069     4.48   2,885,998     3.65

Unamortized
 premium
 (discount),
 net               (282)       -        (380)       -       1,000        -
             ---------- --------  ---------- --------  ---------- --------
  Total
   deposits  $7,018,010     3.17% $6,876,975     2.97% $6,197,503     2.22%
             ========== ========  ========== ========  ========== ========

Since December 31, 2005 deposits have increased $820.5 million primarily due to deposits added in the EFC acquisition. Intense rate competition has made organic deposit growth challenging during 2006. Despite increases in interest rates and competition for deposits, the Company has been successful in maintaining a stable retail deposit base at attractive rates compared to wholesale funding costs.

Borrowed Funds

                    12/31/06             9/30/06             12/31/05
                    --------             -------             --------
                        Weighted             Weighted             Weighted
                        Average              Average              Average
               Amount     Rate      Amount     Rate      Amount     Rate
             ---------- --------  ---------- --------  ---------- --------
                                 (Dollars in thousands)
Federal Home
 Loan Bank
 advances:
  Fixed rate $1,605,000     4.30% $2,333,400     4.45% $2,221,000     4.21%
  Adjustable
   rate         150,000     5.45     200,000     5.46     250,000     4.42
  Open line     400,000     5.29           -        -           -        -
             ---------- --------  ---------- --------  ---------- --------
  Total
   FHLBC
   advances   2,155,000     4.56   2,533,400     4.53   2,471,000     4.23
             ---------- --------  ---------- --------  ---------- --------
Reverse
 repurchase
 agreements     400,000     4.94     500,000     4.97     500,000     4.24
Unsecured
 term loan      147,500     6.32     155,000     6.43      63,000     5.14
Other
 borrowings      70,750     4.74      68,831     4.63      23,379     3.38
Unsecured
 line of
 credit               -        -      15,000     6.18           -        -
Unamortized
 premium            (58)       -       3,138        -         290        -
             ---------- --------  ---------- --------  ---------- --------
  Total
   borrowed
   funds     $2,773,192     4.71% $3,275,369     4.69% $3,057,669     4.24%
             ========== ========  ========== ========  ========== ========

In December 2006, $400 million of short-term open line advances were used to fund the majority of the $502 million of fixed-rate advances repaid as part of the balance sheet restructuring. The open line advance was repaid in January 2007 using proceeds from the sales of investment and mortgage-backed securities.

Stockholders' Equity

During the current quarter, we declared $8.2 million in cash dividends. The after-tax unrealized loss on securities held for sale improved by $10.3 million in the current quarter. This was primarily due to the recognition during the fourth quarter of $7.9 million of losses on investments identified for sale as part of the balance sheet restructuring. The Bank's tangible, core and risk-based capital ratios at December 31, 2006 exceeded minimum and well-capitalized regulatory capital requirements with an additional increase expected in January from the full impact of the balance sheet restructuring. These higher capital levels will provide additional financial flexibility. Return on equity for the three months ended December 31, 2006 was 9.43%, exclusive of balance sheet restructuring charges and certain tax charges. This compared to 11.13% for the fourth quarter of 2005. Return on tangible equity for the current quarter was 15.26%, exclusive of these charges, compared to 16.45% for the fourth quarter of 2005. For information regarding the calculation of return on equity and return on tangible equity ratios exclusive of the balance sheet restructuring and certain tax charges, see "Reconciliation of GAAP to Non-GAAP Financial Measures."

Company Profile

MAF Bancorp is the parent company of Mid America Bank, a federally chartered stock savings bank. The Bank currently operates a network of 82 retail banking offices throughout Chicago and Milwaukee and their surrounding areas. The Company's common stock trades on the NASDAQ Stock Market under the symbol MAFB.

Forward-Looking Information

Statements contained in this news release that are not historical facts, constitute forward-looking statements (within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended), which involve significant risks and uncertainties. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and is including this statement for purposes of invoking these safe harbor provisions. These forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project," "plan," or similar expressions. The Company's ability to predict results or the actual effect of future plans or strategies is inherently uncertain and actual results may differ from those predicted. The Company undertakes no obligation to update these forward-looking statements in the future.

Factors which could have a material adverse effect on operations and could affect management's outlook or future prospects of the Company and its subsidiaries include, but are not limited to, unanticipated changes in interest rates or further inversion of the yield curve, unanticipated changes in secondary mortgage market conditions, deposit flows, competition, unfavorable resolutions of proposed tax assessments and pending tax uncertainties, adverse federal or state legislative or regulatory developments, higher than expected compliance costs, changes in economic conditions which result in increased delinquencies in the Company's loan portfolio, the quality or composition of the Company's loan or investment portfolios, demand for loan products, financial services and residential real estate in the Company's market areas, delays in the closing of existing lot sale contracts, deterioration in local housing markets, the possible short-term dilutive effect of other potential acquisitions, if any, and changes in accounting principles, policies and guidelines. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.

                    MAF BANCORP, INC. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF OPERATIONS
              (Dollars in thousands, except per share data)

                                 Three Months Ended      Year Ended
                                     December 31,        December 31,
                                 -------------------   -------------------
                                   2006       2005       2006       2005
                                 --------   ---------  --------   ---------
                                                (Unaudited)

Interest income                  $151,042     128,324  $595,200     478,656
Interest expense                   90,906      64,306   335,571     213,897
                                 --------   ---------  --------   ---------
  Net interest income              60,136      64,018   259,629     264,759
Provision for loan losses           1,350       1,500     3,900       1,980
                                 --------   ---------  --------   ---------
  Net interest income after
   provision for loan losses       58,786      62,518   255,729     262,779

Non-interest income:
  Net gain (loss) on sale and
   writedown of:
    Loans receivable held for
     sale                            (185)      1,841     8,793      10,675
    Mortgage-backed securities     (9,316)          -    (9,316)          -
    Investment securities          (3,614)          -    (3,614)        727
    Fixed assets                        9          22       795         164
    Foreclosed real estate           (221)         25      (322)        221
    Mortgage loan servicing
     rights                         3,600       2,400     3,600       2,400
  Deposit account service
   charges                         10,592       9,436    41,837      35,193
  Other loan fees                   1,917       1,917     6,821       6,303
  Bank-owned life insurance
   income                           2,161       1,456     7,303       5,576
  Brokerage and insurance
   commissions                      1,715       1,351     6,281       4,891
  Loan servicing fee income,
   net                                861         443     3,409       2,261
  Valuation recovery on
   mortgage servicing rights            -          46         -         171
  Income (loss) from real
   estate operations                 (306)      2,762       785       2,928
  Other                             2,470       2,442     9,546       9,666
                                 --------   ---------  --------   ---------
    Total non-interest income       9,683      24,141    75,918      81,176

Non-interest expense:
  Compensation and benefits        25,100      23,463   105,795      99,988
  Office occupancy and
   equipment                        7,787       7,786    31,813      29,393
  Advertising and promotion         1,522       1,229     7,656       8,313
  Data processing                   2,508       2,100     9,695       8,144
  Prepayment charge related to
   repayment of borrowings          2,813           -     2,813           -
  Other                             8,822       9,641    35,989      37,334
  Amortization of core deposit
   intangibles                      1,041         717     4,309       2,902
                                 --------   ---------  --------   ---------
    Total non-interest expense     49,593      44,936   198,070     186,074
                                 --------   ---------  --------   ---------
    Income before income taxes     18,876      41,723   133,577     157,881
Income taxes                        9,757      14,591    48,994      54,528
                                 --------   ---------  --------   ---------
  Net income                     $  9,119      27,132  $ 84,583     103,353
                                 ========   =========  ========   =========

Basic earnings per share         $   0.28        0.85  $   2.55        3.20
                                 ========   =========  ========   =========
Diluted earnings per share           0.27        0.83      2.51        3.13
                                 ========   =========  ========   =========

Average common and common
 equivalent shares outstanding
 (in thousands):
Basic                              32,859      32,062    33,177      32,307
Diluted                            33,451      32,693    33,765      32,984


                  MAF BANCORP, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                       (Dollars in thousands)

                                                December 31,  December 31,
                                                     2006        2005
                                                ------------  ------------
                                                        (Unaudited)
Assets
Cash and due from banks                         $    198,391  $    183,799
Interest-bearing deposits                             67,883        38,491
Federal funds sold                                    64,944        23,739
                                                ------------  ------------
   Total cash and cash equivalents                   331,218       246,029
Investment securities available for sale, at
 fair value                                          529,998       475,152
Stock in Federal Home Loan Bank of Chicago, at
 cost                                                146,407       165,663
Mortgage-backed securities available for sale,
 at fair value                                     1,195,494     1,313,409
Mortgage-backed securities held to maturity
 (fair value $205,610 and $237,489)                  212,302       243,161
Loans receivable held for sale                       331,961       114,482
Loans receivable, net                              7,448,591     7,211,237
Allowance for loan losses                            (39,931)      (36,495)
                                                ------------  ------------
 Loans receivable, net of allowance for loan
  losses                                           7,408,660     7,174,742
                                                ------------  ------------
Accrued interest receivable                           50,372        44,339
Foreclosed real estate                                 3,942           789
Real estate held for development or sale              83,049        50,066
Premises and equipment, net                          174,474       149,312
Bank-owned life insurance                            149,497       107,253
Other assets                                          78,263        68,685
Goodwill                                             387,980       304,251
Intangibles, net                                      36,882        30,171
                                                ------------  ------------
   Total assets                                 $ 11,120,499  $ 10,487,504

Liabilities and Stockholders' Equity
Liabilities:
   Deposits                                        7,018,010     6,197,503
   Borrowed funds                                  2,773,192     3,057,669
   Junior subordinated debentures                     67,011        67,011
   Advances by borrowers for taxes and
    insurance                                         44,115        45,115
   Accrued expenses and other liabilities            146,026       142,027
                                                ------------  ------------
      Total liabilities                           10,048,354     9,509,325
                                                ------------  ------------
Stockholders' equity:
   Preferred stock, $.01 par value; authorized
    5,000,000 shares; none outstanding                     -             -
   Common stock, $.01 par value; 80,000,000
    shares authorized; 34,499,494 and
    33,634,642 shares issued; 32,895,846 and
    32,066,721 shares outstanding                        345           336
Additional paid-in capital                           569,142       527,131
Retained earnings, substantially restricted          579,651       537,140
Accumulated other comprehensive loss, net of
 tax                                                  (8,476)      (19,391)
Treasury stock, at cost 1,603,648 and 1,567,921
 shares                                              (68,517)      (67,037)
                                                ------------  ------------
   Total stockholders' equity                      1,072,145       978,179
                                                ------------  ------------
                                                $ 11,120,499  $ 10,487,504
                                                ============  ============

                      MAF BANCORP, INC. AND SUBSIDIARIES
                           SELECTED FINANCIAL DATA
                   (Dollars in thousands, except share data)
                               (Unaudited)

                                              December 31,   December 31,
                                                   2006           2005
                                             --------------  -------------
Book value per share                         $        32.59  $       30.50
Tangible book value per share(1)                      20.21          20.70

Stockholders' equity to total assets                   9.64%          9.33%
Tangible stockholders' equity to tangible
 assets(1)                                             6.21           6.52
Tangible capital ratio (Bank only)                     7.44           7.07
Core capital ratio (Bank only)                         7.44           7.07
Risk-based capital ratio (Bank only)                  11.25          11.15

Common shares outstanding                        32,895,846     32,066,721

Mortgage loans serviced for others           $    2,680,242  $   2,919,075
Capitalized mortgage servicing rights, net           17,550         20,007
Core deposit intangibles, net                        19,332         10,164



                         Three Months Ended            Year Ended
                            December 31,              December 31,
                    --------------------------  --------------------------
                        2006          2005          2006          2005
                    ------------  ------------  ------------  ------------
Average balance
 data:
   Total assets     $ 11,251,906  $ 10,340,168  $ 11,300,401  $  9,994,672
   Loans receivable    7,871,109     7,243,131     8,007,644     7,051,371
   Interest-earning
    assets            10,222,229     9,505,190    10,317,994     9,193,692
   Interest-bearing
    deposits           6,378,540     5,639,587     6,245,283     5,575,696
   Interest-bearing
    liabilities        9,498,166     8,671,094     9,506,348     8,360,019
   Stockholders'
    equity             1,067,914       974,797     1,051,984       961,538
  Tangible
   stockholders'
   equity                660,032       659,850       650,992       644,876

Performance ratios
 (exclusive of
 balance sheet
 restructuring and
 certain tax
 charges) (1) (2)
   Return on
    average assets          0.90%         1.05%         0.89%         1.03%
   Return on
    average equity          9.43         11.13          9.57         10.75
   Return on
    average
    tangible equity        15.26         16.45         15.46         16.03
   Non-interest
    expense to
    average assets          1.66          1.74          1.73          1.86
   Efficiency
    ratio(3)               56.16         52.41         56.07         54.31

Loans sold               309,483       178,476     1,278,627       825,750
Cash dividends
 declared per share          .25           .23          1.00           .92


(1) See "Reconciliation of GAAP to Non-GAAP Financial Measures" on the following pages.

(2) Ratios shown for the three month periods are annualized.

(3) The efficiency ratio is calculated by dividing non-interest expense exclusive of balance sheet restructuring charges by the sum of net interest income and non-interest income exclusive of balance sheet restructuring charges and net gain (loss) on sale of mortgage-backed and investment securities and fixed assets.

MAF BANCORP, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

This press release contains certain financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America, or GAAP. The Company's management uses tangible book value per share, tangible stockholders' equity to tangible assets ratio and return on average tangible equity in its analysis of the Company's performance and financial condition and believes this presentation provides useful supplemental information that is helpful in understanding our financial condition and results, as it provides a method to assess management's success in managing alternatives for the utilization of tangible capital.

The Company believes net income, non-interest income and non-interest expense adjusted for the balance sheet restructuring and certain tax charges is useful supplemental information to better understand the core operating performance of the Company. The excluded tax charges relate to adjustments to tax reserves for prior year periods that were recorded in the fourth quarter because of uncertainties that recently arose relating to an unresolved tax authority audit and other developments.

These disclosures should not be considered an alternative to GAAP, nor are they necessarily comparable to non-GAAP performance measures that might be presented by other companies.

Tangible Book Value Per Share

Tangible book value per share is calculated by dividing (a) stockholders' equity less the sum of goodwill and core deposit intangibles, by (b) common shares outstanding. The following table presents a reconciliation of stockholders' equity to tangible stockholders' equity (in thousands):

                   12/31/06             9/30/06              12/31/05
             -------------------  -------------------  -------------------
                           Per                  Per                  Per
               Amount     share     Amount     share     Amount     share
             -----------  ------  -----------  ------  -----------  ------
Stockholders'
 equity - as
 reported   $ 1,072,145   32.59  $ 1,059,152   32.28  $   978,179   30.50
  Goodwill     (387,980) (11.79)    (387,903) (11.82)    (304,251)  (9.48)
  Core
   deposit
   intangibles  (19,332)  (0.59)     (20,374)  (0.62)     (10,164)  (0.32)
             -----------  ------  -----------  ------  -----------  ------
Tangible
 stockholders'
 equity      $   664,833   20.21  $   650,875   19.84  $   663,764   20.70
             ===========  ======  ===========  ======  ===========  ======

Tangible Stockholders' Equity to Tangible Assets

Tangible stockholders' equity to tangible assets is calculated by dividing (a) stockholders' equity less the sum of goodwill and core deposit intangibles, by (b) total assets less the sum of goodwill and core deposit intangibles. The following table presents a reconciliation of total assets to tangible assets (in thousands):

                                    12/31/06      9/30/06       12/31/05
                                  ------------  ------------  ------------
  Total assets - as reported      $ 11,120,499  $ 11,464,799  $ 10,487,504
     Goodwill                         (387,980)     (387,903)     (304,251)
     Core deposit intangibles          (19,332)      (20,374)      (10,164)
                                  ------------  ------------  ------------
  Tangible total assets           $ 10,713,187  $ 11,056,522  $ 10,173,089
                                  ============  ============  ============


Return on Average Stockholders' Equity and Return on Average Tangible Stockholders' Equity

Return on average stockholders' equity is calculated by dividing (a) annualized net income adjusted for balance sheet restructuring charges and certain tax charges (see below) by (b) average stockholders' equity. Return on average tangible stockholders' equity is calculated by dividing (a) annualized net income adjusted for balance sheet restructuring charges and certain tax charges by (b) average stockholders' equity less average goodwill and core deposit intangibles. The following table presents a reconciliation of average stockholders' equity to average tangible stockholders' equity (in thousands):

                           Three Months Ended          Year Ended
                              December 31,             December 31,
                        ------------------------  ------------------------
                            2006         2005         2006         2005
                        -----------  -----------  -----------  -----------
Average stockholders’
 equity                 $ 1,067,914      974,797  $ 1,051,984      961,538
  Average goodwill         (387,870)    (304,313)    (380,489)    (304,950)
  Average core deposit
   intangibles              (20,012)     (10,634)     (20,503)     (11,712)
                        -----------  -----------  -----------  -----------
Average tangible
 stockholders’ equity   $   660,032      659,850  $   650,992      644,876
                        ===========  ===========  ===========  ===========


The following three tables reconcile net income, non-interest income and non-interest expense to net income, non-interest income and non-interest expense as adjusted for the balance sheet restructuring and certain tax charges (in thousands):

Net income adjusted for balance sheet restructuring and certain tax charges

                                                Three Months
                                                    Ended      Year Ended
                                                December 31,  December 31,
                                                ------------  ------------
                                                    2006          2006
                                                ------------  ------------
Net income - as reported                        $      9,119        84,583
  Lower of cost of market adjustment on loans
    transferred to  held for sale                      4,156         4,156
  Loss on mortgage-backed securities                   9,316         9,316
  Loss on investment securities                        3,618         3,618
  Prepayment charge related to repayment
      of borrowings                                    2,813         2,813
  Tax benefits related to balance sheet
    restructuring charges                             (7,798)       (7,798)
  Certain tax charges                                  3,963         3,963
                                                ------------  ------------
Net income adjusted for balance sheet
 restructuring
 and certain tax charges                        $     25,187       100,651
                                                ============  ============

Return on average assets is calculated by dividing (a) net income adjusted for balance sheet restructuring and certain tax charges by (b) average total assets.

Non-interest income adjusted for balance sheet restructuring charges

                                                Three Months
                                                    Ended      Year Ended
                                                December 31,  December 31,
                                                ------------- -------------
                                                    2006          2006
                                                ------------- -------------
Non-interest income - as reported               $       9,683        75,918
  Lower of cost of market adjustment on loans
   transferred to  held for sale                        4,156         4,156
  Loss on mortgage-backed securities                    9,316         9,316
  Loss on investment securities                         3,618         3,618
                                                ------------- -------------
Non-interest income adjusted for balance sheet
 restructuring charges                          $      26,773        93,008
                                                ============= =============


Non-interest expense adjusted for balance sheet restructuring charges

                                                Three Months      Year
                                                    Ended        Ended
                                                December 31,  December 31,
                                                ------------  ------------
                                                        2006          2006
                                                ------------  ------------
Non-interest expense - as reported              $     49,593       198,070
  Prepayment charge related to repayment
    of borrowings                                     (2,813)       (2,813)
                                                ------------  ------------
Non-interest expense adjusted for balance sheet
 restructuring charges                          $     46,780       195,257
                                                ============  ============

The ratio of non-interest expense to average assets is calculated by dividing (a) non-interest expense adjusted for balance sheet restructuring charges by (b) average total assets.

Contact Information

  • Contacts:
    Jerry A. Weberling
    Chief Financial Officer
    (630) 887-5999

    Michael J. Janssen
    SVP
    (630) 986-7544

    MAF Bancorp, Inc.
    55th Street & Holmes Avenue
    Clarendon Hills, IL 60514
    www.mafbancorp.com