SOURCE: Midwest Banc Holdings, Inc.

April 29, 2008 22:00 ET

Midwest Banc Holdings, Inc. Reports First Quarter Operating Earnings of $.17 per Share Before Previously Announced OTTI Charge

MELROSE PARK, IL--(Marketwire - April 29, 2008) - Midwest Banc Holdings, Inc. (NASDAQ: MBHI) reported a loss of $.22 per share after the previously announced non-cash $.40 per share impairment charge. Earnings excluding the first quarter non-cash, non-operating impairment charge on the government sponsored entity (GSE) securities would have been $.17 per share. This $.17 is not comparable to prior periods because of previously announced significant transactions which are discussed below.

Overview

"We made a number of changes this quarter to our leadership and financial position which we feel will positively impact Midwest," stated James J. Giancola, CEO. "We strengthened our team with the addition of our new CFO, JoAnn Lilek. JoAnn has extensive experience in banking having served 23 years at ABNAmro North America and most recently as the CFO for DSC Logistics, a Chicago-based national supply chain management firm. Dan Kadolph, our former CFO, has focused his attention on Risk Management, Audit, Human Resources and Compliance as our newly appointed Chief Administrative Officer. We also announced several significant transactions occurring late this quarter which should positively impact operating results and provide for more normalized reporting going forward. Including the sale of our Bucktown property, the balance sheet repositioning and the additional provision to our reserve we would report $.17 diluted EPS in the first quarter. The non-cash, non-operating impairment charge in our securities portfolio equating to an after-tax cost of $.40 per share result in a reported diluted loss per share of $.22. The recently announced impairment charge required under GAAP on our highest yielding investment-grade GSE securities did not impact our capital position nor will it impact our ability to pay dividends."

Specifically, Midwest announced these noteworthy items in the first quarter.

--  Appointed JoAnn Sannasardo Lilek to Chief Financial Officer.
--  Appointed Daniel R. Kadolph to Chief Administrative Officer.
--  Sold the Bucktown property for $18.4 million resulting in pre-tax gain
    of $15.2 million.
--  Prepaid $130.0 million of FHLB advances with a weighted average rate
    of 4.9%; Midwest expects the replacement borrowings will cost approximately
    2.5% with a 10 year term and callable within one to two years. The penalty
    associated with this prepayment was $7.1 million pre-tax.
--  Charged-off $10.8 million relating to the LPC, eliminating a
    substantial portion of the specific allowance associated with this credit.
    Several positive court findings and a settlement agreement with a
    municipality provided additional clarity on collateral values related to
    this credit.
--  Recorded a provision for loan losses of $5.4 million; March 31, 2008
    allowance for loan losses to loans was .82%.
--  Reduced $70 million term loan to $55 million by converting $15 million
    of this senior credit facility into subordinated debt; March 31, 2008 risk
    based capital ratio of 10.6%
--  Recognized a non-cash, non-operating impairment charge of $17.6
    million pre-tax for the impairment of certain Fannie Mae ("FNMA") and
    Freddie Mac ("FHLMC") preferred securities.
--  Joined the STAR Allpoint/STARsf network providing Midwest customers
    access to 32,000 surcharge-free ATMs nationwide and over 1,000 ATMs in the
    Chicagoland area.
    

The carrying cost of the previously disclosed Large Problem Credit continues to have a substantial negative impact on earnings, reducing net income by approximately $.05 per diluted share in the first quarter of 2008. Adjusting for non-recurring items Midwest estimates run-rate earnings per share going into the second quarter 2008 to be $.10 to $.12. This estimate will increase or decrease based primarily on loan and deposit growth and spread.

Loan Portfolio

Average loans increased by $7 million, from the fourth quarter of 2007 to the first quarter of 2008. There were approximately $42 million of pay-offs in the commercial real estate (CRE) portfolio. Midwest also sold approximately $14 million of loans, net, in order to maintain internal lending limits of $25 million and to help manage its overall credit risk. In addition, loans were reduced by the $10.8 million charge-off related to the LPC.

Through the two recent acquisitions of Royal American and Northwest Suburban, Midwest has significantly changed the mix of its loan portfolio. At December 31, 2004, the loan portfolio was approximately 25% construction and 17% commercial. At March 31, 2008, construction represented approximately 18% of the portfolio while commercial loans have increased to approximately 19%. When owner-occupied CRE loans are added to the commercial loan total, the concentration of commercial loans in 2008 increased to 42%.

Loan Composition -
 Collateral-Based Method         12/31/2004              3/31/2008
                           ----------------------- -----------------------
                           ($ in 000s)  % of Total ($ in 000s)  % of Total
                           ----------- ----------- ----------- -----------
  1-4 Family Loans         $   126,047        11.5 $   270,203        10.9
  Commercial & Multifamily
   Real Estate Loans           411,535        37.5   1,096,342        44.5*
                           ----------- ----------- ----------- -----------
Real Estate Loans              537,582        49.0   1,366,545        55.4
Construction & Development
 Loans                         270,836        24.7     435,748        17.7
  Home Equity Loans            100,322         9.1     196,109         7.9
  Other Consumer Loans           4,377         0.4       9,521         0.4
                           ----------- ----------- ----------- -----------
Consumer Loans                 104,699         9.5     205,630         8.3
Commercial Loans               184,558        16.8     460,085        18.6
                           ----------- ----------- ----------- -----------

Total Gross Loans ($000)   $ 1,097,675       100.0 $ 2,468,008       100.0
                           =========== =========== =========== ===========
* $576 million, or 53%, of the CRE portfolio is owner-occupied. The Bank
  did not monitor the owner-occupied portion of  CRE in 2004, but it was
  estimated to be a small portion of the total in 2004. The largest portion
  of loans in this category was  acquired in the Royal American and
  Northwest Suburban acquisitions.

Net Interest Margin

Midwest experienced continued downward pressure on its net interest margin which declined 11 basis points from the prior quarter to 2.82% on a fully taxable equivalent basis. The average prime rate decreased 1.32% during the quarter. Approximately 26% of Midwest's earning assets, mainly loans tied to the prime rate, re-price immediately when interest rates change while only 9% of the interest bearing liabilities reset immediately. The latter figure does not include core deposits which can be re-priced at management's discretion. Therefore, in a falling rate environment Midwest's margin comes under pressure. As rates continued to decline in the first quarter, Midwest's earning asset yield fell .53% while the interest bearing fund costs declined .45%. The repositioning of the FHLB advances will have a positive impact on margin in the second quarter.

Loan Quality

Midwest made the determination, effective March 31, 2008, to charge-off $10.8 million relating to the LPC. This charge-off had the effect of eliminating a substantial portion of the specific loan loss allowance previously allocated to this credit. Net outstandings for the LPC are $18.2 million and represent 39% of our total nonaccrual loans at March 31, 2008. As previously reported, the borrower's corporate entities have filed for protection under chapter 11 of the Bankruptcy Code. Midwest continues to aggressively pursue collection through the court system and the liquidation of collateral to pay down these loans. Recent developments have confirmed Midwest's valuation estimates. Midwest expects to see a reduction of approximately $5 to $8 million in the remaining $18.2 million outstanding during the second quarter.

Total nonaccrual loans to total loans declined from 1.99% at the end of the fourth quarter to 1.90% at March 31 mostly due to the charge-off of $10.8 million related to the LPC. Excluding the LPC, nonaccrual loans increased by approximately $7.5 million. A majority of the increase to nonaccrual loans was due to a participated loan to a developer for a condominium development of which approximately one-third of the units have been sold and closed. Additional closings are expected in the second quarter. There were no loans over 90 days past due but accruing at March 31, 2008. Other real estate owned (OREO) increased slightly from year end. Loan delinquencies 30-89 days were .82% of loans at March 31, 2008 up from .48% at December 31, 2007. Approximately half the increase were administrative and not credit related issues. Total nonperforming assets to loan-related assets, were 2.00% at quarter-end compared to 2.08% at year end and 2.26% at March 31, 2007.

The allowance for loan losses declined by $6.4 million in the first quarter of 2008 and was .82% of loans outstanding at quarter end compared to 1.08% of loans outstanding at year end. Net charge-offs for the first quarter of 2008 were $11.8 million or 1.93% of average loans, up from $2.3 million or .37% of loans in the fourth quarter. Charge-offs excluding the LPC were $1.0 million or 0.17% of loans. The LPC charge-off was already in the specific reserve. The first quarter 2008 provision for loan losses was $5.4 million, reflecting management's updated assessments of impaired loans and concerns about continued deterioration of economic conditions.

Noninterest Income

Noninterest income on a linked quarter basis was flat excluding the sale of the Bucktown property and the impairment charge. Excluding these two items noninterest income for March 31, 2008 would have been $4.2 million, approximately the same as the previous quarter. While average deposits declined by 3%, or $65 million, service charges on deposits increased slightly from the previous quarter. Trust income decreased by 12% during the quarter, while insurance and brokerage commissions increased by 15%.

Noninterest Expense

On a linked-quarter basis, noninterest expenses in the first quarter of 2008 were up by $7.2 million. This increase was largely attributed to the prepayment penalty of $7.1 million related to the FHLB advances. Absent the prepayment penalty and merger related charges, noninterest expense in the first quarter would have been $21.4 million compared to $20.1 million in the fourth quarter, or up 6.4%. The 12% increase in salaries and benefits includes an increase of $350 thousand in first quarter payroll taxes, $91 thousand in severance payments and $224 thousand in non-recurring charges.

Midwest's projected effective tax rate for 2008 is 25-27%.

Securities Portfolio and Balance Sheet Management

Midwest's $770 million investment securities portfolio is held primarily to assist with liquidity management and is an important component of its interest rate risk management. In managing the securities portfolio Midwest does not take credit risk or invest in exotic investment products. Midwest has no sub-prime or Alt-A mortgage backed securities. All of the $329.3 million in mortgage-backed securities are agency issued, AAA-rated, and are either pass-throughs or CMOs. At March 31, 2008, the ratings of Midwest's securities portfolio were: AAA 85%; AA 13%; and A 2%.

At March 31, 2008, Midwest recognized a previously announced other-than-temporary impairment (OTTI) of certain FNMA and FHLMC preferred securities, with a cost basis of $85.1 million which resulted in a pre-tax, non-cash charge of $17.6 million. Previously, Midwest recognized the decline in market value of these GSE securities directly in shareholders' equity, through comprehensive income. Accordingly, the current charge reclassifies the amount to the statement of income. Shareholders' equity is unchanged. This OTTI charge conforms with accounting guidance established by the FASB and the SEC. The securities, however, are considered investment grade and are rated AA by S&P and Moodys. Midwest continues to maintain a high-quality investment securities portfolio, and it has no direct exposure to the risks arising from the effects of the current sub-prime mortgage crisis.

Midwest has a portfolio of bank owned life insurance that had a cash surrender value (CSV) of $82 million at March 31, 2008. The income from increases in CSV was $858,000 in the first quarter of 2008.

At March 31, 2008, Midwest had $906.5 million of funding from various borrowing sources to complement its $2.4 billion in deposits. Overall, the issues of "tight credit" and liquidity concerns that have challenged some financial institutions have not been a significant issue for Midwest.

Midwest has an aggressive program of modeling the interest rate risk inherent in its balance sheet including simulating various scenarios of market rate changes. At March 31, 2008, Midwest's position is slightly asset sensitive due to a concentration of prime-based commercial loans. Over a 12-month period, however, the impact to earnings from changes in interest rates, either up or down, is minimal.


Financial Highlights

On October 1, 2007, Midwest Banc Holdings, Inc. acquired Northwest Suburban Bancorp, Inc. Special merger-related charges were $1.3 million in the fourth quarter 2007 and $114,000 in the first quarter of 2008. Therefore, comparisons involving prior periods may be affected by these merger-related charges.


Earnings

--  Diluted earnings (loss) per share was ($.22) for first quarter 2008
    --  Compared to $.14 for fourth quarter 2007
    --  Compared to $.18 for first quarter 2007

--  Net income (loss) was ($5.4) million for first quarter 2008
    --  Compared to $4.2 million for fourth quarter 2007
    --  Compared to $4.4 million for first quarter 2007

--  Net interest margin was 2.82% for first quarter 2008
    --  Compared to 2.93% for fourth quarter 2007
    --  Compared to 3.01% for first quarter 2007

--  Top line revenue was $24.0 million for first quarter 2008
    --  Compared to $27.4 million for fourth quarter 2007
    --  Compared to $22.8 million for to first quarter 2007

--  Efficiency ratio was 66% for first quarter 2008
    --  Compared to 73% for fourth quarter 2007
    --  Compared to 70% for first quarter 2007


Loans and Loan Quality

--  Loans in first quarter increased
    --  $7 million on an average balance basis compared to fourth quarter
        2007

--  Annualized net charge-off rate was 1.92% for first quarter 2008
    --  Compared to .37% for fourth quarter 2007
    --  Compared to (.03%) for first quarter 2007

--  Annualized net charge-off rate excluding the LPC was 0.17% for first
    quarter 2008
    --  Compared to .37% for fourth quarter 2007
    --  Compared to (.03%) for first quarter 2007

--  Nonaccrual loans at March 31, 2008 were $46.9 million or 1.90% of loans
    --  Compared to 1.99% at December 31, 2007
    --  Compared to 2.14% at March 31, 2007

--  Nonperforming assets at March 31, 2008 were $49.4 million, or 2.00% of
    loan-related assets
    --  Compared to 2.08% at December 31, 2007
    --  Compared to 2.26% at March 31, 2007

--  Allowance for loan losses at March 31, 2008 was .82% of loans
    --  Compared to 1.08% at December 31, 2007
    --  Compared to 1.23% at March 31, 2007

--  Allowance for loan losses to nonaccrual loans was 43% at March 31, 2008
    --  Compared to 54% at December 31, 2007
    --  Compared to 58% at March 31, 2007

--  Delinquencies 30-89 days to loans were .82% at March 31, 2008
    --  Compared to .48% at December 31, 2007
    --  Compared to .48% at March 31, 2007


Capital Ratios

--  Capital ratios at March 31, 2008
    --  Tier 1 risk-based                         9.33%
    --  Total risk-based                         10.61%
    --  Tier 1 leverage                           7.47%
    --  Equity to assets                         10.22%


Performance Metrics

--  Performance metrics before OTTI & Merger-related charges for first
    quarter 2008
    --  Diluted earnings per share                 $.17
    --  Net income                         $5.6 million
    --  Return on average assets                   .61%
    --  Return on average equity                  5.90%

Additional financial data are contained in the accompanying statements, tables and schedules.

Hosting a Conference Call

Midwest will conduct a conference call to discuss these results on April 30, 2008, 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 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 to 800-860-2442 or +1 412-858-4600 for international calls. The live webcast can be accessed at www.midwestbanc.com and will be available for replay on that website. The audio replay may be accessed through May 7, 2008 at 877-344-7529 or +1 412-317-0088. The replay passcode is 418074.

Franchise

Midwest Banc Holdings, Inc., with $3.7 billion in assets, provides a wide range of retail and commercial banking services, personal and corporate trust services, securities services and insurance brokerage services in the greater Chicago area. Midwest has 29 banking offices and operates 31 ATMs. On January 1, 2008, Midwest joined the STAR Allpoint/STARsf network. Midwest customers now have access to 32,000 surcharge-free Allpoint/STARsf ATMs nationwide, with over 1,000 ATMs in the Chicagoland area. The principal operating subsidiaries of Midwest Banc Holdings, Inc. are Midwest Bank and Trust Company and Midwest Financial and Investment Services, Inc.

Information on Midwest's products and services and locations is available at: www.midwestbanc.com

Forward-Looking Statements

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."

                       Financial Highlights
                    Midwest Banc Holdings, Inc.
                (In thousands, except per share data)



                                     Three Months Ended
                   ------------------------------------------------------
                                December  September
                    March 31,      31,        30,     June 30,  March 31,
                       2008       2007       2007       2007       2007
                   ----------  ---------- ---------- ---------- ----------
Income Statement
 Data:
  Net
 income            $   (5,416) $    4,222 $    4,836 $    5,107 $    4,412


Per Share Data:
  Basic and
   diluted
   earnings        $     (.22) $      .14 $      .20 $      .21 $      .18
  Cash dividends
   declared               .13         .13        .13        .13        .13
  Book value            12.14       11.94      11.69      11.55      11.76
  "If converted"
   book value(10)       12.41       12.23      11.69      11.55      11.76
  Tangible book
   value(1)              5.79        5.56       8.02       7.91       8.12
  "If converted"
   tangible book
   value(1)(10)          6.65        6.44       8.02       7.91       8.12
  Stock price at
   period end           12.78       12.42      14.77      14.50      17.71
  Average stock
   price                11.17       13.34      14.54      16.35      20.25

Share Data:
  Common shares
   outstanding -
   at period end       27,839      27,804     24,406     24,547     24,705
  Basic - average      27,838      27,895     24,454     24,638     24,693
  Diluted - average    27,838      28,043     24,647     24,828     24,950

 Selected Financial Ratios:
  Return on
   average assets        (.59)%       .45%       .64%       .68%       .60%
  Return on
   average equity       (5.69)       4.80       6.75       7.07       6.20
  Net interest
   margin (tax
   equivalent)           2.82        2.93       3.10       3.05       3.01
  Efficiency
   ratio(2)(3)             66          73         64         66         70
  Dividend payout
   ratio                  N/M          91         67         64         74
  Loans to deposits
   at period end          103         101        101         96         97
  Loans to assets
   at period end           66          67         66         66         65
  Equity to assets
   at period end        10.22       10.16       9.41       9.38       9.75
  Tangible equity
   to tangible
   assets at
   period end(1)(4)      5.75        5.62       6.65       6.62       6.94
  Tier 1 capital
   to
   risk-weighted
   assets                9.33        9.21      11.42      11.76      12.02
  Total capital to
   risk-weighted
   assets               10.61       10.17      12.52      12.81      13.10
  Tier 1 leverage
   ratio                 7.47        7.33       8.99       9.13       9.38

Full time
 equivalent
 employees                543         539        460        489        491

Balance Sheet Data:
  Total earning
   assets          $3,298,143  $3,266,461 $2,750,334 $2,698,762 $2,685,977
  Average earning
   assets           3,276,965   3,301,501  2,736,154  2,731,527  2,665,044
  Average assets    3,686,269   3,721,444  3,020,254  3,013,039  2,966,039
  Average loans     2,459,830   2,453,292  1,989,119  1,961,437  1,946,460
  Average
   securities         765,966     808,774    698,541    726,534    677,001
  Average deposits  2,415,385   2,480,831  2,022,709  2,021,256  1,995,721
  Tangible
   shareholders'
   equity(1)          204,295     197,713    195,790    194,138    200,711
  Average equity      382,603     348,639    284,231    289,760    288,783


See footnotes at end of statements, tables and schedules.



                           Statement of Income
                       Midwest Banc Holdings, Inc.
                  (In thousands, except per share data)



                                       Three Months Ended
                     -----------------------------------------------------
                      March      December   September   June      March
                        31,        31,        30,        30,        31,
                       2008       2007       2007       2007       2007
                     ---------  ---------  ---------  ---------  ---------
Interest Income

 Loans               $  40,806  $  44,598  $  37,566  $  36,822  $  36,058
 Loans held for
  sale                      --         --         11         48         30
 Securities
   Taxable               9,060      9,886      8,611      8,729      7,563
   Exempt from fed
    income taxes           598        645        462        462        700
 Dividends from FRB
  and FHLB stock           183        158        227        226        228
 Short-term
  investments              148        150        297        205        187
                     ---------  ---------  ---------  ---------  ---------
    Total interest
     income             50,795     55,437     47,174     46,492     44,766
                     ---------  ---------  ---------  ---------  ---------
Interest Expense
  Deposits              19,089     21,577     18,634     18,582     17,899
  Federal funds
   purchased               815        673         64        393        699
  Securities sold
   under repurchase
   agreements            3,178      3,443      3,137      2,563      2,159
  Advances from the
   FHLB                  3,482      3,811      3,640      3,670      3,648
  Junior
   subordinated
   debentures            1,045      1,325      1,334      1,315      1,301
  Notes payable            970      1,352         18         --         --
                     ---------  ---------  ---------  ---------  ---------
    Total interest
     expense            28,579     32,181     26,827     26,523     25,706
                     ---------  ---------  ---------  ---------  ---------
Net interest income     22,216     23,256     20,347     19,969     19,060
Provision for loan
 losses                  5,400      1,410      1,800      1,036        645
                     ---------  ---------  ---------  ---------  ---------
Net interest income
 after provision
  for loan losses       16,816     21,846     18,547     18,933     18,415
Noninterest Income
  Service charges on
   deposit accounts      1,963      1,953      1,535      1,575      1,634
  Gains (losses) on
   securities
   transactions             12          9          6         31        (14)
  Impairment charge
   on securities       (17,586)        --         --         --         --
  Gains on sale of
   loans                    --          1         41        225        176
  Insurance and
   brokerage
   commissions             560        488        685        541        573
  Trust                    449        508        453        503        393
  Increase in CSV of
   life insurance          858        871        736        703        753
  Gain on sale of
   property             15,196         --         --         --         --
  Other                    338        331        244        318        205
                     ---------  ---------  ---------  ---------  ---------
    Total
     noninterest
     income              1,790      4,161      3,700      3,896      3,720
                     ---------  ---------  ---------  ---------  ---------
Noninterest Expenses
  Salaries and
   employee benefits    13,040     11,665      9,740     10,363     10,447
  Occupancy and
   equipment             2,899      2,740      2,362      2,190      2,190
  Professional
   services              1,538      1,857      1,297      1,108      1,208
  Marketing                576        614        538        478        679
  Foreclosed
   properties                5         (2)         4          7         25
  Loss on
   extinguishment of
   debt                  7,121         --         --         --         --
  Amortization of
   intangible assets       625        644        409        409        456
  Merger related
   charges                 114      1,333         --        (21)        --
  Other                  2,691      2,574      1,895      2,110      2,076
                     ---------  ---------  ---------  ---------  ---------
    Total
     noninterest
     expenses           28,609     21,425     16,245     16,644     17,081
                     ---------  ---------  ---------  ---------  ---------
Income before income
 taxes                 (10,003)     4,582      6,002      6,185      5,054
Provision (benefit)
 for income taxes       (4,587)       360      1,166      1,078        642
                     ---------  ---------  ---------  ---------  ---------
Net Income           $  (5,416) $   4,222  $   4,836  $   5,107  $   4,412
                     =========  =========  =========  =========  =========

Net Income available
 to common
 shareholders        $  (6,251) $   4,018  $   4,836  $   5,107  $   4,412

Basic and diluted
 earnings per share  $    (.22) $     .14  $     .20  $     .21  $     .18
                     =========  =========  =========  =========  =========
Cash dividends
 declared per share  $     .13  $     .13  $     .13  $     .13  $     .13
                     =========  =========  =========  =========  =========

Top line revenue (5) $  24,006  $  27,417  $  24,047  $  23,865  $  22,780
Noninterest income
 to top line revenue         7%        15%        15%        16%        16%


See footnotes at end of statements, tables and schedules.




                                   Balance Sheet
                            Midwest Banc Holdings, Inc.
                                  (In thousands)



                      March      December   September   June      March
                        31,        31,        30,        30,        31,
                       2008       2007       2007       2007       2007
                    ---------- ---------- ---------- ---------- ----------
Assets
  Cash              $   71,080 $   70,111 $   46,963 $   53,832 $   64,153
  Short-term
   investments          31,415     14,388     17,241      8,861     24,485
  Securities
   available-for-
   sale                737,089    710,881    660,986    639,087    639,985
  Securities
   held-to-maturity     32,674     37,601     40,978     42,110     43,562
                    ---------- ---------- ---------- ---------- ----------
      Total
       securities      769,763    748,482    701,964    681,197    683,547
  Federal Reserve
   and FHLB stock,
   at cost              29,264     29,264     23,683     23,683     23,592
  Loans held for
   sale                     --         --         --      2,349      3,740
  Loans              2,467,701  2,474,327  2,007,446  1,982,672  1,950,613
  Allowance for loan
   losses              (20,344)   (26,748)   (24,879)   (23,724)   (24,028)
                    ---------- ---------- ---------- ---------- ----------
    Net loans        2,447,357  2,447,579  1,982,567  1,961,298  1,926,585
  Cash value of life
   insurance            82,024     81,166     67,412     66,676     65,973
  Premises and
   equipment            38,232     41,821     22,468     22,489     22,282
  Other real estate
   owned                 2,527      2,220      2,246      2,312      2,403
  Goodwill and other
   intangibles         176,861    177,451     89,443     89,437     89,788
  Other                 81,923     80,300     78,578    112,510     74,083
                    ---------- ---------- ---------- ---------- ----------
     Total assets   $3,730,446 $3,692,782 $3,032,565 $3,022,294 $2,980,631
                    ========== ========== ========== ========== ==========

Liabilities and
 Shareholders'Equity

Liabilities
  Deposits
    Noninterest-
     bearing        $  313,727 $  321,317 $  246,153 $  256,152 $  247,548
    Interest-bearing 2,090,985  2,136,831  1,748,774  1,801,690  1,759,452
                    ---------- ---------- ---------- ---------- ----------
     Total deposits  2,404,712  2,458,148  1,994,927  2,057,842  2,007,000
  Federal funds
   purchased           184,500     81,000     12,000     29,000      7,000
  Securities sold
   under repurchase
   agreements          394,764    283,400    317,118    282,037    251,070
  FHLB advances        190,000    323,439    319,925    269,911    319,897
  Junior
   subordinated
   debentures           60,741     60,724     65,861     65,845     65,828
  Notes payable         76,500     72,500      2,500         --         --
  Other                 38,073     38,407     35,001     34,084     39,337
                    ---------- ---------- ---------- ---------- ----------
     Total
      liabilities    3,349,290  3,317,618  2,747,332  2,738,719  2,690,132
                    ---------- ---------- ---------- ---------- ----------

Shareholders' Equity

  Preferred equity      43,125     43,125         --         --         --
  Common equity        336,877    345,956    295,807    295,436    295,614
  Accumulated other
   comprehensive
   income (loss)         1,154    (13,917)   (10,574)   (11,861)    (5,115)
                    ---------- ---------- ---------- ---------- ----------
    Total
     shareholders'
     equity            381,156    375,164    285,233    283,575    290,499
                    ---------- ---------- ---------- ---------- ----------
      Total
       liabilities
       and
       shareholders'
       equity       $3,730,446 $3,692,782 $3,032,565 $3,022,294 $2,980,631
                    ========== ========== ========== ========== ==========



Loan Portfolio Composition - Source of Repayment

                            March 31, 2008           December 31, 2007*
                      -------------------------- --------------------------
                      ($ in millions) % of Total ($ in millions) % of Total
                      --------------- ---------- --------------- ----------
Commercial            $         1,060         43 $         1,080         44
Construction                      448         18             464         19
Commercial real estate            658         27             628         25
Consumer                          157          6             153          6
Residential mortgage              145          6             150          6
                      --------------- ---------- --------------- ----------
Total loans, gross    $         2,468        100 $         2,475        100
                      =============== ========== =============== ==========

*Amounts have been reclassified to conform to current period presentation.



                            Balance Sheet Comparison
                           Midwest Banc Holdings, Inc.
                                 (In thousands)



The following table sets forth the changes in the balance sheet at
March 31, 2008 compared to March 31, 2007 excluding the Northwest
Suburban acquisition on October 1, 2007.





                                                              Excluding
                                                              Northwest
                                                               Suburban
                                                Northwest    Acquisition
                      March 31,                  Suburban   --------------
                ----------------------           Acquisi-              %
                   2008        2007     $ Change  tion(a)   $ Change Change
                ----------  ----------  --------  --------  --------  ----
                                  (Dollars in thousands)
Assets
Cash and cash
 equivalents(b) $  102,495  $   88,638  $ 13,857  $  3,342  $ 10,515    12%
Securities
 available-for
 sale              737,089     639,985    97,104    57,597    39,507     6
Securities
 held-to-
 maturity           32,674      43,562   (10,888)       --   (10,888)  (25)
                ----------  ----------  --------  --------  --------  ----
    Total
     securities    769,763     683,547    82,216    57,597    28,619     4
Fed Res and
 FHLB stock, at
 cost               29,264      23,592     5,672     1,503     4,169    18
Loans held for
 sale                   --       3,740    (3,740)       --    (3,740) (100)
Loans            2,467,701   1,950,613   517,088   439,249    77,839     4
Allowance for
 loan loss         (20,344)    (24,028)    3,684    (2,767)    6,451   (27)
                ----------  ----------  --------  --------  --------  ----
Net loans        2,447,357   1,926,585   520,772   436,482    84,290     4
Cash surrender
 value of life
 insurance          82,024      65,973    16,051    12,884     3,167     5
Premises and
 equipment          38,232      22,282    15,950    19,279    (3,329)  (15)
Foreclosed
 properties          2,527       2,403       124        --       124     5
Core deposit
 and other
 intangibles,
 net                16,454      10,163     6,291     8,061    (1,770)  (17)
Goodwill           160,407      79,625    80,782    80,550       232    --
Other               81,923      74,083     7,840     7,914       (74)   --
                ----------  ----------  --------  --------  --------  ----
 Total assets   $3,730,446  $2,980,631  $749,815  $627,612  $122,203     4%
                ==========  ==========  ========  ========  ========  ====

Liabilities and
 Shareholders'
 Equity

Liabilities
Noninterest-
 bearing        $  313,727  $  247,548  $ 66,179  $ 65,299  $    880    --%
Interest-
 bearing         2,090,985   1,759,452   331,533   405,361   (73,828)   (4)
                ----------  ----------  --------  --------  --------  ----
Total deposits   2,404,712   2,007,000   397,712   470,660   (72,948)   (4)
Federal funds
 purchased         184,500       7,000   177,500     6,170   171,330 2,448
Securities sold
 under
 agreements to
 repurchase        394,764     251,070   143,694        --   143,694    57
FHLB advances      190,000     319,897  (129,897)    3,500  (133,397)  (42)
Junior
 subordinated
 debentures         60,741      65,828    (5,087)   10,310   (15,397)  (23)
Notes payable       76,500          --    76,500    75,000     1,500   100
Other               38,073      39,337    (1,264)    6,982    (8,246)  (21)
                ----------  ----------  --------  --------  --------  ----
Total
 liabilities     3,349,290   2,690,132   659,158   572,622    85,536     3

Shareholders'
 Equity

Preferred
 equity             43,125          --    43,125        --    43,125   100
Common equity      336,877     295,614    41,263    54,990   (13,727)   (5)
Accumulated
 other
 comprehensive
 income (loss)       1,154      (5,115)    6,269        --     6,269   123
                ----------  ----------  --------  --------  --------  ----
Total
 shareholders'
 equity            381,156     290,499    90,657    54,990    35,667    12
                ----------  ----------  --------  --------  --------  ----

 Total
  liabilities
  and
  shareholders'
  equity        $3,730,446  $2,980,631  $749,815  $627,612  $122,203     4%
                ==========  ==========  ========  ========  ========  ====


(a) Includes fair value adjustments.

(b) Northwest Suburban Acquisition column includes cash and cash
    equivalents acquired through Northwest Suburban of $10,066 less cash
    paid for acquisition of $81,163, capitalized costs of $414, costs
    relating to the registration statement of $147, and $75,000 borrowing.






                             Net Interest Margin
                          Midwest Banc Holdings, Inc.
                                (In thousands)





                                For the Three Months Ended
                ----------------------------------------------------------
                  March 31, 2008    December 31, 2007     March 31, 2007
                ------------------  ------------------  ------------------

                  Average  Average    Average  Average   Average    Average
                  Balance  Balance    Balance    Rate    Balance     Rate
                ----------  ------  ----------  ------  ----------  ------
Interest-
 Earning Assets:
Short-term
 investments    $   21,939    2.70% $   11,627    5.19% $   15,987    4.68%
Securities:
  Taxable(6)       704,119    5.43     742,114    5.61     603,622    5.37
  Exempt from
   federal
   income
   taxes(6)         61,847    5.95      66,660    5.96      73,379    5.87
                ----------  ------  ----------  ------  ----------  ------
Total
 securities        765,966    5.48     808,774    5.64     677,001    5.44
FRB and FHLB
 stock              29,230    2.50      27,808    2.27      23,592    3.87
Loans held for
 sale                   --      --          --      --       2,004    5.99
Loans (6)(8)(9)  2,459,830    6.65   2,453,292    7.29   1,946,460    7.44
                ----------  ------  ----------  ------  ----------  ------
Total
 interest-
 earning assets $3,276,965    6.31% $3,301,501    6.84% $2,665,044    6.88%

Noninterest-
 Earning Assets:
Cash            $   55,634          $   57,080          $   71,088
Premises and
 equipment          41,325              41,521              22,004
Allowance for
 loan losses       (27,287)            (26,924)            (24,907)
Other              339,632             348,266             232,810
                ----------          ----------          ----------
Total
 noninterest-
 earning assets    409,304             419,943             300,995
                ----------          ----------          ----------
Total assets    $3,686,269          $3,721,444          $2,966,039
                ==========          ==========          ==========

Interest-Bearing
 Liabilities:
Deposits:
Interest-
 bearing demand
 deposits       $  217,515    1.37% $  218,213    1.80% $  163,108    1.79%
Money-market
 demand and
 savings
 account           411,091    1.78     439,720    2.48     378,039    2.59
Time deposits
 less than
 $100,000          847,467    4.36     827,332    5.05     731,217    4.73
Time deposits
 of $100,000 or
 more              622,805    4.68     664,327    4.47     466,924    5.21
Public funds            --      --          --      --          --      --
                ----------  ------  ----------  ------  ----------  ------
Total
 interest-
 bearing
 deposits        2,098,878    3.64   2,149,592    4.02   1,739,288    4.12
Borrowings:
Fed funds purch
 & repurchase
 agreements        402,774    3.97     368,073    4.47     256,322    4.46
FHLB advances      315,158    4.42     323,433    4.71     319,890    4.56
Junior
 subordinated
 debentures         60,733    6.88      66,935    7.92      65,820    7.91
Notes payable       76,368    5.08      82,717    6.54          --      --
                ----------  ------  ----------  ------  ----------  ------
Total
 borrowings        855,033    4.44     841,158    5.04     642,032    4.88
                ----------  ------  ----------  ------  ----------  ------
Total
 interest-
 bearing
 liabilities    $2,953,911    3.87% $2,990,750    4.32% $2,381,320    4.32%

Noninterest-
 Bearing
 Liabilities:
Noninterest-
 bearing demand
 deposits       $  316,507          $  331,239          $  256,433
Other
 liabilities        33,248              50,816              39,503
                ----------          ----------          ----------
Total
 noninterest-
 bearing
 liabilities       349,755             382,055             295,936
                ----------          ----------          ----------
Shareholders'
 equity            382,603             348,639             288,783
                ----------          ----------          ----------
Total
 liabilities
 and
 shareholders'
 equity         $3,686,269          $3,721,444          $2,966,039
                ==========          ==========          ==========

Net interest
 margin (tax
 equivalent)
 (6)(10)                      2.82%               2.93%               3.01%


See footnoes at end of statements, tables and schedules.




                              Credit Risk Management
                             Midwest Banc Holdings, Inc.
                                   (In thousands)



                                     Three Months Ended
                   -------------------------------------------------------
                      March    December   September    June      March
                        31,       31,        30,        30,        31,
                       2008      2007       2007       2007       2007
                   ---------- ---------- ---------- ---------- ----------
Loan Quality

  Nonaccrual loans $   46,916 $   49,173 $   44,681 $   43,588 $   41,679

  Foreclosed
   properties      $    2,527 $    2,220 $    2,246 $    2,312 $    2,403

  Nonperforming
   assets          $   49,443 $   51,393 $   46,927 $   45,900 $   44,082

  90+ days past due
   and accruing    $       -- $       -- $       -- $      608 $       25


  Loans            $2,467,701 $2,474,327 $2,007,446 $1,982,672 $1,950,613

  Loan-related
   assets          $2,470,228 $2,476,547 $2,009,692 $1,984,984 $1,953,016

  Nonaccrual loans
   to loans              1.90%      1.99%      2.23%      2.20%      2.14%

  Nonperforming
   assets to
   loan-related
   assets                2.00%      2.08%      2.34%      2.31%      2.26%


Allowance for Loan
 Losses
  Beginning
   Balance         $   26,748 $   24,879 $   23,724 $   24,028 $   23,229
    Bank
     acquisition           --      2,767         --         --         --
    Provision for
     loan losses        5,400      1,410      1,800      1,036        645
    Net chargeoffs
     (recoveries)
      Large Problem
       Credit          10,774         --         --         --         --
      From
       remainder of
       portfolio        1,030      2,308        645      1,340       (154)
                   ---------- ---------- ---------- ---------- ----------
                       11,804      2,308        645      1,340       (154)
                   ---------- ---------- ---------- ---------- ----------
  Ending balance   $   20,344 $   26,748 $   24,879 $   23,724 $   24,028
                   ========== ========== ========== ========== ==========

  Net chargeoffs
   (recoveries) to
   average loans
    Total                1.93%       .37%       .13%       .27%      (.03)%
    Without Large
     Problem Credit       .17%       .37%       .13%       .27%      (.03)%

  Delinquencies 30
   - 89 days to
   average loans          .82%       .48%       .49%       .63%       .48 %

  Allowance for
   loan losses to
    Loans at period
     end                  .82%      1.08%      1.24%      1.20%      1.23 %
    Nonaccrual
     loans                 43%        54%        56%        54%        58 %





                                     Footnotes
                             Midwest Banc Holdings, Inc.
                                   (In thousands)


(1)  Shareholders' equity less goodwill and net core deposit intangible
     and other intangibles.


                           March    December   September   June     March
                             31,       31,        30,       30,       31,
                            2008      2007       2007      2007      2007
                          --------- --------- --------- --------- ---------

Shareholders' equity      $ 381,156 $ 375,164 $ 285,233 $ 283,575 $ 290,499
Core deposit intangible
 and other intangibles       16,454    17,044     9,586     9,812    10,163
Goodwill                    160,407   160,407    79,857    79,625    79,625
                          --------- --------- --------- --------- ---------
Tangible shareholders'
 equity                   $ 204,295 $ 197,713 $ 195,790 $ 194,138 $ 200,711
                          ========= ========= ========= ========= =========



(2)  Excludes net gains or losses on securities transactions.

(3)  Noninterest expense less amortization and foreclosed properties
     expenses divided by the sum of net interest income (tax equivalent)
     plus noninterest income.

(4)  Total assets less goodwill and net core deposit intangible and other
     intangibles.


                   March     December    September     June       March
                     31,        31,         30,         30,         31,
                    2008       2007        2007        2007        2007
                ----------- ----------- ----------- ----------- -----------

Total assets    $ 3,730,446 $ 3,692,782 $ 3,032,565 $ 3,022,294 $ 2,980,631
Core deposit
 intangible and
 other intangibles   16,454      17,044       9,586       9,812      10,163
Goodwill            160,407     160,407      79,857      79,625      79,625
                ----------- ----------- ----------- ----------- -----------
Tangible assets $ 3,553,585 $ 3,515,331 $ 2,943,122 $ 2,932,857 $ 2,890,843
                =========== =========== =========== =========== ===========



(5)  Includes net interest income and noninterest income.

(6)  Adjusted for 35% tax rate and adjusted for the dividends-received
     deduction where applicable.

(7)  Nonaccrual loans are included in the average balance; however, these
     loans are not earning any interest.

(8)  Includes loan fees.

(9)  Reconciliation of reported net interest income to tax equivalent net
     interest income.



                                          For the Three Months Ended,
                                      -------------------------------------
                                      March 31,   December 31,  March 31,
                                         2008         2007         2007
                                      ----------- ------------- -----------

Net interest income                   $    22,216 $      23,256 $    19,060
Tax equivalent adjustment to net
 interest income                              892           960         979
                                      ----------- ------------- -----------
Net interest income, tax equivalent
 basis                                $    23,108 $      24,216 $    20,039
                                      =========== ============= ===========


(10)  Reconciliation of common equity to shareholders' equity.



                           March    December   September   June     March
                             31,       31,        30,       30,       31,
                            2008      2007       2007      2007      2007
                          --------- --------- --------- --------- ---------

Preferred equity          $  43,125 $  43,125 $      -- $      -- $      --
Common equity               338,031   332,039   285,233   283,575   290,499
                          --------- --------- --------- --------- ---------
Shareholders' equity      $ 381,156 $ 375,164 $ 285,233 $ 283,575 $ 290,499
                          ========= ========= ========= ========= =========


Reconciliation of tangible common equity to tangible shareholders' equity.



                           March    December   September   June     March
                             31,       31,        30,       30,       31,
                            2008      2007       2007      2007      2007
                          --------- --------- --------- --------- ---------

Preferred equity          $  43,125 $  43,125 $      -- $      -- $      --
Tangible common equity      161,170   154,588   195,790   194,138   200,711
                          --------- --------- --------- --------- ---------
Tangible shareholders'
 equity                   $ 204,295 $ 197,713 $ 195,790 $ 194,138 $ 200,711
                          ========= ========= ========= ========= =========



Reconciliation of common shares outstanding at period end to "if converted"
shares outstanding.



                           March    December   September   June     March
                             31,       31,        30,       30,       31,
                            2008      2007       2007      2007      2007
                          --------- --------- --------- --------- ---------

Common shares outstanding    27,839    27,804    24,406    24,547    24,705
Resulting common shares
 ifpreferred shares were
 converted                    2,875     2,875        --        --        --
                          --------- --------- --------- --------- ---------
"If converted" shares
 outstanding                 30,714    30,679    24,406    24,547    24,705
                          ========= ========= ========= ========= =========

Contact Information

  • For further information:
    John B. Pelling, III
    Vice President - Investor Relations
    (708) 498-2013
    Email Contact