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Budget Deficits, Pensions, and Taxes:
Where the City of Chicago is headed and how does MB fare?
Harry Green, Summer Intern 2015

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Table of Contents
Executive Summary ……………………………………………………………………………………………………………………………… 3
Section 1: Budget & Pension Crisis
City of Chicago’s Pension Crisis
Facts and Development ……………………………………………………………………………………………………………. 3
Cook County …………………………………………………………………………………………………………………………….. 4
Rahm Emanuel’s Plan ……………………………………………………………………………………………………………….. 5
Section 2: MB Financial’s Position
Implication of Higher Property Taxes
Market Effect of Property Tax Hike ………………………………………………………………………………………… 6
Effect on Property Owners ……………………………………………………………………………………………………… 7
MB Financial’s Position
Measures in the Underwriting Process …………………………………………………………………………………….. 7
Appraisal Review’s Significance ………………………………………………………………………………………………… 9
Covenant Tracking and Controls ……………………………………………………………………………………………….. 9
Section 3: Opportunities for the Bank
Growth in Non-Interest Core Fee Revenue ………………………………………………………………………………………… 10
Conclusion ……………………………………………………………………………………………………………………………………….. 11
References ………………………………………………………………………………………………………………………………………… 13
Contact Info ……………………………………………………………………………………………………………………………………… 14

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Executive Summary:
It’s nothing new, Cook County and the City of Chicago are facing yet another fiscal crisis. This
one however is of much greater scale and will have graver consequences for taxpayers and public
employees than in previous crises. Years of loose pension fund oversight and increasingly forgiving
pension benefits allowed the County and City funds to balloon to a level of $26 billion in a just a matter
of decades. Cook County is scrambling to find a solution to its looming $198 million budget deficit for
fiscal year 2016 and the City of Chicago is in similar water, struggling to fund its $571 million pension
obligation. On May 8th
, the Illinois Supreme Court ruled against Illinois Governor Bruce Rauner’s plan for
structural reform of the pension system that would prevent automatic increases in the cost of living
adjustment and extend the retirement age, citing the reforms broke the basic rights that pensioners
were promised. This month, Cook County Circuit Court judges struck down similar reform in the City of
Chicago, when they ruled Mayor Rahm Emmanuel’s pension reform plan unconstitutional, referencing
the Illinois ruling. Options for structural reform are diminishing, pushing legislators into a situation
where tax hikes are likely. Cook County President Toni Preckwinkle ran her campaign on a promise to
repeal former board president’s Todd Stroger’s sales tax increase, but just this month it was announced
that the sales tax in the Cook County would be increased a full percentage point. Mayor Emanuel is not
only restructuring his government and eradicating efficiencies, but has proposed a plan to raise property
taxes by $175 million per year.
As a Chicago-based bank with a significant portfolio of real estate properties, MB Financial N.A.
is exposed to a property tax hike in Cook County. Increased real estate taxes will place a burden on the
Bank’s borrowers, creating heightened uncertainty as to whether they can continue to make debt
service payments. The purpose of this report is to provide the MB Financial Commercial Real Estate
Group with an overview of the pension fund crisis and its implications for the performance of the
Group’s portfolio, as well as the efforts being made by the Bank to mitigate rising property tax risk, and
opportunities for the Bank to better position itself in light of these hikes.
City of Chicago’s Pension Crisis:
Facts and Development
The City of Chicago’s budget has been stretched to the brink of collapse as a result of
enormously underfunded pension obligations. Because of the lack of contributions in earlier years, the
City’s pensions funds are short roughly $20 billion. Funding of obligations is extremely low; 30% of the
police fund, 24% of the fire fund, 37% of municipal employees and 57% of laborers funds, with the total
program 35% funded. By law, the City of Chicago must contribute an additional $550 million to the
police and firefighter funds in 2016. The City must also add $50 million to the Municipal Employees and
Laborers funds on top of the City’s budget deficit of $300 million. Property taxes, the City’s main source
of pension fund revenue is likely to cover most of this bill. The City of Chicago does not directly tax real
estate, but rather receives property tax revenues from Cook County to fund its pension obligations. The
City can enact legislation increasing taxes, but these rates are reflected in the County’s total tax bill. In
2015, Cook County estimates that the total property tax extension across all taxing districts in Chicago is

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$4.34 billion. Of that $4.34 billion, 20 percent ($868 million) will be allocated to the City of Chicago
(representing the share of the total tax bill paid to the city). The City of Chicago has budgeted 43% of
these revenues for pension payments and the remaining 45% towards other debts and the City Public
Library. As the City’s finances continue on poor footing, rating agencies have repeatedly downgraded
the City’s bond rating, increasing borrowing costs. Moody’s Inc., one of the big three rating agencies,
recently downgraded Chicago’s $8.1 billion of outstanding general operating debt to Ba1, constituting
junk status. Moody’s cited substantial growth in the City’s unfunded pension liabilities as the reason for
its rating.
Further leading to financial stress, The Chicago Teachers Pension Fund, directly operated by
Chicago Public Schools (CPS), is also significantly underfunded with just 52% of funding available. In
2014, after a 3-day pension holiday, the City’s pension bills shot up by $400 million and will now require
$688 million in 2016 to pay for promised benefits. CPS is projected to run a $1.1 billion deficit in the
same year, largely due to the pension burden. If the City of Chicago continues down this track, it risks
further downgrades by rating agencies, risking a Detroit-like default scenario, which would be
devastating to the economy and residents of the city.
Cook County
Since it cannot directly raise property tax rates in its own districts, the City of Chicago must rely
on cooperation with Cook County in order to achieve an adequate solution to the pension crisis.
Unfortunately for the City, Cook County is facing its own budgetary problems stemming from similar
pension fund mismanagement. The County recently raised its sales tax 1 percentage point from 0.75 to
1.75 percent, pushing the City of Chicago’s total sales tax to 10.25 percent, one of the highest in the
nation in an attempt to shore up must needed revenue. Cook County is projected to incur a deficit of
$198 million for FY 2016. Property tax revenue is expected to drop by $40 million in 2016, largely as a
result of higher debt service obligations. The County’s primary pension fund, The County Officers’ and
Employees’ Annuity and Benefit Fund is not meeting current pension payments, forcing Cook County to
continuously borrow to meet its obligations. Projections show that in 2016 the County’s payment will be
$449 million less than the yearly actuarial required contribution (ARC) . An actuarial required
contribution is the present value of all benefits owed to current and future retires, based on the number
of retirees and the promises made regarding benefits.
The buildup of unfunded pension liabilities is a rather recent phenomenon in Cook County. In
2000, the pension fund was 94% funded and nearly 100% when costs associated with retiree healthcare
were netted out. However, in 2002 significant benefit increases were enacted by the State without the
raising of additional revenues. Coupled with financial crises in both 2001 and 2008, unfunded liabilities
continued to increase, and the situation deteriorated rapidly to where it is today. The County has
attempted to work with the Governor and state legislators in recent years with little success in securing
a long-term funding solution. If the situation continues and no reform is enacted, the County projects
that in order to meet minimum funding obligations, additional funding of $270 million in 2016, $340
million in 2017, and 2% growth in funding per year thereafter is required. If nothing is done to address
the present crisis, unfunded interest will compound, and within a decade, the increased annual interest
cost alone will exceed the shortfall in this year’s payment (see below graph).

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Credit: Cook County Preliminary Forecast Fiscal Year 2016
Rahm Emanuel’s Plan
As the face of the City of Chicago, Mayor Rahm Emanuel is being looked upon to draft a plan to
alleviate and eventually eliminate this dire fiscal situation. Emanuel has yet to lay out a formal plan to
tackle the crisis, but recent actions by the mayor signal his strategy for curbing high pension costs will be
to raise revenues for the city. Since 2011, few mayors have been as successful as Emanuel in increasing
revenue. City tax revenue has increased nearly 20% since Emanuel has taken office. From the extension
of the amusement tax to websites such as Netflix and Spotify, to increases in cable TV and parking taxes,
and to hotel and amusement ticket taxes, Emanuel has been able to successfully boost funds for the city
without touching property taxes. As seen in the following graph, Emanuel has held steady on property
taxes, while the City’s primary operating fund has continued to rise:
Credit: Crain’s Chicago Business
For a mayor it is politically wise to raise targeted taxes and fees and leave property taxes, which
draw most attention, unchanged. Rises in tax rates have not gone unnoticed, however. A recent plan by
the Emanuel administration proposed to apply the corporate lease tax to cloud-based computing
services used for business, drawing backlash from many tech companies. The move could potentially

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slow the recent trend in tech companies and start-ups relocating to downtown areas such as River North
and Fulton Street Market.
Emanuel has also proposed the idea of the State taking over funding of the employer’s
contribution portion of CPS’s Teacher’s Pension Fund, which the state government funds in every
district outside Chicago. Unsurprisingly, the state government is in no condition to add additional
pension obligations to its balance. Governor Rauner rejected the plan offering instead to advance the
City $450 million upfront, but Emanuel declined, highlighting the fact that the crisis got where it is today
because of similar actions. With Emanuel’s strategy of slowly increasing transactional and fee-based
taxes, the explosion of pension obligations, and disagreement with Springfield over the Chicago
Teacher’s Funds, it has never been more likely for the City to raise property taxes. In fact on July 1st
, the
mayor formally proposed a $175 million permanent property tax increase, but only if the State would
pick up the employer’s contribution to the teacher’s fund as he proposed before. It is unlikely that the
City and the State will agree on this particular plan, creating further uncertainty as to whether the
mayor may be forced to propose an even greater property tax hike, to put some sort of stop to the leak
the pension fund crisis has started. The City’s greatest asset is its legal authority to tap into its large and
diverse taxpayer base. Despite the mayor’s history of non-involvement with the City’s property tax, the
present crisis brought on by irresponsible financial management and highlighted by the CPS pension
meltdown, will likely push the mayor where he has not gone before and he will have no choice but to
increase property taxes.
Implication of Higher Property Taxes:
With the developments in Cook County and the City of Chicago, MB’s Real Estate portfolio is
likely to feel the effect of increased property taxes. Tax increases will be felt by both buyers and existing
owners of commercial property throughout the city.
Market Effect of Property Tax Hike
An increased property tax rate in Cook County will have a negative effect on property values in
the City of Chicago and the surrounding area as a result of market forces. For commercial properties,
investment returns will decrease as operating expenses increase with higher tax rates. Without
adjustment in prices, potential buyers will not see the value in many properties and supply of properties
on the market will spike. Buyers will not re-enter the market until corrections in prices are adjusted to
reflect lower earnings. It’s simple economics, as less revenue is realized by a property, the less value a
buyer will see and the price will eventually drop to a lower equilibrium value where buyers will be
willing to take on the increased cost of taxes. There will also be a decrease in attractive real estate
investment ventures in the Chicagoland area. Many projects that were just above break-even will no
longer be profitable and projects in lower-tax surrounding areas will been seen as better investment
opportunities for their lower costs and easier time attracting tenants. These developments could
potentially have a detrimental effect on the CRE Group’s generation of new deals.

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Effect on Property Owners
Higher property taxes will diminish a larger share of owner/operator revenue. For many
properties, especially those in the City of Chicago, real estate taxes already take up a significant
percentage of operating costs. The effect will be different based on asset class. For many retail
properties, leases are triple-net, meaning that the tenant would be responsible for any increases in
property taxes. Even many commercial and industrial properties have tax stops written into their leases
whereby the landlord pays for the current taxes at the time of the lease, but the tenant picks up any
increases. For multi-family units on the other hand, owners are stuck with the tax bill and will increase
rental rates accordingly to account for the increased cost they have taken on. An increase in rental rates
could drive many tenants out of the building over the medium-long run. Owner-occupied commercial
and industrial properties stand will be affected the most because many of these properties lack the
resources needed to adjust to hikes in property taxes. While the majority of the Bank’s commercial and
industrial borrowers will be shielded to property tax increases, small owner-occupied businesses and
multi-family properties will face difficulty in adjusting to these greater costs. The following section will
analyze the processes in place by the Bank in both the underwriting and tracking processes to mitigate
risk of property tax hikes in the City of Chicago.
MB Financial’s Position:
Measures in the Underwriting Process
The Bank has strong underwriting procedures in place to mitigate the risk of customer default.
One of the major risks associated with lending to property owners is the risk of a customer collecting on
his or her tenants and disappearing with the money. To prevent such a situation from happening, MB
Central Credit requires that the majority of CRE customers open up an operating account at the Bank
that tenants pay rent into directly. This allows for oversight of payments and general business activities
of customers to ensure that the borrowers are indeed using their revenues as specified in initial
discussions with the Bank. During the due diligence process, loan officers conduct a tenant analysis for
each retail property, especially those with non-credit tenants. The purpose of such an analysis is to
ensure that tenants can be trusted to make full payment on time to the borrower. It is especially
important to make sure the tenant has a strong and large enough organization that has the resources to
payout the rest of its lease in the event of business failure; or is a tenant with an experienced owner or
manager, making the business less likely to fail. A key component of MB’s business model is its specific
focus on the Chicagoland area. This narrow scope of target customers gives the Bank an advantage in
that officers have a keen understanding of the Chicago Real Estate market. This prevents the CRE group
from lending to projects that may fail because they lack a fit in their respective market. For those
projects and customers outside the reach of Chicago, extensive market research efforts are taken and
borrowers must be based in MB’s target market and have a significant historic relationship with the
Bank.
On top of these underwriting efforts, all real estate loans, with the exception of some waived by
the Bank’s escrow group, require the establishment of a tax escrow account. The purpose of this

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account in the CRE portfolio is to ensure the borrower will pay his or her property taxes. In addition, the
account is set up to ensure that the Bank protects its collateral, decreasing the risk of default. Escrow
payments are made monthly and feature a 2-month cushion to cover any tax increases, such as a hike in
the City of Chicago. In the event that increases are more than the account can handle, the Bank will
short up to $3,000 of the difference, with the borrower holding the obligation to pay back the Bank at
some specific time in the future. If a borrower is short more than $3,000, the loan officer assigned to the
account must approve payment of the difference. The Loan Servicing department of the Bank
continuously monitors the situation of tax escrow accounts through its past due reports. These reports
record any loans with outstanding balances, even amounts as low $1, ensuring that the Bank will not
lose track of its borrower’s payments. As of July 23rd
, the Bank had 96 loans with past due taxes, many of
which were in the foreclosure process, although none of these loans had missed-payment timeframes of
more than 3 years. A past due report and a negative escrow report are presented to senior-level
managers once a month, where managers must come up with a plan for collection of payment from the
borrower. When the borrower fails to make escrow payment, he or she enters into a 2-month deficiency
window, where the Bank will continue to fund deficient escrow payments with the expectation that the
borrower find a solution to the problem. If a borrower does indeed default, the Bank has many
covenants written into the contract at time of signing to ensure MB would become the receiver of the
customer’s collateral.
To account for property tax increases, the Loan Servicing department conducts an annual
financial analysis. When doing this analysis, the department looks at the prior year’s taxes and leaves
leeway for increases, but the review is not inherently future looking, rather an expectation of the future
based on historical trends. When tax increases have been likely, as they are now, many borrowers in
conjunction with a loan officer will actually request to increase escrow fund payments in anticipation of
higher rates. This heightened responsibility by borrowers to hold true on their payment obligations is a
significant advantage for the Bank as its saves huge portions of time and reduces the risk of default from
higher tax rates. Not only does the Bank have responsible customers, but loan officers as well. Many
officers are aware of a tax hike’s threat to their customer’s payments and will discuss possible higher
escrow payment plans with the customer. The Bank has seen a steady increase in tax rates year after
year, so it is experienced and prepared for the shocks of a property tax hike in the City of Chicago.
More extensive forward-looking financial analysis could be conducted by not only the Loan
Processing department, but on a bank-wide scale. With a forward-looking view, this analysis could
account for changing market and world conditions, and catch property tax increases before they make a
mark on the portfolio. It is unlikely that such an analysis will be conducted in the near future as the Bank
lacks the resources needed to conduct such a broad-based analysis. Nevertheless, underwriting
processes employed by the Bank can substantially mitigate the risk of default from increased property
taxes. Strong communicative relationships that have developed between loan officers and senior
management ensure that front-line developments can be addressed in a timely manner, allowing the
Bank to be flexible to change. The Bank’s expertise in the markets it serves further decreases the
likelihood of lending to risky endeavors and borrowers.

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Appraisal Review’s Significance
The Appraisal Review department is an essential instrument for underwriting and monitoring
the financial standing of Commercial Real Estate properties. The purpose of an appraisal for the Bank is
to verify the validity of a borrower’s valuations and estimates of both the property and future revenue
streams. An appraisal is extremely valuable to the Bank in that it gives the Bank an idea of how much the
collateral it is holding is worth in order to make a lending decision. A key component of the appraisal
process is the use of third-party vendors. Using a third-party prevents bias and conflicts of interest that
may arise from either a borrower’s vendor or an internal appraisal by the Bank. The borrower may
inflate values to create a heightened sense of opportunity on a certain project and an appraisal
conducted by the Bank may inflate values in order to receive approval from loan committee. The
Appraisal Review department has an extensive vetting process in place to guarantee it chooses the right
third-party vendors for the department’s needs. The vetting process includes reviewing a third-party’s
sample reports, copies of insurance, references, and qualifications.
Appraisals hold significant value to the Bank throughout the life of a loan. Appraisals are used as
a benchmark to measure the performance of a specific project or property. As a commercial property
owner continues to operate, the property’s capitalization rate (cap rate) will fluctuate to reflect the
overall performance of a property’s Net Operating Income (NOI). The cap rate, calculated as a property’s
NOI divided by its value (appraised value) is the primary measurement of a property’s return on value.
Knowing the appraised value of the property is accurate, gives the Bank great confidence that it knows
the overall financial position of the property. This can be a key factor in the Bank’s control over property
tax hikes, as costs will rise quickly, and officers will need immediate indicators of property performance.
An appraisal can also be thought of as an insurance policy for the Bank. If the loan is repaid as planned,
it’s an unused policy, but it if the borrower defaults, then the Bank has a sound idea of how much it can
recover in foreclosure. Insurance on a real estate loan is a significant mitigating factor for the Bank’s risk
of collateral loss in a volatile market like the one seen today. Having a reliable Appraisal Review
department allows front-line officers to focus their efforts on addressing the immediate needs of
borrowers, adding another layer of risk protecting in the event of property tax increases.
Covenant Tracking and Controls
The Bank maintains extensive monitoring procedures for the tracking of real estate loan
covenants. These monitoring procedures include requesting PFS’ from guarantors and operating
statements from the property. The majority of real estate loans have covenants expressing specific
thresholds that borrowers must maintain, such as a minimum debt service ratio and total guarantor net
worth. The purpose of such covenants is to force the borrower to create an adequate reserve of
resources to combat any changes in personal or market conditions. The consistent gathering of up-to-
date financial and operating statements from borrowers allows for effective tracking of these covenants.
The Bank conducts Acceptable Credit Reviews (ACR), which briefly summarize the position of both the
borrowers and the guarantors of the loan on an annual basis. Most ACRs are conducted around quarter
end. The benefit of such a review is that the Bank has a consistent idea of the performance position of
the portfolio. It allows for any fluctuations in market or borrower conditions to be noticed sooner rather

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than later and continues to hold the borrower accountable for living up to their covenants throughout
the life of the loan. Covenant tracking works almost like a continual real estate market analysis, but at a
more individual level, giving officers and decision makers within the CRE Group essential insight into the
Bank’s properties, allowing them to address detrimental trends before they take full effect.
Opportunities for the Bank:
Growth in Non-Interest Core Fee Revenue
With a full-range of detailed and structured procedures for mitigating risk in the underwriting
and tracking processes, the Commercial Real Estate Group at MB can continue to better position itself to
handle increases in tax rates through diversification of fee income, primarily core fees. Commercial Real
Estate officers frequently deal directly with the Capital Markets Group at the Bank. During the
underwriting and discussion process of a deal, loan officers may discuss possible interest rate swap
options with borrowers. These agreements written into the loan allow the borrower to mitigate some of
the risk of long run interest rate fluctuations.
Many CRE customers come to the Capital Markets Group looking to enter in an interest rate
swap or cap with the Bank. An interest rate swap involves the Bank swapping a customer’s floating
interest rate for a fixed rate payment. In a swap, the Bank receives fixed interest rate payments from the
borrower, while the Bank pays a floating rate to the borrower that is tied to LIBOR. When the LIBOR rate
is higher than the fixed swap rate, the Bank pays the difference, but if LIBOR falls below the swap rate,
the Bank profits because the customer’s fixed payments to the Bank are now greater than the Bank’s
payments to the borrower. Borrowers enter such swaps to hedge against interest-rate risk, giving them
flexibility in budgeting. Cancellable swaps, a very popular product for CRE customers, allow borrowers to
terminate the swap early at no cost in exchange for a higher swap rate. Another popular swap option for
CRE customers is a forward-starting swap. Many CRE customers are interested in this option as it hedges
against the permanent financing and takeout of a project. CRE borrowers, unlike C&I borrowers, have
more exposure to 5/7/10 yr. market rates, as that is what their permanent financing rates are tied to. As
market rate increases become more imminent, CRE borrowers will become increasingly interested in
such a product. Both cancellable and forward-starting swaps significantly decrease CRE customers’
exposure to interest rate risk. Having an interest rate swap in place as a CRE borrower, gives the
borrower space in their budget to account for the difference between incoming rental payments and
interest payments on a loan. A borrower who has limited interest-rate exposure will have an easier time
adjusting to changes in market conditions such as increased property taxes.
Core non-interest fees, fees associated with commercial activities, but not directly linked to
interest rate spreads, have already begun to become a significant part of revenue for the Bank. As of the
most recent earnings release, 2nd
quarter 2015, the Bank posted core non-interest income of $83
million, represents roughly 41 percent of revenues for the quarter. Although capital markets fees
decreased slightly in the quarter, the overall trend has been an enormous growth in revenues. Only four
years prior in 2011, core non-interest income represented 27 percent of total revenues. Growth has
largely been due to a sharp increase in mortgage banking revenue and lease financing, and higher-than-
average growth in treasury management, trust and asset management, and capital markets fees. For

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Capital Markets core fees to grow, customers must be aware of the benefits the group’s products can
provide. Capital Markets revenues are entirely tied to front-line officers’ efforts to introduce products
and tailored solutions to their customers. In addition officers should be aware of a customer’s desire for
a specialized profile, like prepayment flexibilities or forward-starting features, and introduce them to the
Capital Markets Group. A strategy employed at other banks that could be introduced at MB is to
mandate hedging protection on deals. By creating a synthetic fixed rate or capping how high debt
service rates can go, MB is making a loan less risky and easier to underwrite. The real value of a swap
product for MB is the fact that the Bank can realize revenue immediately without facing much risk over
the life of a loan. When a customer/borrower buys a swap, the Bank collects that fee revenue upfront,
instead of exposing itself to risk of non-payment over the long run, like with debt service payments.
Capital Markets derivative revenue is projected to be in the $5-6 million range for fiscal year 2015; this is
a growth initiative for the Bank and future budgets reflect that.
Another strategy for the Bank with respect to diversification of fee revenue is to increase
relationships with borrowers in order to secure further services and fees to the Bank, in areas such as
private banking, trust, and asset management. Many of the Bank’s borrowers have additional financial
needs outside of financing, such as management of both the assets of the company and its owners.
Front-line officers can use their strong relationships to sell additional services to their customers citing
great collaboration and communication between the commercial and wealth management groups of the
Bank. Many customers will see the value of combining multiple services at one institution and seek the
services of the Wealth Management Group, increasing revenues outside of lending. By securing these
services with customers, will not only benefit from interest spreads and swap fees, but in addition
management of other accounts.
With the needs of customers becoming increasingly complex, revenues outside of interest rate
spreads create great opportunity for the Bank to grow with its existing customer base. As long as front-
line officers continue to increase awareness to the Bank’s traditional wealth management and even
more complex Capital Markets products, the likelihood of revenue growth in non-interest core fees is
very high.
Conclusion:
As fiscal conditions continue to deteriorate in Cook County and the City of Chicago, a property
tax increase is becoming increasingly imminent. Toni Preckwinkle and Rahm Emanuel, leaders who have
historically been rather stringent in introducing tax increases, are being pressed by both the public and
creditors for a solution to the pension crisis. Recent rulings in the Illinois Supreme and Cook County
Circuit courts have significantly narrowed the strategic options for both policymakers. No longer can
structural reform in the pension systems be considered to shore up needed funding, while protecting
taxpayers. Cook County and the City of Chicago have been backed into a corner that can only be escaped
by tapping into their large taxpayer bases and increasing revenue. MB Financial N.A. needs to be
observant of these developments as the Bank has significant exposure to real estate in the City and Cook
County. The Bank’s experienced and relationship-focused group of front-line officers is the Bank’s
greatest asset in these volatile political and economic times. MB’s officers with their extensive
knowledge of the Chicago market have a keen eye for market developments and will be proactive in the

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face of rising property taxes. The Bank’s Credit team has established disciplined approaches to
underwriting commercial real estate loans and the Appraisal Review department has been a consistently
reliable component of real estate lending. Higher property tax revenues in the City will obviously impact
borrowers, but the expansion of non-interest core fee revenue, will put not only the Bank, but also its
customers on more sound footing. The selling of swap and cap products by the Capital Markets Group
hedges borrowers against the risk of interest rate changes, such as the Federal Reserve hike likely
coming the end of year or next year. But more importantly, it creates a cushion for borrowers in their
budget to address the heightened cost associated with property tax increases. Referring borrowers to
wealth management services within the Bank, additionally diversifies the Bank revenue stream. As long
as CRE front-line officers can continue to develop strong relationships with the Bank’s customers, stay
disciplined in underwriting, and sell products that are beneficial in mitigating risk for both the Bank and
its customers, MB Financial N.A. will be in sound position to absorb the effects of property tax hikes in
the City of Chicago and poised to continue post-merger to become the premier middle-market bank in
Chicago.

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References
Blaha, Mark. "Field Credit Interview 2." E-mail interview. 15 July 2015.
Byrne, John. "Chicago Property Taxes to Rise $90 on Average." Chicagotribune.com. Chicago Tribune, 18
June 2015. Web. 26 July 2015.
Chicago, City Of. "2015 City of Chicago Budget." (n.d.): n. pag. Office of Budget & Management. City of
Chicago. Web. 18 July 2015.
"Cook County Preliminary Forecast Fiscal Year 2016." Cook County Budget (2015): n. pag. Cook County
Government. Web. 20 July 2015.
Corfman, Thomas. "City Hall's Expanding Appetite for New Taxes." Crain's Chicago Business. N.p., 18 July
2015. Web. 26 July 2015.
Dardick, Hal. "Preckwinkle: Pension Plan May Lower Cook County Sales Tax. But Is Plan
Legal?" Chicagotribune.com. Chicago Tribune, 13 July 2015. Web. 26 July 2015.
Garrett, Adam. "Initial Research/Discussion." Personal interview. 4 June 2015.
Grygiel, Deborah. "Loan Processing Interview." Telephone interview. 23 July 2015.
"Moody's Downgrades Chicago, IL to Ba1, Affecting $8.9B of GO, Sales, and Motor Fuel Tax Debt; Outlook
Negative." Moodys.com. Moody's, 12 May 2015. Web. 26 July 2015.
Pearson, Rick. "Illinois Supreme Court Rules Landmark Pension Law Unconstitutional." Chicago Tribune.
N.p., 8 May 2015. Web. 17 July 2015.
Pierog, Karen. "Pension Fallout Hits Chicago Bonds, Cook County Tax Rate." Reuters. Thomson Reuters,
15 July 2015. Web. 26 July 2015.
Short, Daniel. "Field Credit Interview." Personal interview. 14 July 2015.
Szymusiak, Joe. "Capital Markets Interview." Online interview. 24 July 2015.
Walsh, Mary. "Chicago's Plan to Change Pension Benefits Ruled Unconstitutional." The New York Times.
DealBook, 24 July 2015. Web. 27 July 2015.
Zaveduk, Mitchell. "Appraisal Review Interview." E-mail interview. 24 July 2015.

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Contact Info
For further questions regarding the pension and budgetary crisis in Cook County and the City of
Chicago, feel free to contact Harry Green at the following:
Phone: (630) 408-5819
Email: hgreen64@gmail.com
Email is preferred.