SOURCE: Midwest Banc Holdings, Inc.

January 29, 2007 05:00 ET

Midwest Banc Holdings, Inc. Reports 2006 Results

Net Income Rises for Full Year, Declines in Fourth Quarter Loan Workout Leads to Chargeoff, Loss Provision

MELROSE PARK, IL -- (MARKET WIRE) -- January 29, 2007 -- Midwest Banc Holdings, Inc. (NASDAQ: MBHI) today reported that 2006 net earnings nearly tripled to $17.7 million, or $0.75 per diluted share, from $5.9 million, or $0.30 per diluted share, in 2005. For the fourth quarter ended December 31, 2006, net income declined 56% to $2.9 million, or $0.12 per diluted share, from $6.7 million, or $0.30 per diluted share, for the same period in 2005.

The increase in annual earnings resulted largely from the July 1, 2006 acquisition of Royal American Corporation (Royal), loan growth and the absence of charges related to the company's 2005 balance sheet repositioning. In the fourth quarter, earnings declined primarily as a result of previously reported charges to reflect the deterioration of a loan relationship with a single, long-standing customer.

The fourth quarter charges, announced earlier this year, included a loan loss provision of $5.5 million and an interest income reversal of $1.0 million. The combination of these items reduced fourth quarter net income by $4.0 million, or $0.16 per diluted share. Excluding this impact, the company would have reported fourth quarter net income of $6.9 million, or $0.28 per diluted share.

"During 2006, our employees delivered growth in our customer relationships, including loans and wealth management, and we achieved all the benefits we anticipated when we acquired Royal American Corporation at mid-year," said James J. Giancola, president and chief executive officer. Giancola noted that the integration of Royal advanced more quickly than expected, yielding both the anticipated cost savings and strong additions to senior management.

"The commitment and contribution of all our employees are in evidence throughout the organization, although our financial results were adversely affected by losses relating to a large loan relationship," Giancola added.

Expansion Continues in Challenging Market Environment


$ in thousands             4Q2006    3Q2006    2Q2006    1Q2006    4Q2005
                          --------  --------  --------  --------  --------
Interest Income           $ 44,710  $ 45,903  $ 35,290  $ 33,359  $ 32,101
Interest Expense          $ 25,535  $ 24,510  $ 17,737  $ 16,198  $ 14,385
Net Interest Income       $ 19,175  $ 21,393  $ 17,553  $ 17,161  $ 17,716
Noninterest Income        $  3,790  $  4,147  $  3,601  $  3,013  $  2,538
Top Line Revenue          $ 22,965  $ 25,540  $ 21,154  $ 20,174  $ 20,254
Net Interest Margin-FTE       3.08%     3.40%     3.46%     3.39%     3.57%
Core Efficiency Ratio (1)    66.10%    56.45%    57.38%    55.20%    50.66%
(1) Excludes balance sheet repositioning charges and merger
related charges. See attached reconciliation table.
The company reported total interest income of $44.7 million in the fourth quarter, up 39% from the prior-year period and approximately 3% lower than in the third quarter of 2006. Total loans grew 44%, reaching $1.9 billion for the full year, due to the Royal acquisition and organic growth. The company acquired $500.6 million in total loans through Royal. Loan activity, which slowed as the Royal operations were integrated in the third quarter, resumed its upward trend with 2% growth ($37.8 million net new loans) in the fourth quarter. The average yield on earning assets increased to 6.96% in the fourth quarter from 6.32% a year earlier but declined from 7.08% in the third quarter of 2006. The decrease in the fourth quarter was due to the $1.0 million interest income reversal previously announced. For the full year, the average yield on earning assets increased to 6.83% from 5.93%.

"The highly competitive market continues to challenge our pricing structure as we pursue high quality new loan relationships," Giancola said.

The same factors influenced deposit levels and pricing. Total interest expense of $25.5 million in the fourth quarter of 2006 was 78% higher than in the same quarter of 2005, mainly due to the Royal acquisition, and 4% higher than in the third quarter of 2006. On a full-year basis, interest expense of $84.0 million was 65% higher than in 2005, mainly due to the Royal acquisition and the higher rates on borrowings. Borrowings also increased as a result of the cash payment of $64.6 million relating to the Royal acquisition. The inverted yield curve negatively affected margins, as did intense price competition in the bank's geographic service area.

Deposits declined 3% from the end of the third quarter to December 31, 2006, reflecting price discipline applied by the bank in attracting cost-effective funding. For the full year, deposits increased 28% to just under $2.0 billion, largely due to the Royal acquisition. Demand deposits closed the year at $275.4 million, up 1% from the end of the third quarter and 74% from December 31, 2005, with $125.5 million attributed to Royal. The loan-to-deposit ratio rose to 99% at December 31, 2006, up from 94% three months earlier and 89% a year ago. The loan-to-asset ratio increased to 66% at year end, from 65% at the end of the third quarter and 59% one year earlier.

Pricing and cost pressures led to a narrowing of net interest margin for both the fourth quarter and the full year. Net interest income of $19.2 million in the fourth quarter increased 8% from the year-earlier period and declined 10% from the third quarter of 2006. For the full year, net interest income rose 23% to $75.3 million. Net interest margin, on a tax equivalent basis, declined to 3.08% in the fourth quarter from 3.57% in the same period of 2005 and 3.40% in the third quarter. The $1.0 million interest income reversal reduced the net interest margin by 16 basis points for the fourth quarter. For the full year, the net interest margin, on a tax equivalent basis, increased to 3.32% from 3.31% a year ago.

Loan Workout Reduces Results for Quarter and Year

Earnings were reduced by provisions for loan losses recorded to reflect the deterioration of a large lending relationship. In the fourth quarter, the company recorded a $5.5 million provision for loan losses and charged off $7.5 million of its loans to reflect the deterioration of the relationship with this borrower. Previously, the company recorded a loan loss provision of $5.0 million relating to this problem relationship in the second quarter of 2006. On December 31, 2006, total nonaccrual loans related to this relationship were $25.8 million, representing 60% of total nonaccrual loans.

"Resolution of this problem account is a priority for senior management," Giancola said. "We have increased our collateral position, as reported in the third quarter, and we are working closely with the borrower and others to achieve timely closure of the relationship. This is a complex situation, however, we expect to be dealing with this workout for an extended period."

Noninterest income, excluding net gains on securities transactions, of $3.7 million in the fourth quarter was up 48% from the same quarter of 2005, partly as a result of increased trust revenues acquired with Royal and higher service charges on deposit accounts. Noninterest income, excluding net gains on securities transactions, declined 10% from third quarter levels, due to $624,000 of trading profits recorded in the earlier period. Noninterest income, excluding net gains on securities transactions and trading profits, increased 6%, or $225,000 when compared to the third quarter. For the full year, noninterest income, excluding net losses on securities transactions, was $14.7 million compared to $11.2 million in the prior year, reflecting a 31% increase.

In the fourth quarter, the core efficiency ratio was 66.10% compared with 56.45% in the third quarter and 50.66% in the prior year period. For the full year, the core efficiency ratio of 58.86% increased slightly from 58.00% in 2005.

Income tax expense was $1.4 million, or 7.4% of pre-tax income, for the year ended December 31, 2006. During the fourth quarter of 2006, tax liabilities established for tax uncertainties in 2002 were no longer required, primarily as a result of the expiration of the statute of limitations. In addition, tax expense in 2006 was reduced by an increase in low income housing tax credits.

Loan Quality


                        12/31/2006 9/30/2006 6/30/2006 3/31/2006 12/31/2005
                        ---------- --------- --------- --------- ----------
Loans 90 days past and
 accruing               $       34 $      29 $      14 $      15 $        4
Nonaccrual and impaired
 loans not accruing     $   42,826 $  21,555 $  10,925 $   7,888 $    7,905
Other real estate       $    2,640 $   2,864 $   5,237 $  11,036 $   11,154
Total nonperforming
 assets                 $   45,466 $  24,419 $  16,162 $  18,924 $   19,059
Allowance for loan
 losses as a % of loans       1.19      1.34      1.47      1.26       1.32
Nonaccruing loans as a
 % of loans                   2.20      1.13      0.77      0.56       0.59
Allowance for loan
 losses as a % of
 nonaccruing loans              54       118       191       225        225
Net loan charge-offs as
 a % of QTD average
 loans                        1.62      0.03      0.53      0.01       0.12
Nonperforming assets to
 total assets                 1.55      0.83      0.68      0.81       0.83
"Our loan quality ratios have been affected by this one large loan relationship. Excluding this, the allowance for loan losses would be 119% of the nonaccrual loans, and the ratio of nonperforming assets to total assets at December 31, 2006, would be 0.67%," noted Giancola.

Total nonaccrual loans of $42.8 million at year end represented 2.20% of total loans, up from $21.6 million, or 1.13% of total loans at the end of the third quarter, and $7.9 million, or 0.59% of total loans, one year ago. The allowance for loan losses declined 9% to $23.2 million at year end from $25.5 million at September 30, 2006, due largely to the $7.5 million chargeoff. The allowance for loan losses at year end was 31% higher than at the close of 2005. As a percentage of nonaccrual loans, the allowance for loan losses declined to 54% at December 31, 2006, from 118% at September 30, 2006 and 225% a year ago.

Nonperforming assets increased to $45.5 million at year end from $24.4 million at the close of the third quarter and $19.1 million a year ago. As a percentage of total assets, nonperforming assets increased to 1.55% at December 31, 2006, from 0.83% at both September 30, 2006 and December 31, 2005.

Assets and Stockholders' Equity

$ in thousands, except per share
 data                                12/31/2006    9/30/2006    6/30/2006
                                     -----------  -----------  -----------
Total assets                         $ 2,942,046  $ 2,942,301  $ 2,361,602
Total loans                          $ 1,946,816  $ 1,909,026  $ 1,422,830
Investment securities and other
 related assets (2)                  $   644,814  $   710,632  $   719,534
Deposits                             $ 1,956,810  $ 2,026,836  $ 1,584,067
Deposits (noninterest- bearing)      $   275,381  $   272,442  $   165,837
Deposits (interest- bearing)         $ 1,681,429  $ 1,754,394  $ 1,418,230
Loan/Deposit Ratio                            99%          94%          90%
Borrowings as a % of total deposits           33%          29%          33%
Stockholders’ Equity                 $   289,208  $   289,477  $   213,112
Book Value Per Share                 $     11.73  $     11.67  $      9.71



$ in thousands, except per share
 data                                 3/31/2006   12/31/2005
                                     -----------  -----------
Total assets                         $ 2,336,448  $ 2,307,608
Total loans                          $ 1,403,700  $ 1,349,996
Investment securities and other
 related assets (2)                  $   733,449  $   758,357
Deposits                             $ 1,616,634  $ 1,523,384
Deposits (noninterest- bearing)      $   161,528  $   158,406
Deposits (interest- bearing)         $ 1,455,106  $ 1,364,978
Loan/Deposit Ratio                            87%          89%

Borrowings as a % of total deposits           29%          35%
Stockholders’ Equity                 $   219,187  $   216,126
Book Value Per Share                 $      9.99  $      9.91
(2) Includes investment securities, federal funds and other short-term
investments, and net due from broker. See attached reconciliation table.
Total assets increased 28% to $2.9 billion at December 31, 2006, from $2.3 billion on December 31, 2005, due to both the Royal acquisition and internal growth, and were essentially flat with the end of the third quarter. Stockholders' equity expanded 34% to $289.2 million from $216.1 million a year earlier, due to the Royal acquisition, and was even with the September 30, 2006 level. Book value per share grew 18% to $11.73 at the end of 2006 from $9.91 at the close of 2005. Shares outstanding increased 13% to 24.7 million from 21.8 million a year earlier, primarily due to the Royal acquisition. Book value per share at year end was about 1% higher than the $11.67 level at September 30, 2006, with approximately the same number of shares outstanding.

Stock Repurchases Continue

During the year, 204,000 shares were repurchased at an average price of $23.37. These shares were acquired in private and public transactions as part of the company's 5% stock repurchase program. There are 1.0 million shares available to be repurchased under this program. The company will continue to buy back shares in private and public transactions.

Conference Call

The company will conduct a conference call to discuss its fourth quarter results on January 29, 2007, at 11:00 A.M. Eastern/10:00 A.M. Central. The webcast and call will be hosted by members of management. A brief discussion of quarterly results and trends will be followed by questions from professional investors and analysts invited to participate in the interactive portion of the discussion.

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 30, 2007. The audio replay may be accessed through February 6, 2007 at (877) 660-6853 or (201) 612-7415 for international calls, account number 286, conference ID number 227576.

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.; Midwest Bank Insurance Services, LLC; and Royal American Investment Services, Inc.

This news 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 (UNAUDITED)
           (In thousands, except share and per share data)

                                            December 31,    December 31,
                                                2006            2005
                                            ------------    ------------
ASSETS
Cash                                        $     91,630    $     58,329
Federal funds sold and other short-term
 investments                                       8,902          12,270
                                            ------------    ------------
     Total cash and cash equivalents             100,532          70,599
Securities available-for-sale                    589,981         687,937
Securities held-to-maturity (fair value:
 $44,687 at December 31, 2006 and $58,332
 at December 31, 2005)                            45,931          59,451
Federal Reserve and Federal Home Loan
 Bank stock, at cost                              23,592          14,661
Loans held for sale                                2,672           1,912
Loans                                          1,946,816       1,349,996
Allowance for loan losses                        (23,229)        (17,760)
                                            ------------    ------------
     Net loans                                 1,923,587       1,332,236
Cash value of life insurance                      65,220          44,433
Premises and equipment, net                       21,960          22,247
Other real estate                                  2,640          11,154
Core deposit and other intangibles, net           11,273           1,788
Goodwill                                          79,488             891
Other assets                                      75,170          60,299
                                            ------------    ------------
     Total assets                           $  2,942,046    $  2,307,608
                                            ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits
     Noninterest-bearing                    $    275,381    $    158,406
     Interest-bearing                          1,681,429       1,364,978
                                            ------------    ------------
          Total deposits                       1,956,810       1,523,384
Federal funds purchased                           66,000          68,000
Securities sold under agreements to
 repurchase                                      201,079         264,808
Advances from the Federal Home Loan Bank         319,883         150,000
Junior subordinated debentures                    65,812          55,672
Due to broker                                          —           1,301
Other liabilities                                 43,254          28,317
                                            ------------    ------------
     Total liabilities                         2,652,838       2,091,482
                                            ------------    ------------

STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value,
 1,000,000 shares authorized; none issued              —               —
Common stock, $0.01 par value, 64,000,000
 shares authorized; 25,504,095 shares
 issued at December 31, 2006 and
 22,139,089 shares issued at
 December 31, 2005                                   255             221
Additional paid-in capital                       200,797         134,857
Retained earnings                                 97,807          92,121
Restricted stock                                       —          (3,013)
Accumulated other comprehensive loss              (6,273)         (7,606)
Treasury stock, at cost (840,678 shares at
 December 31, 2006 and 325,311 shares at
 December 31, 2005)                               (3,378)           (454)
                                            ------------    ------------
     Total stockholders' equity                  289,208         216,126
                                            ------------    ------------
          Total liabilities and
           stockholders' equity             $  2,942,046    $  2,307,608
                                            ============    ============


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

                               -------------Three Months Ended-------------
                               Dec 31,  Sep 30,  June 30, March 31, Dec 31,
                                 2006     2006     2006     2006     2005
                               -------- -------- -------- -------- --------

Interest Income
   Loans                       $ 36,011 $ 36,918 $ 26,663 $ 24,387 $ 22,983
   Securities
      Taxable                     7,450    7,484    7,469    7,922    8,174
      Exempt from federal
       income taxes                 962      956      833      819      669
   Trading securities                 -      189        -        -        -
   Dividend income from Federal
    Reserve and Federal Home
    Loan Bank stock                 218      199      139      137      157
   Federal funds sold and other
    short-term investments           69      157      186       94      118
                               -------- -------- -------- -------- --------
      Total interest income      44,710   45,903   35,290   33,359   32,101
Interest Expense
   Deposits                      17,495   16,963   12,323   10,737    9,470
   Federal funds purchased          776      352      150      248      412
   Securities sold under
    agreement to repurchase       2,651    2,857    2,208    2,671    2,216
   Advances from the Federal
    Home Loan Bank                3,286    3,001    1,982    1,539    1,335
   Junior subordinated
    debentures                    1,327    1,337    1,074    1,003      952
                               -------- -------- -------- -------- --------
      Total interest expense     25,535   24,510   17,737   16,198   14,385
                               -------- -------- -------- -------- --------
Net interest income              19,175   21,393   17,553   17,161   17,716
Provision for loan losses         5,500    1,550    5,000        -      149
                               -------- -------- -------- -------- --------
Net interest income after
 provision for loan losses       13,675   19,843   12,553   17,161   17,567
Noninterest Income
   Service charges on deposit
    accounts                      1,572    1,543    1,415    1,203    1,273
   Net gains (losses) on
    securities transactions          42        -        -     (195)       -
   Net trading profits                -      624        -        -       13
   Gains on sale of loans           270      194      205       91      103
   Insurance and brokerage
    commissions                     514      478      486      512      339
   Trust                            399      357       86       77       79
   Increase in cash surrender
    value of life insurance         694      676      534      490      478
   Life insurance benefit             -        -        -        -        -
   Gain on extinguishment of debt     -        -      625      625        -
   Other                            299      275      250      210      253
                               -------- -------- -------- -------- --------
      Total noninterest income    3,790    4,147    3,601    3,013    2,538
Noninterest Expenses
   Salaries and employee
    benefits                     10,058    9,318    7,618    7,482    6,447
   Occupancy and equipment        2,088    1,885    1,647    1,456      993
   Professional services          1,172    1,452    1,267    1,080    1,355
   Marketing                        591      418      587      453      274
   Other real estate owned           75       47      220      (31)       8
   Merger related charges             -    1,595        -        -        -
   Other                          2,511    2,479    1,702    1,445    1,787
                               -------- -------- -------- -------- --------
      Total noninterest
       expenses                  16,495   17,194   13,041   11,885   10,864
                               -------- -------- -------- -------- --------
Income  before income taxes
 and discontinued operations        970    6,796    3,113    8,289    9,241
Provision (benefit) for income
 taxes                           (1,963)     814      223    2,348    2,571
                               -------- -------- -------- -------- --------
Income from continuing
 operations                       2,933    5,982    2,890    5,941    6,670
                               -------- -------- -------- -------- --------
Discontinued operations
   Income from discontinued
    operations before income
    taxes                             -        -        -        -        -
   Provision for income taxes         -        -        -        -        -
                               -------- -------- -------- -------- --------
   Income from discontinued
    operations                        -        -        -        -        -
                               -------- -------- -------- -------- --------
Net Income                     $  2,933 $  5,982 $  2,890 $  5,941 $  6,670
                               ======== ======== ======== ======== ========
Basic earnings per share from
 continuing operations         $   0.12 $   0.24 $   0.13 $   0.27 $   0.31
                               ======== ======== ======== ======== ========
Basic earnings per share from
 discontinued operations       $      - $      - $      - $      - $      -
                               ======== ======== ======== ======== ========
Basic earnings per share       $   0.12 $   0.24 $   0.13 $   0.27 $   0.31
                               ======== ======== ======== ======== ========
Diluted earnings per share
 from continuing operations    $   0.12 $   0.24 $   0.13 $   0.27 $   0.30
                               ======== ======== ======== ======== ========
Diluted earnings per share
 from discontinued operations  $      - $      - $      - $      - $      -
                               ======== ======== ======== ======== ========
Diluted earnings per share     $   0.12 $   0.24 $   0.13 $   0.27 $   0.30
                               ======== ======== ======== ======== ========
Cash dividends per common
 share                         $   0.13 $   0.13 $   0.13 $   0.12 $   0.12
                               ======== ======== ======== ======== ========

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

                                              ----Twelve Months Ended-----
                                              December 31,    December 31,
                                                  2006            2005
                                              ------------    ------------
Interest Income
   Loans                                      $    123,979    $     79,947
   Securities
      Taxable                                       30,325          29,429
      Exempt from federal income taxes               3,570           1,248
   Trading securities                                  189             388
   Dividend income from Federal Reserve and
    Federal Home Loan Bank stock                       693             727
   Federal funds sold and other short-term
    investments                                        506             505
                                              ------------    ------------
      Total interest income                        159,262         112,244
Interest Expense
   Deposits                                         57,518          34,067
   Federal funds purchased                           1,526           1,016
   Securities sold under agreement to repurchase    10,387           6,213
   Advances from the Federal Home Loan Bank          9,808           5,701
   Junior subordinated debentures                    4,741           3,791
   Notes payable                                         -               9
                                              ------------    ------------
      Total interest expense                        83,980          50,797
                                              ------------    ------------
Net interest income                                 75,282          61,447
Provision for loan losses                           12,050           2,589
                                              ------------    ------------
Net interest income after provision for loan
 losses                                             63,232          58,858
Noninterest Income
   Service charges on deposit accounts               5,733           5,139
   Net losses on securities transactions              (153)        (17,440)
   Net trading profits                                 624             413
   Gains on sale of loans                              760             357
   Insurance and brokerage commissions               1,990           1,519
   Trust                                               919             303
   Increase in cash surrender value of life
    insurance                                        2,394           1,765
   Life insurance benefit                                -             789
   Gain on extinguishment of debt                    1,250               -
   Other                                             1,034             910
                                              ------------    ------------
      Total noninterest income                      14,551          (6,245)
Noninterest Expenses
   Salaries and employee benefits                   34,476          26,693
   Occupancy and equipment                           7,076           5,584
   Professional services                             4,971           4,723
   Loss on extinguishment of debt                        -          13,125
   Marketing                                         2,049           1,755
   Other real estate owned                             311           2,551
   Merger related                                    1,595               -
   Other                                             8,137           6,096
                                              ------------    ------------
      Total noninterest expenses                    58,615          60,527
                                              ------------    ------------
Income (loss) before income taxes and
 discontinued operations                            19,168          (7,914)
Provision (benefit) for income taxes                 1,422          (6,325)
                                              ------------    ------------
Income (loss) from continuing operations            17,746          (1,589)
                                              ------------    ------------
Discontinued operations
   Income from discontinued operations
    before income taxes                                  -           9,236
   Provision for income taxes                            -           1,703
                                              ------------    ------------
   Income from discontinued operations                   -           7,533
                                              ------------    ------------
Net Income                                    $     17,746    $      5,944
                                              ============    ============
Basic earnings per share from continuing
 operations                                   $       0.76    $      (0.08)
                                              ============    ============
Basic earnings per share from discontinued
 operations                                   $          -    $       0.38
                                              ============    ============
Basic earnings per share                      $       0.76    $       0.30
                                              ============    ============
Diluted earnings per share from continuing
 operations                                   $       0.75    $      (0.08)
                                              ============    ============
Diluted earnings per share from discontinued
 operations                                   $          -    $       0.38
                                              ============    ============
Diluted earnings per share                    $       0.75    $       0.30
                                              ============    ============
Cash dividends per common share               $       0.51    $       0.48
                                              ============    ============


                        MIDWEST BANC HOLDINGS, INC.
                     CONSOLIDATED NET INTEREST MARGIN

    The following tables set 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% tax rate.

                                           For the Three Months Ended
                                     -------------------------------------
                                               December 31, 2006
                                     -------------------------------------
                                       Average                   Average
                                       Balance      Interest       Rate
                                     ------------ ------------ -----------
                                             (Dollars in thousands)
Interest-Earning Assets:
Federal funds sold and interest-
 bearing deposits due from banks     $      5,223 $         69        5.28%
Securities:
   Taxable(1)                             597,167        8,090        5.42
   Exempt from federal income
    taxes(1)                              100,410        1,480        5.90
                                     ------------ ------------
Total securities                          697,577        9,570        5.48
FRB and FHLB stock                         21,885          218        3.98
Loans:
   Commercial loans(1)(3)(4)              372,473        7,101        7.63
   Commercial real estate
    loans(1)(3)(4)(6)                   1,270,500       24,150        7.60
   Agricultural loans(1)(3)(4)              2,563           51        7.96
   Consumer real estate
    loans(3)(4)(6)                        264,365        4,560        6.90
   Consumer installment loans(3)(4)        11,312          211        7.46
                                     ------------ ------------
Total loans                             1,921,213       36,073        7.52
                                     ------------ ------------
Total interest-earning assets        $  2,645,898 $     45,930        6.96%
                                     ============ ============

Interest-Bearing Liabilities:
Deposits:
Interest-bearing demand deposits     $    155,351 $        642        1.65%
Money-market demand accounts and
 savings accounts                         401,962        2,609        2.60
Time deposits less than $100,000          721,362        8,492        4.71
Time deposits of $100,000 or more         436,659        5,739        5.26
Public funds                                1,065           13        4.88
                                     ------------ ------------
Total interest-bearing deposits         1,716,399       17,495        4.08
Borrowings:
Federal funds purchased and
 repurchase agreements                    275,700        3,427        4.97
FHLB advances                             281,724        3,286        4.67
Notes payable and other borrowings         65,806        1,327        8.07
                                     ------------ ------------
Total borrowings                          623,230        8,040        5.16
                                     ------------ ------------
Total interest-bearing liabilities   $  2,339,629 $     25,535        4.36%
                                     ============ ============
Net interest income (tax
 equivalent)(1)(5)                                $     20,395        2.60%
                                                  ============
Net interest margin (tax
 equivalent)(1)                                                       3.08%

Net interest income(2)(5)                         $     19,175
                                                  ============
Net interest margin(2)                                                2.90%





                                           For the Three Months Ended
                                     -------------------------------------
                                               December 31, 2005
                                     -------------------------------------
                                       Average                   Average
                                       Balance      Interest       Rate
                                     ------------ ------------ -----------
                                             (Dollars in thousands)
Interest-Earning Assets:
Federal funds sold and interest-
 bearing deposits due from banks     $     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(1)(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
                                     -------------------------------------
                                               September 30, 2006
                                     -------------------------------------
                                       Average                   Average
                                       Balance      Interest       Rate
                                     ------------ ------------ -----------
                                             (Dollars in thousands)
Interest-Earning Assets:
Federal funds sold and interest-
 bearing deposits due from banks     $     13,057 $        157        4.81%
Securities:
   Taxable(1)                             604,176        8,273        5.48
   Exempt from federal income
    taxes(1)                               99,746        1,471        5.90
                                     ------------ ------------
Total securities                          703,922        9,744        5.52
FRB and FHLB stock                         20,914          199        3.81
Loans:
   Commercial loans(1)(3)(4)              406,046        8,242        8.12
   Commercial real estate
    loans(1)(3)(4)(6)                   1,241,622       23,925        7.71
   Agricultural loans(1)(3)(4)              2,701           54        8.00
   Consumer real estate
    loans(3)(4)(6)                        257,589        4,529        7.03
   Consumer installment loans(3)(4)        13,569          247        7.28
                                     ------------ ------------
Total loans                             1,921,527       36,997        7.72
                                     ------------ ------------
Total interest-earning assets        $  2,659,420 $     47,097        7.08%
                                     ============ ============

Interest-Bearing Liabilities:
Deposits:
Interest-bearing demand deposits     $    165,672 $        568        1.37%
Money-market demand accounts and
 savings accounts                         413,626        2,589        2.50
Time deposits less than $100,000          748,929        8,118        4.34
Time deposits of $100,000 or more         417,731        5,461        5.23
Public funds                               19,397          227        4.68
                                     ------------ ------------
Total interest-bearing deposits         1,765,355       16,963        3.84
Borrowings:
Federal funds purchased and
 repurchase agreements                    255,718        3,209        5.02
FHLB advances                             254,862        3,001        4.71
Notes payable and other borrowings         65,788        1,337        8.13
                                     ------------ ------------
Total borrowings                          576,368        7,547        5.24
                                     ------------ ------------
Total interest-bearing liabilities   $  2,341,723 $     24,510        4.20%
                                     ============ ============

Net interest income (tax
 equivalent)(1)(5)                                $     22,587        2.88%
                                                  ============
Net interest margin (tax
 equivalent)(1)                                                       3.40%

Net interest income(2)(5)                         $     21,393
                                                  ============
Net interest margin(2)                                                3.22%


(1) Adjusted for 35% tax rate in 2006 and 2005 and adjusted for the
    dividends-received deduction where applicable.
(2) Not adjusted for 35% tax rate in 2006 and 2005 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.
(5) The following table reconciles reported net interest income on a tax
    equivalent basis for the periods presented:


                                            For the three months ended,
                                            December 31,      September 30,
                                         2006         2005        2006
                                     ------------ ------------ -----------
Net interest income                  $     19,175 $     17,716 $    21,393
Tax equivalent adjustment to net
 interest income                            1,220          858       1,194
                                     ------------ ------------ -----------
Net interest income, tax equivalent
 basis                               $     20,395 $     18,574 $    22,587
                                     ============ ============ ===========

(6) Includes construction loans.


                        MIDWEST BANC HOLDINGS, INC.
                     CONSOLIDATED NET INTEREST MARGIN


                                          For the Twelve Months Ended
                                     -------------------------------------
                                               December 31, 2006
                                     -------------------------------------
                                       Average                   Average
                                       Balance      Interest       Rate
                                     ------------ ------------ -----------
                                             (Dollars in thousands)
Interest-Earning Assets:
Federal funds sold and interest-
 bearing deposits due from banks     $     10,009 $        506        5.06%
Securities:
   Taxable(1)                             613,485       32,593        5.31
   Exempt from federal income
    taxes(1)                               93,347        5,492        5.88
                                     ------------ ------------
Total securities                          706,832       38,085        5.39
FRB and FHLB stock                         18,105          693        3.83
Loans:
   Commercial loans(1)(3)(4)              296,533       23,219        7.83
   Commercial real estate
    loans(1)(3)(4)(6)                   1,110,828       83,891        7.55
   Agricultural loans(3)(4)                 2,456          191        7.78
   Consumer real estate
    loans(3)(4)(6)                        242,629       16,332        6.73

   Consumer installment loans(3)(4)         8,502          631        7.42
                                     ------------ ------------
Total loans                             1,660,948      124,264        7.48
                                     ------------ ------------
Total interest-earning assets        $  2,395,894 $    163,548        6.83%
                                     ============ ============
Interest-Bearing Liabilities:
Deposits:
Interest-bearing demand deposits     $    150,503 $      1,759        1.17%
Money-market demand accounts and
 savings accounts                         346,933        7,571        2.18
Time deposits less than $100,000          747,676       31,370        4.20
Time deposits of $100,000 or more         326,516       16,287        4.99
Public funds                               11,703          531        4.54
                                     ------------ ------------
Total interest-bearing deposits         1,583,331       57,518        3.63
Borrowings:
Federal funds purchased and
 repurchase agreements                    255,843       11,913        4.66
FHLB advances                             228,811        9,808        4.29
Notes payable and other borrowings         60,776        4,741        7.80
                                     ------------ ------------
Total borrowings                          545,430       26,462        4.85
                                     ------------ ------------
Total interest-bearing liabilities   $  2,128,761 $     83,980        3.95%
                                     ============ ============
Net interest income (tax
 equivalent)(1)(5)                                $     79,568        2.88%
                                                  ============
Net interest margin (tax
 equivalent)(1)                                                       3.32%

Net interest income(2)(5)                         $     75,282
                                                  ============
Net interest margin(2)                                                3.14%





                                         For the Twelve Months Ended
                                     -----------------------------------
                                             December 31, 2005
                                     -----------------------------------
                                       Average                 Average
                                       Balance    Interest      Rate
                                     ----------- ----------- ----------
                                           (Dollars in thousands)
Interest-Earning Assets:
Federal funds sold and interest-
 bearing deposits due from banks     $    18,576 $       505       2.72%
Securities:
   Taxable(1)                            662,100      31,448       4.75
   Exempt from federal income
    taxes(1)                              31,801       1,920       6.04
                                     ----------- -----------
Total securities                         693,901      33,368       4.81
FRB and FHLB stock                        14,081         727       5.16
Loans:
   Commercial loans(1)(3)(4)             183,553      12,194       6.64
   Commercial real estate
    loans(1)(3)(4)(6)                    842,889      57,130       6.78
   Agricultural loans(3)(4)                1,615         116       7.18
   Consumer real estate
    loans(3)(4)(6)                       179,787      10,539       5.86

   Consumer installment loans(3)(4)        3,834         293       7.64
                                     ----------- -----------
Total loans                            1,211,678      80,272       6.62
                                     ----------- -----------
Total interest-earning assets        $ 1,938,236 $   114,872       5.93%
                                     =========== ===========
Interest-Bearing Liabilities:
Deposits:
Interest-bearing demand deposits     $   176,355 $     2,147       1.22%
Money-market demand accounts and
 savings accounts                        347,792       5,718       1.64
Time deposits less than $100,000         747,611      23,814       3.19
Time deposits of $100,000 or more         60,405       1,950       3.23
Public funds                              13,943         438       3.14
                                     ----------- -----------
Total interest-bearing deposits        1,346,106      34,067       2.53
Borrowings:
Federal funds purchased and
 repurchase agreements                   232,326       7,229       3.11
FHLB advances                            134,194       5,701       4.25
Notes payable and other borrowings        55,874       3,800       6.80
                                     ----------- -----------
Total borrowings                         422,394      16,730       3.96
                                     ----------- -----------
Total interest-bearing liabilities   $ 1,768,500 $    50,797       2.87%
                                     =========== ===========
Net interest income (tax
 equivalent)(1)(5)                               $    64,075       3.05%
                                                 ===========
Net interest margin (tax
 equivalent)(1)                                                    3.31%

Net interest income(2)(5)                        $    61,447
                                                 ===========
Net interest margin(2)                                             3.17%


(1) Adjusted for 35% tax rate in 2006 and 2005 and adjusted for the
    dividends-received deduction where applicable.
(2) Not adjusted for 35% tax rate in 2006 and 2005 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.
(5) The following table reconciles reported net interest income on a tax
    equivalent basis for the periods presented:



                                              For the twelve months ended,
                                                       December 31,
                                                     2006       2005
                                                 ----------- ----------
Net interest income                              $    75,282 $   61,447
Tax equivalent adjustment to net interest income       4,286      2,628
                                                 ----------- ----------
Net interest income, tax equivalent basis        $    79,568 $   64,075
                                                 =========== ==========

(6) Includes construction loans.


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

                                           Three Months Ended
                                ------------------------------------------
                               December September June    March  December
                                  31,      30,     30,      31,     31,
                                 2006     2006    2006     2006     2005
                               -------  -------  -------  -------  -------
Income Statement Data:
   Net income                  $ 2,933  $ 5,982  $ 2,890  $ 5,941  $ 6,670
   Core net income (1)           2,933    6,943    2,890    5,941    6,670
   Core efficiency ratio
   (1) (3) (4) (8)               66.10%   56.45%   57.38%   55.20%   50.66%

Per Share Data and Other:
   Basic earnings per share
    from continuing operations $  0.12  $  0.24  $  0.13  $  0.27  $  0.31
   Basic earnings per share
    from discontinued operations     —        —        —        —        —
   Basic earnings per share       0.12     0.24     0.13     0.27     0.31
   Diluted earnings per share
    from continuing operations    0.12     0.24     0.13     0.27     0.30
   Diluted earnings per share
    from discontinued operations     —        —        —        —        —
   Diluted earnings per share     0.12     0.24     0.13     0.27     0.30
   Cash dividends declared        0.13     0.13     0.13     0.12     0.12
   Book value at end of period   11.73    11.67     9.71     9.99     9.91
   Tangible book value at end
    of period (10)                8.05     8.03     9.60     9.88     9.78
   Stock price at end of period  23.75    24.42    22.25    25.94    22.25
   Average stock price           23.66    23.03    22.84    24.25    22.42

   Full time equivalent
    employees                      494      498      420      412      402

Selected Financial Ratios:
   Return on average assets
    from continuing
    operations (5)                0.39%    0.80%    0.50%    1.05%    1.18%
   Core return on average assets
    from continuing
    operations (1) (5)            0.39     0.93     0.50     1.05     1.18
   Return on average equity
    from continuing
    operations (6)                4.00     8.43     5.31    11.06    12.37
   Core return on average equity
    from continuing
    operations (1) (5)            4.00     9.79     5.31    11.06    12.37
   Dividend payout from
    continuing operations       111.08    54.70   100.24    44.29    39.55
   Loans to deposits at
    end of period                99.49    94.19    89.82    86.83    88.62
   Loans to assets at end
    of period                    66.17    64.88    60.25    60.08    58.50
   Average equity to
    average assets                9.87     9.48     9.42     9.46     9.50
   Equity to assets at
    end of period                 9.83     9.84     9.02     9.38     9.37
   Tangible capital to
    tangible assets at end
    of period (10) (11)           6.96     6.99     8.93     9.28     9.26
   Tier I capital to risk-
    weighted assets (12)         12.59    12.64    16.22    16.49    16.97
   Total capital to risk-
    weighted assets (12)         13.68    13.84    17.44    17.53    18.07
   Net interest margin (tax
    equivalent) (7) (8)           3.08     3.40     3.46     3.39     3.57
   Allowance for loan losses
    to total loans at the end
    of period                     1.19     1.34     1.47     1.26     1.32
   Net loans charged off to
    average loans                 1.62     0.03     0.53     0.01     0.12
   Nonaccruing loans to loans
    at the end of period          2.20     1.13     0.77     0.56     0.59
   Nonperforming assets to
    total assets (9)              1.55     0.83     0.68     0.81     0.83
   Allowance to nonaccruing
    loans                         0.54x   1.18x     1.91x    2.25x    2.25x


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

                                               Twelve Months Ended
                                            --------------------------
                                            December 31,   December 31,
                                                2006            2005
                                              --------        --------
Income Statement Data:
   Net Income                                 $ 17,746        $  5,944
   Core net income (1)                          18,707          20,036
   Core efficiency ratio (1) (3) (4) (8)         58.86%          58.00%

Per Share Data and Other:
   Basic earnings per share from continuing
    operations                                $   0.76        $  (0.08)
   Basic earnings per share from
    discontinued operations                       0.00            0.38
   Basic earnings per share                       0.76            0.30
   Diluted earnings per share from
    continuing operations                         0.75           (0.08)
   Diluted earnings per share from
    discontinued operations                       0.00            0.38
   Diluted earnings per share                     0.75            0.30
   Cash dividends declared                        0.51            0.48
   Book value at end of period                   11.73            9.91
   Tangible book value at end of period (10)      8.05            9.78
   Stock price at end of period                  23.75           22.25
   Average stock price                           23.44           21.22

   Full time equivalent employees                  494             402

Selected Financial Ratios:
   Return on average assets from continuing
    operations (5)                                0.67%          (0.07)%
   Core return on average assets from
    continuing operations  (1) (5)                0.71            0.76
   Return on average equity from continuing
    operations (6)                                7.03           (0.95)
   Core return on average equity from
    continuing operations (1) (5)                 7.41           10.37
   Dividend payout from continuing operations    67.95             n/a
   Loans to deposits at end of period            99.49           88.62
   Loans to assets at end of period              66.17           58.50
   Average equity to average assets               9.58            7.29
   Equity to assets at end of period              9.83            9.37
   Tangible capital to tangible assets at
    end of period (10) (11)                       6.96            9.26
   Tier I capital to risk-weighted assets (12)   12.59           16.97
   Total capital to risk-weighted assets (12)    13.68           18.07
   Net interest margin (tax equivalent) (7) (8)   3.32            3.31
   Allowance for loan losses to total loans
    at the end of period                          1.19            1.31
   Net loans charged off to average loans         0.59            0.09
   Nonaccruing loans to loans at the end
    of period                                     2.20            0.58
   Nonperforming assets to total assets (9)       1.55            0.83
   Allowance to nonaccruing loans                 0.54x           2.25x


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

                                      Three Months Ended
                     ------------------------------------------------------
                      December  September    June       March     December
                         31,        30,       30,        31,         31,
                        2006       2006       2006       2006       2005
                     ---------- ---------- ---------- ---------- ----------
Balance Sheet Data:
  Total assets       $2,942,046 $2,942,301 $2,361,602 $2,336,448 $2,307,608
  Total earning
   assets             2,617,894  2,628,847  2,170,311  2,128,688  2,126,227
  Average earning
   assets (quarter-
   to-date)           2,645,898  2,659,420  2,138,317  2,131,391  2,083,125
  Average assets
   (quarter-to-date)  2,946,366  2,967,572  2,319,713  2,303,413  2,252,078
  Total loans         1,946,816  1,909,026  1,422,830  1,403,700  1,349,996
  Average loans
   (quarter-to-date)  1,918,376  1,918,941  1,421,485  1,367,971  1,301,623
  Total securities      635,912    692,876    675,585    693,674    747,388
  Average securities
   (quarter-to-date)    697,577    703,922    688,634    737,667    751,779
  Allowance for loan
   losses                23,229     25,542     20,874     17,737     17,760
  Total deposits      1,956,810  2,026,836  1,584,067  1,616,634  1,523,384
  Average deposits
   (quarter-to-date)  1,996,592  2,062,014  1,605,473  1,551,065  1,517,163
  Borrowings            652,774    584,345    527,275    473,618    538,480
  Stockholders’
   equity               289,208    289,477    213,112    219,187    216,126
  Tangible
   stockholders’
   equity (10)          198,447    199,233    210,629    216,615    213,447
  Average equity
   (quarter-to-date)    290,776    281,367    218,505    217,807    213,872

Share Data:
  Common shares
   outstanding           24,663     24,796     21,946     21,933     21,814
  Basic                  24,725     24,811     21,942     21,871     21,797
  Diluted – continuing
   operations            25,083     25,176     22,176     22,136     22,077
  Diluted –
   discontinued
   operations                 —          —          —          —          —
  Diluted                25,083     25,176     22,176     22,136     22,077

                      Twelve Months Ended
                      -------------------
                      December   December
                         31,        31,
                        2006       2005
                     ---------- ----------
Balance Sheet Data:
  Total assets       $2,942,046 $2,307,608
  Total earning
   assets             2,617,894  2,126,227
  Average earning
   assets
   (year-to-date)     2,395,894  1,938,236
  Average assets
   (year-to-date)     2,635,138  2,305,086
  Total loans         1,946,816  1,349,996
  Average loans
   (year-to-date)     1,658,920  1,210,873
  Total securities      635,912    747,388
  Average securities
   (year-to-date)       706,832    693,901
  Allowance for loan
   losses                23,229     17,760
  Total deposits      1,956,810  1,523,384
  Average deposits
   (year-to-date)     1,803,968  1,500,286
  Borrowings            652,774    538,480
  Stockholders’
   equity               289,208    216,126
  Tangible
   stockholders’
   equity (10)          198,447    213,447
  Average equity
   (year-to-date)       252,406    168,025

Share Data:
  Common shares
   outstanding           24,663     21,814
  Basic                  23,348     19,573
  Diluted –
   continuing
   operations            23,790     19,573
  Diluted –
   discontinued
   operations                 —     19,845
  Diluted                23,790     19,845


(1) Core net income is net income excluding balance sheet repositioning
    charges, gain on sale of subsidiary, and merger related charges.
    Management believes that core net income is a more useful measure of
    operating performance since it excludes items that are not recurring
    in nature.  In addition, management believes core net income is more
    reflective of current trends.  The following table reconciles reported
    net income to core net income for the periods presented:



                                           Three Months Ended
                                           ------------------
                              December September   June    March   December
                                  31,      30,      30,      31,      31,
                                 2006     2006     2006     2006     2005
                               -------  -------  -------  -------  -------

Net income                     $ 2,933  $ 5,982  $ 2,890  $ 5,941  $ 6,670
Merger related charges, net
 of tax                              -      961        -        -        -
                               -------  -------  -------  -------  -------
Core net income                $ 2,933  $ 6,943  $ 2,890  $ 5,941  $ 6,670
                               =======  =======  =======  =======  =======

                             Twelve Months Ended
                             -------------------
                               December December
                                  31,      31,
                                 2006     2005
                               -------  -------

Net income                     $17,746  $ 5,944
Gain on sale of subsidiary,
 net of tax                          -   (6,881)
Loss on U.S. Agency debt
 securities, net of tax              -   12,563
Charge from prepayment of
 FHLB advances, net of tax           -    5,886
Charge from unwinding swaps,
 net of tax                          -    2,206
Charge from redemption of
 trust preferred securities,
 net of tax                          -      318
Merger related charges, net
 of tax                            961        -
                               -------  -------
Core net income                $18,707  $20,036
                               =======  =======

Core income from continuing operations is income from continuing operations
excluding balance sheet repositioning charges and merger related charges.
As explained above, core income from continuing operations provides greater
insight into comparisons between periods by eliminating the impact of
specific charges relating to the balance sheet repositioning.   The
following table reconciles reported income from continuing operations to
core income from continuing operations for the periods presented:

                                           Three Months Ended
                                           ------------------
                              December September   June    March   December
                                  31,      30,      30,      31,      31,
                                 2006     2006     2006     2006     2005
                               -------  -------  -------  -------  -------

Income from continuing
 operations                    $ 2,933  $ 5,982  $ 2,890  $ 5,941  $ 6,670
Merger related charges, net
 of tax                              -      961        -        -        -
                               -------  -------  -------  -------  -------
Core income from
 continuing operations         $ 2,933  $ 6,943  $ 2,890  $ 5,941  $ 6,670
                               =======  =======  =======  =======  =======

                             Twelve Months Ended
                             -------------------
                               December December
                                  31,      31,
                                 2006     2005
                               -------  -------

Income (loss) from continuing
 operations                    $17,746  $(1,589)
Loss on U.S. Agency debt
 securities, net of tax              -   10,595
Charge from prepayment of
 FHLB advances, net of tax           -    5,886
Charge from unwinding swaps,
 net of tax                          -    2,206
Charge from redemption of
 trust preferred securities,
 net of tax                          -      318
Merger related charges, net
 of tax                            961        -
                               -------  -------
Core income from continuing
 operations                    $18,707  $17,416
                               =======  =======

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

                     December   September  June 30,   March 31,  December
                     31, 2006   30, 2006     2006       2006     31, 2005
                     ---------- ---------- ---------  ---------- ---------

Investment
 securities          $  635,912 $  692,876 $ 675,585  $  693,674 $ 747,388
Federal funds and
 other short-term
 investments              8,902      2,647    52,152      14,965    12,270
Net due from broker           —     15,109    (8,203)     24,810    (1,301)
                     ---------- ---------- ---------  ---------- ---------
Total investment
 securities and
 other related
 assets              $  644,814 $  710,632 $ 719,534  $  733,449 $ 758,357
                     ========== ========== =========  ========== =========


(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. Core efficiency ratio excludes charges from the
    balance sheet repositioning and merger related charges. Management
    believes that the core efficiency ratio is a more useful measure since
    it excludes items that are not recurring in nature and is more
    reflective of current trends. The following tables reconcile reported
    noninterest expense to core noninterest expenses for the periods
    presented:




                                           Three Months Ended
                                           ------------------
                              December September   June    March   December
                                  31,      30,      30,      31,      31,
                                 2006     2006     2006     2006     2005
                               -------  -------  -------  -------  -------

Noninterest expenses           $16,495  $17,194  $13,041  $11,885  $10,864
Merger related charges               -   (1,595)       -        -        -
                               -------  -------  -------  -------  -------
Core noninterest expenses      $16,495  $15,599  $13,041  $11,885  $10,864
                               =======  =======  =======  =======  =======


                             Twelve Months Ended
                             -------------------
                               December December
                                  31,      31,
                                 2006     2005
                               -------  -------

Noninterest expenses           $58,615  $60,527
Charge from prepayment of
 FHLB advances                       -   (9,547)
Charge from unwinding swaps          -   (3,578)
Charge from redemption of
 trust preferred securities          -     (516)
Merger related charges          (1,595)       -
                               -------  -------

Core noninterest expenses      $57,020  $46,886
                               =======  =======


(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:

                                           Three Months Ended
                                           ------------------
                              December September   June    March   December
                                  31,      30,      30,      31,      31,
                                 2006     2006     2006     2006     2005
                               -------  -------  -------  -------  -------

Net interest income            $19,175  $21,393  $17,553  $17,161  $17,716
Tax equivalent adjustment to
 net interest income             1,220    1,194      943      929      858
                               -------  -------  -------  -------  -------
Net interest income, tax
 equivalent basis              $20,395  $22,587  $18,496  $18,090  $18,574
                               =======  =======  =======  =======  =======


                             Twelve Months Ended
                             -------------------
                               December December
                                  31,      31,
                                 2006     2005
                               -------  -------

Net interest income            $75,282  $61,447
Tax equivalent adjustment to
 net interest income             4,286    2,628
                               -------  -------
Net interest income, tax
 equivalent basis              $79,568  $64,075
                               =======  =======

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

                     December   September  June 30,   March 31,  December
                     31, 2006   30, 2006     2006       2006     31, 2005
                     ---------- ---------- ---------  ---------- ---------

Stockholders' equity $  289,208 $  289,477 $ 213,112  $  219,187 $ 216,126
Core deposit
 intangible and
 other intangibles,
 net                     11,273     11,677     1,592       1,681     1,788
Goodwill                 79,488     78,567       891         891       891
                     ---------- ---------- ---------  ---------- ---------
Tangible
 stockholders'
 equity              $  198,447 $  199,233 $ 210,629  $  216,615 $ 213,447
                     ---------- ---------- ---------  ---------- ---------



(11) Total assets less goodwill and net core deposit intangible and other
     intangibles. The following table reconciles reported total assets to
     tangible assets for the periods presented:

                 December   September      June       March      December
                     31,        30,         30,         31,         31,
                    2006       2006        2006        2006        2005
                ----------  ----------  ----------  ----------  ----------

Total assets    $2,942,046  $2,942,301  $2,361,602  $2,336,448  $2,307,608
Core deposit
 intangible
 and other
 intangibles,
 net                11,273      11,677       1,592       1,681       1,788
Goodwill            79,488      78,567         891         891         891
                ----------  ----------  ----------  ----------  ----------
Tangible
 assets         $2,851,285  $2,852,057  $2,359,119  $2,333,876  $2,304,929
                ----------  ----------  ----------  ----------  ----------

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

                 December   September      June       March      December
                     31,        30,         30,         31,         31,
                    2006       2006        2006        2006        2005
                ----------  ----------  ----------  ----------  ----------
Accumulated
 other
 comprehensive
 loss           $   (6,273) $   (6,561) $  (16,380) $   (9,682) $   (7,606)

Contact Information

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