SOURCE: Midwest Banc Holdings, Inc.

January 26, 2006 06:00 ET

Midwest Banc Holdings, Inc. Reports 2005 Results

Net Income Rises for Fourth Quarter, Full Year; Core Income From Continuing Operations Expands; Loan Growth Maintains Strong Pace

MELROSE PARK, IL -- (MARKET WIRE) -- January 26, 2006 -- Midwest Banc Holdings, Inc. (NASDAQ: MBHI) announced today that continued growth in lending activity and other improvements led to a strong increase in earnings for the fourth quarter of 2005 when compared with the fourth quarter of 2004. The community bank holding company reported net income of $6.7 million ($0.30 per diluted share) for the fourth quarter, up from a loss of $5.6 million ($0.31 per diluted share) in the same period of 2004. For the full year, net income of $5.9 million ($0.30 per diluted share) was up from $2.4 million ($0.13 per diluted share) in 2004.

"We closed out the year with two solid and improving quarters, especially in the areas of loan growth and asset quality," said James J. Giancola, president and chief executive officer. He noted that loan growth was 6% for the fourth quarter of 2005 and 23% for the year. "We enter 2006 as a much stronger and more focused organization than was the case just a year ago. Over the past 15 months, we expanded our management team, repositioned our balance sheet with both necessary charges and a public offering of common stock, and tied our strategy to the Chicago metropolitan area through the sale of our western Illinois subsidiary."

"As 2006 begins, we are focused on expansion of our flagship subsidiary, Midwest Bank and Trust Company, both through expanded relationships in the communities we already serve and through strategic acquisitions and selective branch expansion," he added. "We believe our internal control systems and management depth can accommodate significant growth in the years ahead."

Quarterly Review of Core Income

Fourth quarter income from continuing operations (excluding the year-ago impact of the western Illinois subsidiary) improved to $6,670,000, or $0.30 per diluted share, from a loss of $3,278,000, or $0.18 per diluted share for the fourth quarter of 2004. Core income from continuing operations increased 131% to $6,670,000 from $2,884,000 a year ago. (Core income from continuing operations, a non-GAAP measure detailed in the table below, provides greater insight into comparisons between periods by eliminating the impact of specific charges related to the company's turnaround process as well as the write down of the other real estate and life insurance benefit.)

$ in thousands, except         4Q 2005  3Q 2005  2Q 2005  1Q 2005  4Q 2004
 per share amounts             -------  -------  -------  -------  -------

Income (loss) from              $6,670   $5,913 $(17,149)  $2,977  $(3,278)
 Continuing Operations
Life insurance benefit               -     (789)       -        -        -
Loss on U.S. Agency debt
 securities, net of tax              -        -   10,595        -        -
Charge from prepayment of
 FHLB advances, net of tax           -        -    5,886        -    2,158
Charge from unwinding of
 swaps, net of tax                   -        -    2,206        -        -
Write down on other real
 estate owned, net of tax            -        -    1,502        -        -
Charge from redemption of
 trust preferred securities,
 net of tax                          -        -      318        -        -
Employment severance charges,
 net of tax                          -        -      123        -      218
Impairment loss on equity
 securities, net of tax              -        -        -        -    3,786
Core Income from Continuing
 Operations (1)                 $6,670   $5,124   $3,481   $2,977   $2,884

Diluted EPS from Continuing
 Operations                     $ 0.30   $ 0.29   $(0.94)  $ 0.16   $(0.18)
Core Diluted EPS from
 Continuing Operations (1)      $ 0.30   $ 0.25   $ 0.19   $ 0.16   $ 0.16

(1)  See attached reconciliation table.
Net Interest Margin and Core Efficiency Ratio Trends
$ in thousands                 4Q 2005  3Q 2005  2Q 2005  1Q 2005  4Q 2004
                               -------  -------  -------  -------  -------
Interest Income                $32,101  $28,880  $26,731  $24,532  $23,877
Interest Expense               $14,385  $12,457  $12,661  $11,294  $ 9,594
Net Interest Income            $17,716  $16,423  $14,070  $13,238  $14,283
Net Interest Margin - FTE        3.57%    3.53%    3.08%    3.01%    3.17%
Core Efficiency Ratio           50.66%   55.88%   63.89%   65.47%   56.97%
Total interest income increased 34% in the fourth quarter of 2005 to $32.1 million from $23.9 million in the fourth quarter of 2004, largely as a result of a 45% increase in loan interest to $23.0 million from $15.9 million. Total loans outstanding grew 23% to $1.4 billion at December 31, 2005 from $1.1 billion a year earlier. Total loans at year end were up 6% from $1.3 billion at September 30, 2005.

Total interest expense grew at a 50% rate to $14.4 million in the fourth quarter of 2005 from $9.6 million in the same period in 2004, reflecting higher costs of funds and the movement from interest-bearing demand deposits to certificates of deposits. Deposits increased 1% to $1.5 billion at December 31, 2005 from $1.5 billion a year earlier, while declining less than 1% from September 30, 2005 levels.

Net interest margin widened to 3.57% in the fourth quarter of 2005 from 3.17% a year earlier, while up slightly from 3.53% in the third quarter of 2005. "Deposit growth is a key mandate for Midwest Bank and Trust Company," he said. "As we emphasize deeper relationships with customers in our targeted markets, we are focused on both the deposit and loan sides of the equation." Giancola noted that there is strong competition among Chicago area banks for deposits, especially lower cost demand deposits, NOW, and money market accounts.

The company's core efficiency ratio also improved, reflecting stronger core earnings from expanded lending activity and overall revenue growth. The core efficiency ratio improved to 50.7% in the fourth quarter from 57.0% a year earlier and 55.9% in the third quarter of 2005.

Asset Quality Ratios

                        12/31/2005 9/30/2005 6/30/2005 3/31/2005 12/31/2004
Allowance for loan      ---------- --------- --------- --------- ----------
 losses as % of loans        1.31      1.41      1.43      1.47      1.48
Nonaccruing loans
 as % of loans               0.58      0.54      0.54      0.77      0.85
Allowance for loan losses
 as % of nonaccruing loans    225       261       263       193       174
Net loan charge-offs as %
 of quarter-to-date
 average loans               0.12      0.08      0.13      0.01      0.20
The company's net loan charge-offs declined to $382,000 in the fourth quarter from $531,000 in the fourth quarter of 2004. Net loan charge-offs were up from $239,000 in the third quarter of 2005.

The company's allowance for loan losses declined to 1.31% of loans outstanding at December 31, 2005 from 1.48% at the end of 2004 and 1.41% at September 30, 2005. The allowance for loan losses represented 225% of nonaccruing loans at year-end 2005, compared with 174% a year earlier and 261% at September 30, 2005.

Public Offering and Repositioning Strengthen Balance Sheet

Stronger lending activity, the successful public offering of common stock and the sale of the western Illinois subsidiary yielded a stronger balance sheet at year-end 2005 than at the close of 2004, more than compensating for the repositioning charges, severance and other expenses incurred as part of the company's turnaround.

$ in thousands,      12/31/2005  9/30/2005  6/30/2005  3/31/2005 12/31/2004
 except per          ---------- ---------- ---------- ---------- ----------
 share data
Total Assets         $2,307,608 $2,225,097 $2,526,163 $2,287,753 $2,236,813
Total Loans          $1,351,908 $1,277,432 $1,219,026 $1,153,395 $1,097,992
Investment Securities
 and Other
 Related Assets (2)  $  758,357 $  749,930 $  735,163 $  685,532 $  695,787
Deposits             $1,523,384 $1,533,225 $1,502,208 $1,496,964 $1,501,646
Deposits (non-
 interest-bearing)   $  158,406 $  154,652 $  157,055 $  148,700 $  162,610
Deposits
 (interest-bearing)  $1,364,978 $1,378,573 $1,345,153 $1,348,264 $1,339,036
Loan/Deposit Ratio          89%        83%        81%        77%        73%
Borrowings           $  538,480 $  442,255 $  481,319 $  369,408 $  320,636
Stockholders' Equity $  216,126 $  215,186 $  140,099 $  135,792 $  137,423
Book Value Per Share $     9.91 $     9.87 $     7.65 $     7.44 $     7.66

(2) Includes investment securities, federal funds and other short-term
    investments, and net due from broker. See attached reconciliation
    table.
Stockholders' equity increased 57% to $216.1 million at December 31, 2005 from $137.4 million at December 31, 2004, while book value per share grew 29% to $9.91 from $7.66. Investment securities and other related assets, as described above, increased 9% to $758.4 million at year-end 2005 from $695.8 million at year-end 2004, largely reflecting the repositioned portfolio with higher yield and reduced duration. Expanded emphasis on lending generated a significant increase in the company's loan/deposit ratio, which grew to 89% at December 31, 2005 from 73% at December 31, 2004 and 83% at September 30, 2005.

"We plan to capitalize on the strength of our balance sheet as we expand our market share in the Chicago metropolitan area," Giancola said. "This market presents substantial growth opportunities for well managed community banks, and we plan to capitalize on these opportunities."

Financial Repositioning Yields Full-Year Loss from Continuing Operations

Write-offs and expenses related to the company's repositioning and turnaround initiatives led to a $1.6 million ($0.08 per diluted share) loss from continuing operations for 2005, versus net income of $3.1 million ($0.17 per diluted share) in 2004. Core income from operations, as defined previously, which excludes these write-offs and expenses, increased 80% to $18.3 million ($0.92 per diluted share) in 2005 from $10.1 million ($0.55 per diluted share) in 2004.

$ in thousands, except per share amounts               2005        2004
                                                     --------    --------
Income (Loss) from Continuing Operations             $ (1,589)   $  3,072
Life insurance benefit                                   (789)          -
Loss on U.S. Agency debt securities, net of tax        10,595           -
Charge from prepayment of FHLB advances, net of tax     5,886       2,158
Charge from unwinding of swaps, net of tax              2,206           -
Write down on other real estate owned, net of tax       1,502           -
Charge from redemption of trust preferred securities,
 net of tax                                               318           -
Employment severance charges, net of tax                  123         218
Impairment loss on equity securities, net of tax            -       3,786
Retirement benefit obligation, net of tax                   -         902
Core Income from Continuing Operations (1)           $ 18,252    $ 10,136

Diluted EPS from Continuing Operations               $  (0.08)   $   0.17
Core Diluted EPS from Continuing Operations (1)      $   0.92    $   0.55

(1) See attached reconciliation table.
"The fundamental performance of our company as a community banking organization improved throughout the past year as we significantly lowered our risk profile," Giancola noted. "We believe we can continue to achieve stronger results at Midwest Bank and Trust Company, and continue the earnings momentum established in the third and fourth quarters of 2005."
$ in thousands                  2005         2004
                              --------     --------
Interest Income               $112,244     $ 91,962
Interest Expense              $ 50,797     $ 41,780
Net Interest Income           $ 61,447     $ 50,182
Net Interest Margin - FTE        3.31%        2.82%
Core Efficiency Ratio           58.35%       63.09%
Expanded lending activity and expense control were key drivers of improved core earnings in 2005. Loan growth was 23% in 2005. Interest income rose 22% to $112.2 million in 2005 from $92.0 million in 2004, while interest expense rose 22% to $50.8 million from $41.8 million. Net interest income grew 22% to $61.4 million from $50.2 million and net interest margin widened to 3.31% from 2.82%. The company reduced its core efficiency ratio for the year to 58.4% from 63.1% in 2004, due to expanded income.

James J. Giancola, president and chief executive officer, and Daniel R. Kadolph, chief financial officer, will review financial results and outlook with investors via a webcast and conference call to be conducted on Thursday, January 26, 2006 at 10:00 A.M. EST/9:00 A.M. CST. Interested parties wishing to participate in the interactive portion of the call can dial in at (877) 407-0778 or (201) 689-8565 for International calls. The live webcast can be accessed at www.midwestbanc.com and will be available for replay on that website through April 26, 2006. The audio replay may be accessed through February 2, 2006 at (877) 660-6853 or (201) 612-7415 for International calls, account number 286, conference ID number 186914. Information on MBHI is available on the Internet at www.midwestbanc.com.

Midwest Banc Holdings, Inc. provides a wide range of retail and commercial lending services, personal and corporate trust services, residential mortgage origination, and securities and insurance brokerage activities throughout the greater Chicago metropolitan area. The Company's principal operating subsidiaries are: Midwest Bank and Trust Company, Midwest Financial and Investment Services, Inc., and Midwest Bank Insurance Services, L.L.C.

This press release contains certain "Forward-Looking Statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and should be reviewed in conjunction with the Company's Annual Report on Form 10-K and other publicly available information regarding the Company, copies of which are available from the Company upon request. Such publicly available information sets forth certain risks and uncertainties related to the Company's business which should be considered in evaluating "Forward-Looking Statements."

                               MIDWEST BANC HOLDINGS, INC.
                               CONSOLIDATED BALANCE SHEETS
                                     (In thousands)

                                                (Unaudited)
                                                December 31,   December 31,
                                                    2005          2004
                                                ------------  ------------
ASSETS
Cash                                            $     58,329  $     49,245
Federal funds sold and other short-term
 investments                                          12,270       169,779
Securities available-for-sale                        687,937       437,050
Securities held-to-maturity (fair value:
 $58,332 at December 31, 2005 and
 $89,010 at December 31, 2004)                        59,451        88,958
Federal Reserve and Federal Home
 Loan Bank stock, at cost                             14,661        13,830
Loans                                              1,351,908     1,097,992
Allowance for loan losses                            (17,760)      (16,217)
                                                ------------  ------------
        Net loans                                  1,334,148     1,081,775
Cash value of life insurance                          44,433        43,229
Premises and equipment, net                           22,247        23,515
Other real estate                                     11,154         8,064
Core deposit and other intangibles, net                1,788         2,217
Goodwill                                                 891           891
Assets held for sale                                       -       274,023
Other assets                                          60,299        44,237
                                                ------------  ------------
        Total assets                            $  2,307,608  $  2,236,813
                                                ============  ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits
  Non-interest-bearing                          $    158,406  $    162,610
  Interest-bearing                                 1,364,978     1,339,036
                                                ------------  ------------
        Total deposits                             1,523,384     1,501,646
Federal funds purchased                               68,000             -
Securities sold under agreements to repurchase       264,808       146,885
Advances from the Federal Home Loan Bank             150,000       118,079
Junior subordinated debt owed to unconsolidated
 trusts                                               55,672        55,672
Due to broker                                          1,301             -
Liabilities held for sale                                  -       250,456
Other liabilities                                     28,317        26,652
                                                ------------  ------------
        Total liabilities                          2,091,482     2,099,390
                                                ------------  ------------
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value,
 1,000,000 shares authorized; none issued                  -             -
Common stock, $.01 par value, 32,000,000
 shares authorized; 22,139,089 shares issued at
 December 31, 2005 and 18,668,140 share issued
 at December 31, 2004                                    221           187
Surplus                                              134,857        65,781
Retained earnings                                     92,121        95,829
Unearned stock-based compensation                     (3,013)       (2,642)
Accumulated other comprehensive loss                  (7,606)      (16,457)
Treasury stock, at cost (325,311 shares
 at December 31, 2005 and 586,413 shares
 at December 31, 2004)                                  (454)       (5,275)
                                                ------------  ------------
  Total stockholders' equity                         216,126       137,423
                                                ------------  ------------
     Total liabilities and
      stockholders' equity                      $  2,307,608  $  2,236,813
                                                ============  ============



                        MIDWEST BANC HOLDINGS, INC.
              CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
                   (In thousands, except per share data)

                                  Three Months Ended    Twelve Months Ended
                               -------------------------  ----------------
                                   December    September      December
                                      31,          30,           31,
                               -------------------------  ----------------
                                 2005     2004     2005     2005     2004
                               -------  -------  -------  -------  -------
Interest Income
   Loans                       $22,983  $15,902  $20,825  $79,947  $59,370
   Securities
      Taxable                    8,174    7,353    7,192   29,429   28,028
      Exempt from federal
       income taxes                669      117      340    1,248      615
   Trading securities                -        -      198      388    1,560
   Dividend income from
    Federal Reserve and Federal
    Home Loan Bank stock           157      208      183      727    1,058
   Federal funds sold and other
    short-term investments         118      297      142      505    1,331
                               -------  -------  -------  -------  -------
      Total interest income     32,101   23,877   28,880  112,244   91,962
Interest Expense
   Deposits                      9,470    7,640    8,521   34,067   27,652
   Federal funds purchased         412       36      317    1,016       68
   Securities sold under
    agreement to repurchase      2,216    1,081    1,404    6,213    4,249
   Advances from the Federal
    Home Loan Bank               1,335     (101)   1,340    5,701    6,244
   Junior subordinated debt
    owed to unconsolidated
    trusts                         952      938      875    3,791    3,547
   Notes payable                     -        -        -        9       20
                               -------  -------  -------  -------  -------
      Total interest expense    14,385    9,594   12,457   50,797   41,780
                               -------  -------  -------  -------  -------

Net interest income             17,716   14,283   16,423   61,447   50,182
Provision for loan losses          149    1,800      813    2,589    3,400
                               -------  -------  -------  -------  -------
Net interest income after
 provision for loan losses      17,567   12,483   15,610   58,858   46,782
Noninterest Income
   Service charges on deposit
    accounts                     1,273    1,264    1,335    5,139    5,255
   Net losses on securities
    transactions                     -     (664)       -  (17,440)  (3,786)
   Impairment loss on equity
    securities                       -   (6,248)       -        -   (6,248)
   Net trading profits              13      185      269      413      209
   Gains on sale of loans          103      101      116      357      537
   Insurance and brokerage
    commissions                    339      392      414    1,519    1,424
   Trust income                     79       72       80      303      304
   Increase in cash surrender
    value of life insurance        478      331      399    1,765    1,450
   Life insurance benefit            -        -      789      789        -
   Other                           253      200      160      910      767
                               -------  -------  -------  -------  -------
      Total noninterest income   2,538   (4,367)   3,562   (6,245)     (88)
Noninterest Expenses
   Salaries and employee
    benefits                     6,447    5,736    6,889   26,693   24,284
   Occupancy and equipment         993    1,557    1,576    5,584    5,990
   Professional services         1,355    1,444    1,029    4,723    4,672
   Loss on extinguishment of
    debt                             -    3,560        -   13,125    3,560
   Other                         2,069    2,426    1,783   10,402    7,985
                               -------  -------  -------  -------  -------
      Total noninterest
       expenses                 10,864   14,723   11,277   60,527   46,491
                               -------  -------  -------  -------  -------
Income (loss) before income
 taxes                           9,241   (6,607)   7,895   (7,914)     203
Provision for income taxes       2,571   (3,329)   1,982   (6,325)  (2,869)
                               -------  -------  -------  -------  -------
Income (loss) from continuing
 operations                      6,670   (3,278)   5,913   (1,589)   3,072
                               -------  -------  -------  -------  -------
Discontinued operations
   Income (loss) from
    discontinued operations
    before income taxes              -   (3,993)   6,554    9,236   (2,002)
   Provision for income taxes        -   (1,669)     925    1,703   (1,306)
                               -------  -------  -------  -------  -------
   Income (loss) from
    discontinued operations          -   (2,324)   5,629    7,533     (696)
                               -------  -------  -------  -------  -------
Net Income (Loss)              $ 6,670  $(5,602) $11,542  $ 5,944  $ 2,376
                               =======  =======  =======  =======  =======
Basic earnings per share from
 continuing operations         $  0.31  $ (0.18) $  0.30  $ (0.08) $  0.17
                               =======  =======  =======  =======  =======
Basic earnings per share from
 discontinued operations       $  0.00  $ (0.13) $  0.28  $  0.38  $ (0.04)
                               =======  =======  =======  =======  =======
Basic earnings per share       $  0.31  $ (0.31) $  0.58  $  0.30  $  0.13
                               =======  =======  =======  =======  =======
Diluted earnings per share
 from continuing operations    $  0.30  $ (0.18) $  0.29  $ (0.08) $  0.17
                               =======  =======  =======  =======  =======
Diluted earnings per share
 from discontinued operations  $  0.00  $ (0.13) $  0.28  $  0.38  $ (0.04)
                               =======  =======  =======  =======  =======
Diluted earnings per share     $  0.30  $ (0.31) $  0.57  $  0.30  $  0.13
                               =======  =======  =======  =======  =======
Cash dividends per common
 share                         $  0.12  $  0.12  $  0.12  $  0.48  $  0.48
                               =======  =======  =======  =======  =======

Average common shares
 outstanding
Basic                           21,797   17,906   20,060   19,573   17,888
Diluted - continuing operations 22,077   17,906   20,354   19,573   18,291
Diluted - discontinued
 operations                     22,077   17,906   20,354   19,845   17,888
Diluted                         22,077   17,906   20,354   19,845   18,291




                      MIDWEST BANC HOLDINGS, INC.
                   CONSOLIDATED NET INTEREST MARGIN

The following table sets forth the average balances, net interest income
and expense and average yields and rates for the Company's interest-earning
assets and interest-bearing liabilities for the indicated periods on a
tax-equivalent basis assuming a 35.0% tax rate for 2005 and 2004.

                                    For the Three Months Ended
                                        December 31, 2005
                                 Average                   Average
                                 Balance       Interest      Rate
                              -------------  -------------  ------
                                     (Dollars in thousands)
Interest-Earning
  Assets:
Federal funds sold and other
 short term investments       $      13,879  $         118    3.40%
Securities:
  Taxable(1)                        682,325          8,588    5.03
  Exempt from federal income
   taxes(1)                          69,454          1,029    5.93
                              -------------  -------------
Total securities                    751,779          9,617    5.12
FRB and FHLB stock                   14,560            157    4.31
Loans:
  Commercial loans(1)(3)(4)         190,735          3,492    7.32
  Commercial real estate
   loans(1)(3)(4)(6)                904,757         16,376    7.24
  Agricultural loans(3)(4)            2,182             41    7.52
  Consumer real estate
   loans(3)(4)(6)                   201,228          3,079    6.12
  Consumer installment
   loans(3)(4)                        4,005             79    7.89
                              -------------  -------------
Total loans                       1,302,907         23,067    7.08
                              -------------  -------------
Total interest-earning assets $   2,083,125  $      32,959    6.32%
                              =============  =============
Interest-Bearing
  Liabilities:
Deposits:
Interest-bearing demand
 deposits                     $     153,319  $         322    0.84%
Money-market demand accounts
 and savings accounts               344,009          1,455    1.69
Time deposits less than
 $100,000                           757,250          6,639    3.51
Time deposits of $100,000 or
 more                                88,148            872    3.96
Public funds                         19,018            182    3.83
                              -------------  -------------
Total interest-bearing
 deposits                         1,361,744          9,470    2.80
Borrowings:
Federal funds purchased and
 repurchase agreements              289,409          2,628    3.63
FHLB advances                       150,000          1,335    3.56
Notes payable and other
 borrowings                          55,672            952    6.84
                              -------------  -------------
Total borrowings                    495,081          4,915    3.96
                              -------------  -------------
Total interest-bearing
 liabilities                  $   1,856,825  $      14,385    3.08%
                              =============  =============
Net interest income (tax
 equivalent)(1)(5)                           $      18,574    3.24%
                                             =============
Net interest margin (tax
 equivalent)(1)                                               3.57%

Net interest income(2)(5)                    $      17,716
                                             =============
Net interest margin(2)                                        3.40%


                                    For the Three Months Ended
                                        December 31, 2004
                                 Average                   Average
                                 Balance       Interest      Rate
                              -------------  -------------  ------
                                     (Dollars in thousands)
Interest-Earning
  Assets:
Federal funds sold and other
 short term investments       $      59,025  $         297    2.01%
Securities:
  Taxable(1)                        745,338          7,767    4.17
  Exempt from federal income
   taxes(1)                          10,678            180    6.74
                              -------------  -------------
Total securities                    756,016          7,947    4.20
FRB and FHLB stock                   13,830            208    6.02
Loans:
  Commercial loans(1)(3)(4)         171,790          2,490    5.80
  Commercial real estate
   loans(1)(3)(4)(6)                736,970         11,538    6.26
  Agricultural loans(3)(4)            1,460             23    6.30
  Consumer real estate
   loans(3)(4)(6)                   133,194          1,868    5.61
  Consumer installment
   loans(3)(4)                        3,926             74    7.54
                              -------------  -------------
Total loans                       1,047,340         15,993    6.12
                              -------------  -------------
Total interest-earning assets $   1,876,211  $      24,445    5.20%
                              =============  =============
Interest-Bearing
  Liabilities:
Deposits:
Interest-bearing demand
 deposits                     $     194,681  $         709    1.46%
Money-market demand accounts
 and savings accounts               343,788          1,391    1.62
Time deposits less than
 $100,000                           725,139          5,128    2.83
Time deposits of $100,000 or
 more                                64,387            367    2.28
Public funds                          8,000             45    2.25
                              -------------  -------------
Total interest-bearing
 deposits                         1,335,995          7,640    2.28
Borrowings:
Federal funds purchased and
 repurchase agreements              169,814          1,117    2.63
FHLB advances                       176,787           (101)  -0.23
Notes payable and other
 borrowings                          55,672            938    6.74
                              -------------  -------------
Total borrowings                    402,273          1,954    1.96
                              -------------  -------------
Total interest-bearing
 liabilities                  $   1,738,268  $       9,594    2.20%
                              =============  =============
Net interest income (tax
 equivalent)(1)(5)                           $      14,851    3.00%
                                             =============
Net interest margin (tax
  equivalent)(1)                                              3.17%

Net interest income(2)(5)                    $      14,283
                                             =============
Net interest margin(2)                                        3.05%


                                    For the Three Months Ended
                                        September 30, 2005
                                 Average                   Average
                                 Balance       Interest      Rate
                              -------------  -------------  ------
                                     (Dollars in thousands)
Interest-Earning
  Assets:
Federal funds sold and other
 short term investments       $      15,252  $         142    3.72%
Securities:
  Taxable(1)                        643,561          7,803    4.85
  Exempt from federal income
   taxes(1)                          34,432            524    6.09
                              -------------  -------------
Total securities                    677,993          8,327    4.92
FRB and FHLB stock                   14,093            183    5.19
Loans:
  Commercial loans(1)(3)(4)         179,926          3,106    6.91
  Commercial real estate
   loans(1)(3)(4)(6)                854,888         14,876    6.96
  Agricultural loans(3)(4)            1,565             29    7.41
  Consumer real estate
   loans(3)(4)(6)                   190,306          2,823    5.93
  Consumer installment
   loans(3)(4)                        3,796             75    7.90
                              -------------  -------------
Total loans                       1,230,481         20,909    6.80
                              -------------  -------------
Total interest-earning assets $   1,937,819  $      29,561    6.12%
                              =============  =============
Interest-Bearing
  Liabilities:
Deposits:
Interest-bearing demand
 deposits                     $     170,647  $         355    0.83%
Money-market demand accounts
 and savings accounts               335,347          1,275    1.52
Time deposits less than
 $100,000                           771,113          6,353    3.30
Time deposits of $100,000 or
 more                                44,929            384    3.42
Public funds                         18,900            154    3.26
                              -------------  -------------
Total interest-bearing
 deposits                         1,340,936          8,521    2.56
Borrowings:
Federal funds purchased and
 repurchase agreements              224,556          1,721    3.07
FHLB advances                       150,000          1,340    3.57
Notes payable and other
 borrowings                          55,672            875    6.29
                              -------------  -------------
Total borrowings                    430,228          3,936    3.64
                              -------------  -------------
Total interest-bearing
 liabilities                  $   1,771,164  $      12,457    2.80%
                              =============  =============
Net interest income (tax
 equivalent)(1)(5)                           $      17,104    3.32%
                                             =============
Net interest margin (tax
 equivalent)(1)                                               3.53%

Net interest income(2)(5)                    $      16,423
                                             =============
Net interest margin(2)                                        3.39%


(1)  Adjusted for 35% tax rate in 2005 and 2004 and adjusted for the
     dividends-received deduction where applicable.
(2)  Not adjusted for 35% tax rate in 2005 and 2004 or for the
     dividends-received deduction.
(3)  Nonaccrual loans are included in the average balance; however,
     these loans are not earning any interest.
(4)  Includes loan fees which are immaterial.
(5)  The following table reconciles reported net interest income on
     a tax equivalent basis for the periods presented:
                                           4Q05       4Q04       3Q05
  Net interest income                   $  17,716  $  14,283  $  16,423
  Tax equivalent adjustment to net
   interest income                            858        568        681
                                        ---------  ---------  ---------
  Net interest income, tax equivalent
   basis                                $  18,574  $  14,851  $  17,104
                                        =========  =========  =========
(6)  Includes construction loans.




                    MIDWEST BANC HOLDINGS, INC.
                 CONSOLIDATED FINANCIAL HIGHLIGHTS
        (Dollars and shares in thousands, except per share data)

                                           Three Months      Twelve Months
                                              Ended             Ended
                                     ------------------------------------
                                       December    September   December
                                          31,         30,         31,
                                     ------------------------------------
                                     2005    2004    2005    2005    2004
                                     ----    ----    ----    ----    ----
Income Statement Data:
  Net income (loss)                 $6,670 $(5,602)$11,542  $5,944  $2,376
  Core net income (2)                6,670   3,291   5,840  20,872  12,171
  Core efficiency ratio
  (2) (3) (4) (8)                    50.66%  56.97%  55.88%  58.35%  63.09%

Per Share Data and Other:
  Basic earnings per share
   from continuing operations        $0.31  $(0.18)  $0.30  $(0.08)  $0.17
  Basic earnings per share
   from discontinued operations       0.00   (0.13)   0.28    0.38   (0.04)
  Basic earnings per share            0.31   (0.31)   0.58    0.30    0.13
  Diluted earnings per share
   from continuing operations         0.30   (0.18)   0.29   (0.08)   0.17
  Diluted earnings per share
   from discontinued operations       0.00   (0.13)   0.28    0.38   (0.04)
  Diluted earnings per share          0.30   (0.31)   0.57    0.30    0.13
  Cash dividends declared             0.12    0.12    0.12    0.48    0.48
  Book value at end of period         9.91    7.66    9.87    9.91    7.66
  Tangible book value at end
   of period (10)                     9.87    7.61    9.83    9.87    7.61
  Stock price at end of period       22.25   21.87   23.06   22.25   21.87
  Average stock price                22.42   20.98   21.91   21.22   21.75

  Full time equivalent employees    402.00  382.00  388.00  402.00  382.00

Selected Financial Ratios:
  Return on average assets
   from continuing operations (5)     1.18%  -0.56%   0.98%  -0.07%   0.13%
  Core return on average assets
   from continuing operations (2)(5)  1.18    0.49    0.85    0.79    0.44
  Return on average equity
   from continuing operations (6)    12.37   -9.37   13.49   -0.95    2.17
  Core return on average equity
   from continuing operations (2)(5) 12.37    8.24   11.69   10.86    7.17
  Dividend payout from
   continuing operations             39.55     n/a   44.58     n/a  279.59
  Loans to deposits at end
   of period                         88.74   73.12   83.32   88.74   73.12
  Average equity to average
   assets                             9.50    5.97    7.30    7.29    6.12
  Equity to assets at end
   of period                          9.37    6.14    9.67    9.37    6.14
  Tangible capital to assets
   at end of period (10)              9.33    6.10    9.63    9.33    6.10
  Tier I capital to risk-weighted
   assets (11)                       16.97   13.27   17.33   16.97   13.27
  Total capital to risk-weighted
   assets (11)                       18.07   14.65   18.48   18.07   14.65
  Net interest margin
   (tax equivalent) (7)(8)            3.57    3.17    3.53    3.31    2.82
  Allowance for loan losses to
   total loans at the end of period   1.31    1.48    1.41    1.31    1.48
  Net loans charged off to
   average loans                      0.12    0.20    0.08    0.09    0.17
  Nonaccruing loans to loans
   at the end of period               0.58    0.85    0.54    0.58    0.85
  Nonperforming assets to total
   assets (9)                         0.83    0.78    0.81    0.83    0.78
  Allowance to nonaccruing loans      2.25x   1.74x   2.61x   2.25x   1.74x


                                             December 31,     September 30,
                                          ------------------------------
                                          2005         2004         2005
                                          ----         ----         ----
Balance Sheet Data:
  Total assets                        $2,307,608   $2,236,813   $2,225,097
  Total earning assets                 2,126,227    1,807,609    2,048,772
  Average earning assets
   (quarter-to-date)                   2,083,125    1,876,211    1,937,819
  Average earning assets
   (year-to-date)                      1,938,236    1,863,460    1,889,409
  Average assets (quarter-to-date)     2,252,078    2,330,635    2,382,602
  Average assets (year-to-date)        2,305,086    2,310,594    2,322,965
  Total loans                          1,351,908    1,097,992    1,277,432
  Average loans (quarter-to-date)      1,302,907    1,047,340    1,230,481
  Average loans (year-to-date)         1,211,678      986,167    1,180,934
  Total securities                       747,388      526,008      751,342
  Average securities
   (quarter-to-date)                     751,779      756,016      677,993
  Average securities (year-to-date)      693,901      744,224      674,397
  Allowance for loan losses               17,760       16,217       17,993
  Total deposits                       1,523,384    1,501,646    1,533,225
  Average deposits (quarter-to-date)   1,517,163    1,495,560    1,499,732
  Average deposits (year-to-date)      1,500,286    1,451,581    1,494,614
  Borrowings                             538,480      320,636      442,255
  Stockholders' equity                   216,126      137,423      215,186
  Tangible stockholders' equity (10)     215,235      136,532      214,295
  Average equity (quarter-to-date)       213,872      139,185      173,838
  Average equity (year-to-date)          168,025      141,444      152,575


Common Shares Outstanding                 21,814       17,932       21,793
Average Shares Outstanding
 (quarter-to-date)                        21,797       17,906       20,060
Average Shares Outstanding
 (year-to-date)                           19,573       17,888       18,824


(1) Core net income is net income excluding the balance sheet repositioning
    and severance charges, the gain on sale of subsidiary, write down of
    other real estate, and the life insurance benefit.  The following table
    reconciles reported net income to core net income for the periods
    presented:
                             Quarter-to-date               Year-to-date
                      ---------------------------        ----------------
                      4Q05       4Q04        3Q05        2005        2004
Net income
 (loss)         $    6,670  $   (5,602) $   11,542  $    5,944  $    2,376
Gain on sale of
 subsidiary, net
 of tax                  -           -      (6,881)     (6,881)          -
Life insurance
 benefit                 -           -        (789)       (789)          -
Loss on U.S.
 Agency debt
 securities,
 net of tax              -           -       1,968      12,563           -
Charge from
 prepayment of
 FHLB advances,
 net of tax              -       2,555           -       5,886       2,555
Charge from
 unwinding of
 swaps, net
 of tax                  -           -           -       2,206           -
Write down on
 other real
 estate owned,
 net of tax              -           -           -       1,502           -
Charge from
 redemption of
 trust preferred
 securities, net
 of tax                  -           -           -         318           -
Employment
 severance
 charges, net of
 tax                     -         218           -         123         218
Impairment loss
 on equity
 securities,
 net of tax              -       6,120           -           -       6,120
Retirement
 benefit obligation,
 net of tax              -           -           -           -         902
                ----------  ----------  ----------  ----------  ----------
Core net income $    6,670  $    3,291  $    5,840  $   20,872  $   12,171
                ----------  ----------  ----------  ----------  ----------
Core diluted
 earnings per
 share          $    0.30  $      0.18  $     0.29  $     1.05  $     0.67


                           Quarter-to-date               Year-to-date
                      ---------------------------      ----------------
                      4Q05       4Q04       3Q05      2005         2004

Income (loss)
 from
 continuing
 operations     $    6,670  $   (3,278) $     5,913 $   (1,589) $    3,072
Gain on sale of
 subsidiary, net
 of tax                  -           -            -          -           -
Life insurance
 benefit                 -           -         (789)      (789)          -
Loss on U.S.
 Agency debt
 securities,
 net of tax              -           -           -      10,595           -
Charge from
 prepayment of
 FHLB advances,
 net of tax              -       2,158           -       5,886       2,158
Charge from
 unwinding of
 swaps, net of
 tax                     -           -           -       2,206           -
Write down on
 other real
 estate owned,
 net of tax              -           -           -       1,502           -
Charge from
 redemption of
 trust preferred
 securities,
 net of tax              -           -           -         318           -
Employment
 severance
 charges,
 net of tax              -         218           -         123         218
Impairment loss
 on equity
 securities,
 net of tax              -       3,786           -           -       3,786
Retirement
 benefit
 obligation,
 net of tax              -           -           -           -         902
                ----------  ----------  ----------  ----------  ----------
Core income
 from
 continuing
 operations     $    6,670  $    2,884  $    5,124  $   18,252  $   10,136
                ----------  ----------  ----------  ----------  ----------
Core diluted
 earnings per
 share from
 continuing
 operation     $     0.30  $     0.16   $     0.25  $     0.92  $     0.55

(2)  The following table reconciles investment securities to investment
     securities and other related assets for the periods presented:

                        12/31/2005 9/30/2005 6/30/2005 3/31/2005 12/31/2004

Investment securities    $ 747,388 $ 751,342 $ 518,245 $ 681,434 $ 526,008
Federal funds and other
 short-term investments     12,270     5,440     9,294     4,098   169,779
Net due from broker         (1,301)   (6,852)  207,624         -         -
                         --------- --------- --------- --------- ---------
Total investment
 securities and other
 related assets          $ 758,357 $ 749,930 $ 735,163 $ 685,532 $ 695,787
                         ========= ========= ========= ========= =========

(3)   Excludes net gains or losses on securities transactions.
(4)   Noninterest expense less amortization and other real estate expenses
      divided by the sum of net interest income (tax equivalent) plus
      noninterest income.
(5)   Net income divided by average assets for the period.
(6)   Net income divided by average equity for the period.
(7)   Net interest income, on a tax equivalent basis, divided by average
      interest earning assets for the period.
(8)   The following table reconciles reported net interest income on a tax
      equivalent basis for the periods presented:

         QTD                             4Q05      4Q04      3Q05
         Net interest income           $ 17,716  $ 14,283  $ 16,423
         Tax equivalent adjustment to
          net interest income               858       568       681
                                       --------  --------  --------
         Net interest income, tax
          equivalent basis             $ 18,574  $ 14,851  $ 17,104
                                       --------  --------  --------


         YTD                             2005      2004
         Net interest income           $ 61,447  $ 50,182
         Tax equivalent adjustment to
          net interest income             2,628     2,399
                                       --------  --------
         Net interest income, tax
          equivalent basis             $ 64,075  $ 52,581
                                       --------  --------

(9)   Includes total nonaccrual loans and other real estate owned.
(10)  Stockholders' equity less goodwill.  The following table reconciles
      reported stockholders' equity to tangible stockholders' equity for
      the periods presented:

                                         4Q05      4Q04      3Q05
         Stockholders' equity          $216,126  $137,423  $215,186
         Goodwill                           891       891       891
                                       --------  --------  --------
         Tangible stockholders'
          equity                       $215,235  $136,532  $214,295
                                       --------  --------  --------

(11)    These regulatory capital ratios exclude the accumulated other
        comprehensive loss as follows:

                                         4Q05      4Q04      3Q05
         Accumulated other
          comprehensive loss           $ (7,606) $(16,457) $ (3,937)

Contact Information

  • For further information, please contact:
    Daniel R. Kadolph
    Senior Vice President and Chief Financial Officer
    (708) 450-6759