SOURCE: Midwest Banc Holdings, Inc.

October 24, 2006 20:40 ET

Midwest Banc Holdings Reports Third Quarter Results

MELROSE PARK, IL -- (MARKET WIRE) -- October 24, 2006 -- Midwest Banc Holdings, Inc. (NASDAQ: MBHI) reported today its third quarter earnings, which for the first time include the contribution of Royal American Corporation ("RAC"). The charges related to the closing of the transaction totaled $0.04 per diluted share, or slightly less than previously estimated. Diluted earnings per share for the quarter totaled $0.24. Core income from continuing operations, which exclude the aforementioned charges totaled $6.9 million or $0.28 per diluted share.

Third Quarter Key Accomplishments

The acquisition of RAC, which was announced in February 2006, closed on July 1, 2006. The system conversions were completed by the end of July. "Tremendous efforts by our conversion teams position us to begin to realize the economic benefits of this transaction in the fourth quarter of this year," said James J. Giancola, president and chief executive officer. The company fully expects to have the previously announced cost savings in addition to some revenue enhancements fully in place by the first quarter of 2007.

Perhaps the most significant accomplishment is that every key sales officer from Royal American has been retained, and the combined teams are working together. Jay Fritz, Brogan Ptacin and Kelly O'Keeffe have assumed leadership roles as senior officers of the combined company.

Revenue growth continues to propel the company forward. Top line revenue was up 54.3% in the third quarter from the same period last year and 28.7% from the prior quarter. A solid combination of organic growth and the RAC acquisition are driving revenue gains. Loans were up 49.6% from the same period last year and 34.2% from the prior quarter.

Concentrations on the balance sheet have also been reduced -- while the company continues to be an active real estate lender, better diversification reduces the inherent risk in the balance sheet. The real estate component of total loans has been reduced to 81.0% as of September 30, 2006 from 83.9% as of September 30, 2005. In addition, the company has increased its reliance on noninterest-bearing deposits from 10.1% of total deposits at the end of the third quarter of 2005 to 13.4% at the end of the third quarter of 2006. Also, customer deposits are normally lower cost than purchased funds. The competitive nature of the Chicago marketplace, however, has driven the company to the brokered CD market, which currently offers a lower cost than retail CDs in Chicagoland. "While we believe this is a temporary situation, we continue to review all of our options to manage our cost of funds," Giancola said.

The company's core income from continuing operations was $6.9 million for the third quarter of 2006 compared to $2.9 million in the prior quarter and $5.9 million in the same quarter of the prior year. Core diluted earnings per share from continuing operations for the third quarter of 2006 were $0.28 compared to $0.13 in the prior quarter and $0.29 in the prior year. Core income from continuing operations, core diluted earnings per share from continuing operations, core efficiency ratio, core return on average assets and core return on average equity are non-GAAP terms defined in the tables included with this news release. Management believes core income from continuing operations and core diluted earnings per share from continuing operations are meaningful presentations of the company's operating results.

Giancola said, "The Royal integration process was executed in a very timely and successful manner during the quarter. Having been part of over 25 previous integration processes, I would rank this as one of the smoothest. Our staff worked long and hard in planning and executing on the integration. The most important part of this success is that we are positioned to realize our cost savings and we are looking to capitalize on revenue enhancement opportunities beginning in the fourth quarter and beyond."

Noninterest income increased by $546,000 during the third quarter of 2006 from the prior quarter and $585,000 from the prior year. For the third quarter of 2006, the increases over the prior quarter were centered in service charges on deposits, net trading profits, trust income and an increase in cash surrender value of life insurance. In comparing the third quarter of 2006 to the prior year the increases were centered in service charges on deposits, net trading profits, gains on sales of loans, insurance and brokerage commissions, trust income, and an increase in cash surrender value of life insurance.

The net interest margin decreased 6 basis points during the third quarter of 2006 compared to the prior quarter and 13 basis points from a year ago. As part of the integration process some pricing adjustments were made to protect the acquired deposits and loans. Additionally, the highly competitive marketplace has forced the company to remain defensive to protect its deposit base as some core deposits have migrated into higher cost time deposits. During the first three quarters of 2006, retail account openings have increased along with cross selling of multiple bank products including small business loans. The cost of funds has increased more rapidly in absolute terms than the yields on earning assets.

                     Income Statement Highlights


$ in thousands              3Q2006   2Q2006   1Q2006   4Q2005   3Q2005
----------------------------------------------------------------------
Interest Income            $45,903  $35,290  $33,359  $32,101  $28,880
----------------------------------------------------------------------
Interest Expense           $24,510  $17,737  $16,198  $14,385  $12,457
----------------------------------------------------------------------
Net Interest Income        $21,393  $17,553  $17,161  $17,716  $16,423
----------------------------------------------------------------------
Noninterest Income         $ 4,147  $ 3,601  $ 3,013  $ 2,538  $ 3,562
----------------------------------------------------------------------
Top Line Revenue           $50,050  $38,891  $36,372  $34,639  $32,442
----------------------------------------------------------------------
Net Interest Margin-FTE      3.40%    3.46%    3.39%    3.57%    3.53%
----------------------------------------------------------------------
Core Efficiency Ratio (1)   56.45%   57.38%   55.20%   50.66%   53.75%
----------------------------------------------------------------------

(1) Excludes balance sheet repositioning charges and one-time merger
    related charges.  See attached reconciliation table.



                           Asset Quality Ratios


--------------------------------------------------------------------------
                    9/30/2006  6/30/2006  3/31/2006  12/31/2005  9/30/2005
--------------------------------------------------------------------------
Allowance for loan     1.34       1.47       1.26        1.32       1.41
 losses as a % of
 loans
--------------------------------------------------------------------------
Nonaccruing loans      1.13       0.77       0.56        0.59       0.54
 as a % of loans
--------------------------------------------------------------------------
Allowance for loan      118        191        225         225        261
 losses as a % of
 nonaccruing loans
--------------------------------------------------------------------------
Net loan charge-       0.03       0.53       0.01        0.12       0.08
 offs as a % of
 QTD average loans
--------------------------------------------------------------------------
Nonperforming          0.83       0.68       0.81        0.83       0.81
 assets to total
 assets
--------------------------------------------------------------------------
Total nonperforming assets were 0.83% of total assets at September 30, 2006 up from 0.68% on June 30, 2006 and 0.81% on September 30, 2005. Asset quality ratios remain at satisfactory levels, despite the downgrading of a large loan relationship linked to a single long-standing customer that was disclosed last quarter; $11.3 million of this loan relationship is on nonaccrual. As part of the company's workout strategy, additional financing was provided along with the cross collateralization and the cross guaranty of the borrower. The company recorded a $1.6 million provision for loan losses during the third quarter of 2006, following a $5.0 million provision for loan losses during the second quarter of 2006.

As a result of the quarter end analysis, nonaccruing loans at September 30, 2006 increased to 1.13% of total loans from 0.77% on June 30, 2006 and 0.54% on September 30, 2005. The allowance for loan losses decreased to 1.34% of total loans from 1.47% at the close of the second quarter and 1.41% a year ago. The allowance for loan losses increased by $3.2 million due to the Royal merger. The allowance for loan losses at September 30, 2006 represented 118% of nonaccruing loans, versus 191% three months earlier and 261% a year ago. Other real estate declined to $2.9 million as of September 30, 2006 from $5.2 million on June 30, 2006 and $11.2 million on September 30, 2005. Without the single large participation credit, previously discussed, asset quality ratios were at approximately the same levels that were evidenced during the first quarter of 2006.

              Balance Sheet Strength Reflects Performance

$ in thousands,  9/30/2006   6/30/2006   3/31/2006  12/31/2005   9/30/2005
 except per
 share data
--------------------------------------------------------------------------
Total assets    $2,942,301  $2,361,602  $2,336,448  $2,307,608  $2,225,097
--------------------------------------------------------------------------
Total loans     $1,909,026  $1,422,830  $1,403,700  $1,349,996  $1,276,026
--------------------------------------------------------------------------
Investment        $710,632    $719,534    $733,449    $758,357    $749,930
 securities
 and other
 related
 assets (2)
--------------------------------------------------------------------------
Deposits        $2,026,836  $1,584,067  $1,616,634  $1,523,384  $1,533,225
--------------------------------------------------------------------------
Deposits          $272,442    $165,837    $161,528    $158,406    $154,652
 (noninterest-
 bearing)
--------------------------------------------------------------------------
Deposits        $1,754,394  $1,418,230  $1,455,106  $1,364,978  $1,378,573
 (interest-
 bearing)
--------------------------------------------------------------------------
Loan/Deposit            94%         90%         87%         89%         83%
 Ratio
--------------------------------------------------------------------------
Borrowings as           29%         33%         29%         35%         29%
 a % of total
 deposits
--------------------------------------------------------------------------
Stockholders'     $289,477    $213,112    $219,187    $216,126    $215,186
 Equity
--------------------------------------------------------------------------
Book Value          $11.67       $9.71       $9.99       $9.91       $9.87
 Per Share
--------------------------------------------------------------------------

(2) Includes investment securities, federal funds and other short-term
    investments, and net due from broker. See attached reconciliation
    table.
The company reported a 24.6% increase in assets following the merger of Royal as of July 1, 2006 compared to the second quarter of 2006. Loans increased $486.2 million with the majority of the loans being commercial and industrial loans and commercial real estate loans. Over 75.0% of the acquired commercial real estate loans are owner occupied loans. Deposits increased 28.0% with non-interest bearing deposits increasing by 64.3% and interest bearing deposits increasing by 23.7% when compared to the prior quarter. The loan to deposit ratio increased to 94.2% on September 30, 2006 from 89.8% on June 30, 2006 and 83.2% on September 30, 2005. The company's securities and other related assets decreased 1.2% to $710.6 million from $719.5 million three months earlier and 5.2% to $749.9 million on September 30, 2005. Borrowings increased 10.8% to $584.3 million at the close of the third quarter from $527.3 million on June 30, 2006 and were up 32.1% from $442.3 million a year earlier.

Stockholders' Equity

In May, the company announced an increase of 8.3% of its common stock dividend from $0.12 to $0.13 with an annualized amount of $0.52 per common share. In addition, the company established a 5.0% stock repurchase program. During the third quarter of 2006, 70,368 shares of common stock were repurchased for an average price of $23.48. Shares will be purchased from time to time in the open market or in privately negotiated transactions as market conditions warrant.

Conference Call

James J. Giancola, president and chief executive officer, Jay Fritz, president of Midwest Bank and Trust Company, and Daniel R. Kadolph, chief financial officer, will review financial results and outlook with investors via a webcast and conference call to be conducted on Wednesday, October 25, at 11:00 a.m. EDT/10:00 a.m. CDT. 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 January 25, 2007. The audio replay may be accessed through November 2, 2006 at (877) 660-6853 or (201) 612-7415 for international calls, account number 286, conference ID number 216403. 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 press release contains certain "Forward-Looking Statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and should be reviewed in conjunction with the Company's Annual Report on Form 10-K and other publicly available information regarding the Company, copies of which are available from the Company upon request. Such publicly available information sets forth certain risks and uncertainties related to the Company's business which should be considered in evaluating "Forward-Looking Statements."


                     MIDWEST BANC HOLDINGS, INC.
               CONSOLIDATED BALANCE SHEETS (UNAUDITED)
           (In thousands, except share and per share data)

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

ASSETS
Cash                                 $    70,004  $    58,329  $    56,983
Federal funds sold and other
 short-term investments                    2,647       12,270        5,440
                                     -----------  -----------  -----------
  Total cash and cash equivalents         72,651       70,599       62,423
Securities available-for-sale            642,188      687,937      684,575
Securities held-to-maturity (fair
 value: $49,403 at September 30,
 2006, $58,332 at December 31, 2005,
 and $66,000 at September 30, 2005)       50,688       59,451       66,767
Federal Reserve and Federal Home
 Loan Bank stock, at cost                 20,977       14,661       14,558
Loans held for sale                        3,321        1,912        1,406
Loans                                  1,909,026    1,349,996    1,276,026
Allowance for loan losses                (25,542)     (17,760)     (17,993)
                                     -----------  -----------  -----------
  Net loans                            1,883,484    1,332,236    1,258,033
Cash value of life insurance              64,526       44,433       43,954
Premises and equipment, net               20,993       22,247       22,383
Other real estate                          2,864       11,154       11,154
Core deposit and other
 intangibles, net                         11,677        1,788        1,895
Goodwill                                  78,567          891          891
Due from broker                           15,109            -            -
Other assets                              75,256       60,299       57,058
                                     -----------  -----------  -----------
  Total assets                       $ 2,942,301  $ 2,307,608  $ 2,225,097
                                     ===========  ===========  ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits
  Noninterest-bearing                $   272,442  $   158,406  $   154,652
  Interest-bearing                     1,754,394    1,364,978    1,378,573
                                     -----------  -----------  -----------
    Total deposits                     2,026,836    1,523,384    1,533,225
Federal funds purchased                   34,000       68,000       25,000
Securities sold under agreements
 to repurchase                           229,676      264,808      211,583
Advances from the Federal Home
 Loan Bank                               254,869      150,000      150,000
Junior subordinated debt owed to
 unconsolidated trusts                    65,800       55,672       55,672
Due to broker                                  -        1,301        6,852
Other liabilities                         41,643       28,317       27,579
                                     -----------  -----------  -----------
  Total liabilities                    2,652,824    2,091,482    2,009,911
                                     -----------  -----------  -----------

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;
 25,423,982 shares issued at
 September 30, 2006, 22,139,089
 shares issued  at December 31,
 2005, and  22,118,140 shares
 issued at September 30, 2005                254          221          221
Additional paid-in capital               199,878      134,857      134,549
Retained earnings                         98,132       92,121       88,088
Unearned stock-based compensation              -       (3,013)      (3,281)
Accumulated other comprehensive loss      (6,561)      (7,606)      (3,937)
Treasury stock, at cost (627,995
 shares at September 30, 2006,
 325,311 shares at December 31,
 2005, and September 30, 2005)            (2,226)        (454)        (454)
                                     -----------  -----------  -----------
  Total stockholders' equity             289,477      216,126      215,186
                                     -----------  -----------  -----------
    Total liabilities and
     stockholders' equity            $ 2,942,301  $ 2,307,608  $ 2,225,097
                                     ===========  ===========  ===========


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

                          -----------------Three Months Ended-------------
                          September   June     March    December September
                             30,       30,       31,       31,       30,
                            2006      2006      2006      2005      2005
                          --------  --------  --------  --------  --------
Interest Income
  Loans                   $ 36,918  $ 26,663  $ 24,387  $ 22,983  $ 20,825
  Securities
    Taxable                  7,484     7,469     7,922     8,174     7,192
    Exempt from federal
     income taxes              956       833       819       669       340
  Trading securities           189         -         -         -       198
  Dividend income from
   Federal Reserve and
   Federal Home Loan
   Bank stock                  199       139       137       157       183
  Federal funds sold and
   other short-term
   investments                 157       186        94       118       142
                          --------  --------  --------  --------  --------
    Total interest income   45,903    35,290    33,359    32,101    28,880
Interest Expense
  Deposits                  16,963    12,323    10,737     9,470     8,521
  Federal funds purchased      352       150       248       412       317
  Securities sold under
   agreement to repurchase   2,857     2,208     2,671     2,216     1,404
  Advances from the
   Federal Home Loan Bank    3,001     1,982     1,539     1,335     1,340
  Junior subordinated
   debt owed to
   unconsolidated trusts     1,337     1,074     1,003       952       875
                          --------  --------  --------  --------  --------
    Total interest
     expense                24,510    17,737    16,198    14,385    12,457
                          --------  --------  --------  --------  --------
Net interest income         21,393    17,553    17,161    17,716    16,423
Provision for loan losses    1,550     5,000         -       149       813
                          --------  --------  --------  --------  --------
Net interest income
 after provision for
 loan losses                19,843    12,553    17,161    17,567    15,610
Noninterest Income
  Service charges on
   deposit accounts          1,543     1,415     1,203     1,273     1,335
  Net losses on
   securities transactions       -         -      (195)        -         -
  Net trading profits          624         -         -        13       269
  Gains on sale of loans       194       205        91       103       116
  Insurance and brokerage
   commissions                 478       486       512       339       414
  Trust                        357        86        77        79        80
  Increase in cash
   surrender value of
   life insurance              676       534       490       478       399
  Life insurance benefit         -         -         -         -       789
  Gain on extinguishment
   of debt                       -       625       625         -         -
  Other                        275       250       210       253       160
                          --------  --------  --------  --------  --------
    Total noninterest
     income                  4,147     3,601     3,013     2,538     3,562
Noninterest Expenses
  Salaries and employee
   benefits                  9,318     7,618     7,482     6,447     6,889
  Occupancy and equipment    1,885     1,647     1,456       993     1,576
  Professional services      3,047     1,267     1,080     1,355     1,029
  Marketing                    418       587       453       274       449
  Other                      2,526     1,922     1,414     1,795     1,334
                          --------  --------  --------  --------  --------
    Total noninterest
     expenses               17,194    13,041    11,885    10,864    11,277
                          --------  --------  --------  --------  --------
Income (loss) before
 income taxes and
 discontinued operations     6,796     3,113     8,289     9,241     7,895
Provision for income
 taxes                         814       223     2,348     2,571     1,982
                          --------  --------  --------  --------  --------
Income (loss) from
 continuing operations       5,982     2,890     5,941     6,670     5,913
                          --------  --------  --------  --------  --------
Discontinued operations
  Income (loss) from
   discontinued
   operations before
   income taxes                  -         -         -         -     6,554
  Provision for income
   taxes                         -         -         -         -       925
                          --------  --------  --------  --------  --------
  Income (loss) from
   discontinued
   operations                    -         -         -         -     5,629
                          --------  --------  --------  --------  --------
Net Income (Loss)         $  5,982  $  2,890  $  5,941  $  6,670  $ 11,542
                          ========  ========  ========  ========  ========
Basic earnings per share
 from continuing
 operations               $   0.24  $   0.13  $   0.27  $   0.31  $   0.30
                          ========  ========  ========  ========  ========
Basic earnings per share
 from discontinued
 operations               $   0.00  $   0.00  $   0.00  $   0.00  $   0.28
                          ========  ========  ========  ========  ========
Basic earnings per share  $   0.24  $   0.13  $   0.27  $   0.31  $   0.58
                          ========  ========  ========  ========  ========
Diluted earnings per
 share from continuing
 operations               $   0.24  $   0.13  $   0.27  $   0.30  $   0.29
                          ========  ========  ========  ========  ========
Diluted earnings per
 share from discontinued
 operations               $   0.00  $   0.00  $   0.00  $   0.00  $   0.28
                          ========  ========  ========  ========  ========
Diluted earnings per
 share                    $   0.24  $   0.13  $   0.27  $   0.30  $   0.57
                          ========  ========  ========  ========  ========
Cash dividends per common
 share                    $   0.13  $   0.13  $   0.12  $   0.12  $   0.12
                          ========  ========  ========  ========  ========



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

                                     Nine Months Ended
                                   September  September
                                       30,       30,
                                      2006      2005
                                    --------  --------
Interest Income
  Loans                             $ 87,968  $ 56,964
  Securities
    Taxable                           22,875    21,255
    Exempt from federal income
     taxes                             2,608       579
  Trading securities                     189       388
  Dividend income from Federal
   Reserve and Federal Home
   Loan Bank stock                       475       570
  Federal funds sold and other
   short-term investments                437       387
                                    --------  --------
    Total interest income            114,552    80,143
Interest Expense
  Deposits                            40,023    24,597
  Federal funds purchased                750       604
  Securities sold under agreement
   to repurchase                       7,736     3,997
  Advances from the Federal Home
   Loan Bank                           6,522     4,366
  Junior subordinated debt owed to
   unconsolidated trusts               3,414     2,839
  Notes payable                            -         9
                                    --------  --------
    Total interest expense            58,445    36,412
                                    --------  --------
Net interest income                   56,107    43,731
Provision for loan losses              6,550     2,440
                                    --------  --------
Net interest income after
 provision for loan losses            49,557    41,291
Noninterest Income
  Service charges on deposit
   accounts                            4,161     3,866
  Net losses on securities
   transactions                         (195)  (17,440)
  Net trading profits                    624       400
  Gains on sale of loans                 490       254
  Insurance and brokerage
   commissions                         1,476     1,180
  Trust                                  520       224
  Increase in cash surrender
   value of life insurance             1,700     1,287
  Life insurance benefit                   -       789
  Gain on extinguishment of debt       1,250         -
  Other                                  735       657
                                    --------  --------
    Total noninterest income          10,761    (8,783)
Noninterest Expenses
  Salaries and employee benefits      24,418    20,246
  Occupancy and equipment              4,988     4,591
  Professional services                5,394     3,368
  Loss on extinguishment of debt           -    13,125
  Marketing                            1,459     1,481
  Other real estate owned                237     2,544
  Other                                5,624     4,308
                                    --------  --------
    Total noninterest expenses        42,120    49,663
                                    --------  --------
Income (loss) before income taxes
 and discontinued operations          18,198   (17,155)
Provision for income taxes             3,385    (8,896)
                                    --------  --------
Income (loss) from continuing
 operations                           14,813    (8,259)
                                    --------  --------
Discontinued operations
  Income (loss) from discontinued
   operations before income taxes          -     9,236
  Provision for income taxes               -     1,703
                                    --------  --------
  Income (loss) from discontinued
   operations                              -     7,533
                                    --------  --------
Net Income (Loss)                   $ 14,813  $   (726)
                                    ========  ========
Basic earnings per share
 from continuing operations         $   0.65  $  (0.44)
                                    ========  ========
Basic earnings per share
 from discontinued operations       $   0.00  $   0.40
                                    ========  ========
Basic earnings per share            $   0.65  $  (0.04)
                                    ========  ========
Diluted earnings per share
 from continuing operations         $   0.64  $  (0.44)
                                    ========  ========
Diluted earnings per share
 from discontinued operations       $   0.00  $   0.39
                                    ========  ========
Diluted earnings per share          $   0.64  $  (0.04)
                                    ========  ========
Cash dividends per common share     $   0.38  $   0.36
                                    ========  ========

                         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 2006 and 2005.


                                          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%



                                          For the Three Months Ended
                                             September 30, 2005
                                   --------------------------------------
                                    Average                    Average
                                    Balance       Interest      rate
                                   ------------ ------------ ------------
                                           (Dollars in thousands)
Interest-Earning Assets:
Federal funds sold and
 interest-bearing deposits
 due from banks                    $     15,252 $        142        3.72%
Securities:
  Taxable(1)                            643,561        7,803        4.85
  Exempt from federal income
   taxes(1)                              34,432          524        6.09
                                   ------------ ------------
Total securities                        677,993        8,327        4.92
FRB and FHLB stock                       14,093          183        5.19
Loans:
  Commercial loans(1)(3)(4)             179,926        3,106        6.91
  Commercial real estate
   loans(1)(3)(4)(6)                    854,888       14,876        6.96
  Agricultural loans(1)(3)(4)             1,565           29        7.41
  Consumer real estate
   loans(3)(4)(6)                       190,306        2,823        5.93
  Consumer installment
   loans(3)(4)                            3,796           75        7.90
                                   ------------ ------------
Total loans                           1,230,481       20,909        6.80
                                   ------------ ------------
Total interest-earning assets      $  1,937,819 $     29,561        6.12%
                                   ============ ============

Interest-Bearing Liabilities:
Deposits:
Interest-bearing demand deposits   $    170,647 $        355        0.83%
Money-market demand accounts
  and savings accounts                  335,347        1,275        1.52
Time deposits less than $100,000        771,113        6,353        3.30
Time deposits of $100,000 or more        44,929          384        3.42
Public funds                             18,900          154        3.26
                                   ------------ ------------
Total interest-bearing deposits       1,340,936        8,521        2.56
Borrowings:
Federal funds purchased and
 repurchase agreements                  224,556        1,721        3.07
FHLB advances                           150,000        1,340        3.57
Notes payable and other borrowings       55,672          875        6.29
                                   ------------ ------------
Total borrowings                        430,228        3,936        3.64
                                   ------------ ------------
Total interest-bearing
 liabilities                       $ 1,771,164   $    12,457        2.80%
                                   ============ ============
Net interest income (tax
 equivalent)(1)(5)                              $     17,104        3.32%
                                                ============
Net interest margin (tax
 equivalent)(1)                                                     3.53%

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



                                          For the Three Months Ended
                                               June 30, 2006
                                   --------------------------------------
                                    Average                    Average
                                    Balance       Interest      rate
                                   ------------ ------------ ------------
                                           (Dollars in thousands)
Interest-Earning Assets:
Federal funds sold and
 interest-bearing deposits
 due from banks                    $     11,834 $        186        6.29%
Securities:
  Taxable(1)                            601,238        7,893        5.25
  Exempt from federal income
   taxes(1)                              87,396        1,281        5.86
                                   ------------ ------------
Total securities                        688,634        9,174        5.32
FRB and FHLB stock                       14,851          139        3.74
Loans:
  Commercial loans(1)(3)(4)             208,637        4,172        8.00
  Commercial real estate
   loans(1)(3)(4)(6)                    979,351       18,655        7.62
  Agricultural loans(1)(3)(4)             2,540           49        7.72
  Consumer real estate
   loans(3)(4)(6)                       227,913        3,768        6.61
  Consumer installment
   loans(3)(4)                            4,557           90        7.90
                                   ------------ ------------
Total loans                           1,422,998       26,734        7.52
                                   ------------ ------------
Total interest-earning assets      $  2,138,317 $     36,233        6.76%
                                   ============ ============

Interest-Bearing Liabilities:
Deposits:
Interest-bearing demand deposits   $    136,094 $        269        0.79%
Money-market demand accounts
 and savings accounts                   276,221        1,158        1.68
Time deposits less than $100,000        758,439        7,685        4.05
Time deposits of $100,000 or more       260,695        3,068        4.71
Public funds                             12,539          143        4.56
                                   ------------ ------------
Total interest-bearing deposits       1,443,988       12,323        3.40
Borrowings:
Federal funds purchased and
 repurchase agreements                  207,660        2,358        4.54
FHLB advances                           206,594        1,982        3.84
Notes payable and other borrowings       55,672        1,074        7.72
                                   ------------ ------------
Total borrowings                        469,926        5,414        4.60
                                   ------------ ------------
Total interest-bearing liabilities $  1,913,914 $     17,737        3.72%
                                   ============ ============
Net interest income (tax
 equivalent)(1)(5)                              $     18,496        3.04%
                                                ============
Net interest margin (tax
 equivalent)(1)                                                     3.46%

Net interest income(2)(5)                       $     17,553
                                                ============
Net interest margin(2)                                              3.28%


(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 which are immaterial.
(5) The following table reconciles reported net interest income on a tax
    equivalent basis for the periods presented:
                                             3Q06       3Q05       2Q06
      Net interest income                $  21,393  $  16,423  $  17,553
      Tax equivalent adjustment to
       net interest income                   1,194        681        943
                                         ---------  ---------  ---------
      Net interest income, tax
       equivalent basis                  $  22,587  $  17,104  $  18,496
                                         =========  =========  =========
(6)  Includes construction loans.



             MIDWEST BANC HOLDINGS, INC.
          CONSOLIDATED NET INTEREST MARGIN


                                           For the Nine 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     $     11,621 $        437        5.01%
Securities:
  Taxable(1)                              618,985       24,503        5.28
  Exempt from federal income
   taxes(1)                                90,966        4,012        5.88
                                     ------------ ------------
Total securities                          709,951       28,515        5.36
FRB and FHLB stock                         16,832          475        3.76
Loans:
  Commercial loans(1)(3)(4)               270,941       16,118        7.93
  Commercial real estate
   loans(1)(3)(4)(6)                    1,057,020       59,741        7.54
  Agricultural loans(3)(4)                  2,419          140        7.72
  Consumer real estate
   loans(3)(4)(6)                         235,304       11,772        6.67
  Consumer installment
   loans(3)(4)                              7,556          420        7.41
                                     ------------ ------------
Total loans                             1,573,240       88,191        7.48
                                     ------------ ------------
Total interest-earning assets        $  2,311,644 $    117,618        6.79%
                                     ============ ============
Interest-Bearing Liabilities:
Deposits:
Interest-bearing demand deposits     $    148,869 $      1,117        1.00%
Money-market demand accounts
  and savings accounts                    328,388        4,962        2.01
Time deposits less than $100,000          756,544       22,878        4.03
Time deposits of $100,000 or more         289,399       10,548        4.86
Public funds                               15,288          518        4.52
                                     ------------ ------------
Total interest-bearing deposits         1,538,488       40,023        3.47
Borrowings:
Federal funds purchased and
 repurchase agreements                    249,151        8,486        4.54
FHLB advances                             210,979        6,522        4.12
Notes payable and other borrowings         59,081        3,414        7.70
                                     ------------ ------------
Total borrowings                          519,211       18,422        4.73
                                     ------------ ------------
Total interest-bearing liabilities   $  2,057,699 $     58,445        3.79%
                                     ============ ============
Net interest income (tax
 equivalent)(1)(5)                                $     59,173        3.00%
                                                  ============
Net interest margin (tax
 equivalent)(1)                                                       3.41%

Net interest income(2)(5)                         $     56,107
                                                  ============
Net interest margin(2)                                                3.24%


                                           For the Nine 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     $     20,159 $        387        2.56%
Securities:
  Taxable(1)                              655,284       22,860        4.65
  Exempt from federal income
   taxes(1)                                19,113          891        6.22
                                     ------------ ------------
Total securities                          674,397       23,751        4.70
FRB and FHLB stock                         13,919          570        5.46
Loans:
  Commercial loans(1)(3)(4)               181,133        8,701        6.40
  Commercial real estate
   loans(1)(3)(4)(6)                      822,040       40,754        6.61
  Agricultural loans(3)(4)                  1,424           75        7.02
  Consumer real estate
   loans(3)(4)(6)                         172,561        7,460        5.76
  Consumer installment
   loans(3)(4)                              3,776          215        7.59
                                     ------------ ------------
Total loans                             1,180,934       57,205        6.46
                                     ------------ ------------
Total interest-earning assets        $  1,889,409 $     81,913        5.78%
                                     ============ ============
Interest-Bearing Liabilities:
Deposits:
Interest-bearing demand deposits     $    184,117 $      1,825        1.32%
Money-market demand accounts
  and savings accounts                    349,067        4,263        1.63
Time deposits less than $100,000          744,363       17,175        3.08
Time deposits of $100,000 or more          51,057        1,078        2.82
Public funds                               12,232          256        2.79
                                     ------------ ------------
Total interest-bearing deposits         1,340,836       24,597        2.45
Borrowings:
Federal funds purchased and
 repurchase agreements                    213,089        4,601        2.88
FHLB advances                             128,867        4,366        4.52
Notes payable and other borrowings         55,943        2,848        6.79
                                     ------------ ------------
Total borrowings                          397,899       11,815        3.96
                                     ------------ ------------
Total interest-bearing liabilities   $  1,738,735 $     36,412        2.79%
                                     ============ ============
Net interest income (tax
 equivalent)(1)(5)                                $     45,501        2.99%
                                                  ============
Net interest margin (tax
 equivalent)(1)                                                       3.21%

Net interest income(2)(5)                         $     43,731
                                                  ============
Net interest margin(2)                                                3.09%


(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 which are immaterial.
(5) The following table reconciles reported net interest income on a tax
    equivalent basis for the periods presented:

                                                   3Q06        3Q05
          Net interest income                  $  56,107   $  43,731
          Tax equivalent adjustment to net
           interest income                         3,066       1,770
                                               ---------   ---------
          Net interest income, tax equivalent
           basis                               $  59,173   $  45,501
                                               =========   =========

(6) Includes construction loans.




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

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

Income Statement Data:
   Net income (loss)               $5,982  $2,890  $5,941  $6,670  $11,542
   Core net income (1)              6,943   2,890   5,941   6,670    6,629
   Core efficiency ratio
    (1)(3)(4)(8)                    56.45%  57.38%  55.20%  50.66%   53.75%

Per Share Data and Other:
   Basic earnings per share
    from continuing operations      $0.24   $0.13   $0.27   $0.31    $0.30
   Basic earnings per share
    from discontinued operations     0.00    0.00    0.00    0.00     0.28
   Basic earnings per share          0.24    0.13    0.27    0.31     0.58
   Diluted earnings per share
    from continuing operations       0.24    0.13    0.27    0.30     0.29
   Diluted earnings per share
    from discontinued operations     0.00    0.00    0.00    0.00     0.28
   Diluted earnings per share        0.24    0.13    0.27    0.30     0.57
   Cash dividends declared           0.13    0.13    0.12    0.12     0.12
   Book value at end of period      11.67    9.71    9.99    9.91     9.87
   Tangible book value at end of
    period (10)                      8.51    9.67    9.95    9.87     9.83
   Stock price at end of period     24.42   22.25   25.94   22.25    23.06
   Average stock price              23.03   22.84   24.25   22.42    21.91

   Full time equivalent employees  498.00  420.00  412.00  402.00   388.00

Selected Financial Ratios:
   Return on average assets from
    continuing operations (5)        0.80%   0.50%   1.05%   1.18%    0.98%
   Core return on average assets
    from continuing operations
    (1) (5)                          0.93    0.50    1.05    1.18     0.98
   Return on average equity
    from continuing operations (6)   8.43    5.31   11.06   12.37    13.49
   Core return on average equity
    from continuing operations
    (1) (5)                          9.79    5.31   11.06   12.37    13.49
   Dividend payout from continuing
    operations                      54.70  100.24   44.29   39.55    44.58
   Loans to deposits at end of
    period                          94.19   89.82   86.83   88.62    83.22
   Average equity to average
    assets                           9.48    9.42    9.46    9.50     7.30
   Equity to assets at end of
    period                           9.84    9.02    9.38    9.37     9.67
   Tangible capital to assets at
    end of period (10)               7.17    8.99    9.34    9.33     9.63
   Tier I capital to risk-weighted
    assets (11)                     12.64   16.22   16.49   16.97    17.33
   Total capital to risk-weighted
    assets (11)                     13.84   17.44   17.53   18.07    18.48
   Net interest margin (tax
    equivalent) (7) (8)              3.40    3.46    3.39    3.57     3.53
   Allowance for loan losses to
    total loans at the end of
    period                           1.34    1.47    1.26    1.32     1.41
   Net loans charged off to
    average loans                    0.03    0.53    0.01    0.12     0.08
   Nonaccruing loans to loans
    at the end of period             1.13    0.77    0.56    0.59     0.54
   Nonperforming assets to
    total assets (9)                 0.83    0.68    0.81    0.83     0.81
   Allowance to nonaccruing loans    1.18x   1.91x   2.25x   2.25x    2.61x



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

                                                 Nine Months Ended
                                            September 30,    September 30,
                                                2006             2005
                                           ---------------  --------------

Income Statement Data:
  Net income (loss)                          $    14,813      $     (726)
  Core net income (1)                             15,774          13,366
  Core efficiency ratio (1) (3) (4) (8)            56.36%          60.86%

Per Share Data and Other:
  Basic earnings per share
   from continuing operations                $      0.65      $    (0.44)
  Basic earnings per share
   from discontinued operations                     0.00            0.40
  Basic earnings per share                          0.65           (0.04)
  Diluted earnings per share
   from continuing operations                       0.64           (0.44)
  Diluted earnings per share
   from discontinued operations                     0.00            0.39
  Diluted earnings per share                        0.64           (0.04)
  Cash dividends declared                           0.38            0.36
  Book value at end of period                      11.67            9.87
  Tangible book value at end of
   period (10)                                      8.51            9.83
  Stock price at end of period                     24.42           23.06
  Average stock price                              23.37           20.82

  Full time equivalent employees                  498.00          388.00

Selected Financial Ratios:
  Return on average assets
   from continuing operations (5)                   0.78%          (0.48)%
  Core return on average assets
   from continuing operations  (1) (5)              0.83            0.62
  Return on average equity
   from continuing operations (6)                   8.27           (7.24)
  Core return on average equity
   from continuing operations (1) (5)               8.81            9.42
  Dividend payout from continuing
   operations                                      59.41             n/a
  Loans to deposits at end of period               94.19           83.22
  Average equity to average assets                  9.46            6.57
  Equity to assets at end of period                 9.84            9.67
  Tangible capital to assets at end of
   period (10)                                      7.17            9.63
  Tier I capital to risk-weighted
   assets (11)                                     12.64           17.33
  Total capital to risk-weighted
   assets (11)                                     13.84           18.48
  Net interest margin (tax equivalent)
   (7) (8)                                          3.41            3.21
  Allowance for loan losses to total loans
   at the end of period                             1.34            1.41
  Net loans charged off to average loans            0.17            0.08
  Nonaccruing loans to loans at the end
   of period                                        1.13            0.54
  Nonperforming assets to total assets (9)          0.83            0.81
  Allowance to nonaccruing loans                    1.18x           2.61x


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


                                      Three Months Ended
                                     --------------------
                     September    June       March     December September
                        30,        30,        31,        31,        30,
                       2006       2006       2006       2005      2005
                    ---------- ---------- ---------- ---------- ----------
Balance Sheet
 Data:
 Total assets       $2,942,301 $2,361,602 $2,336,448 $2,307,608 $2,225,097
 Total earning
  assets             2,628,847  2,170,311  2,128,688  2,126,227  2,048,772
 Average earning
  assets
 (quarter-to-date)   2,659,420  2,138,317  2,131,391  2,083,125  1,937,819
 Average assets
  (quarter-to-date)  2,967,572  2,319,713  2,303,413  2,252,078  2,382,602
 Total loans         1,909,026  1,422,830  1,403,700  1,349,996  1,276,026
 Average loans
  (quarter-to-date)  1,918,941  1,421,485  1,367,971  1,301,623  1,229,508
 Total securities      692,876    675,585    693,674    747,388    751,342
 Average securities
  (quarter-to-date)    703,922    688,634    737,667    751,779    677,993
 Allowance for
  loan losses           25,542     20,874     17,737     17,760     17,993
 Total deposits      2,026,836  1,584,067  1,616,634  1,523,384  1,533,225
 Average deposits
  (quarter-to-date)  2,062,014  1,605,473  1,551,065  1,517,163  1,499,732
 Borrowings            584,345    527,275    473,618    538,480    442,255
 Stockholders'
  equity               289,477    213,112    219,187    216,126    215,186
 Tangible
  stockholders'
  equity (10)          210,910    212,221    218,296    215,235    214,295
 Average equity
  (quarter-to-date)    281,367    218,505    217,807    213,872    173,838


Share Data:
 Common shares
  outstanding           24,796     21,946     21,933     21,814     21,793
 Basic                  24,811     21,942     21,871     21,797     20,060
 Diluted -
  continuing
  operations            25,176     22,176     22,136     22,077     20,354
 Diluted -
  discontinued
  operations            25,176    22,176      22,136     22,077     20,354
 Diluted                25,176    22,176      22,136     22,077     20,354

                       Nine Months Ended
                       -----------------
                     September  September
                         30,       30,
                        2006       2005
                    ---------- ----------
Balance Sheet Data:
 Total assets       $2,942,301 $2,225,097
 Total earning
  assets             2,628,847  2,048,772
 Average earning
  assets
 (year-to-date)      2,311,644  1,889,409
 Average assets
  (year-to-date)     2,532,571  2,322,965
 Total loans         1,909,026  1,276,026
 Average loans
  (year-to-date)     1,571,484  1,180,290
 Total securities      692,876    751,342
 Average securities
  (year-to-date)       709,951    674,397
 Allowance for
  loan losses           25,542     17,993
 Total deposits      2,026,836  1,533,225
 Average deposits
  (year-to-date)     1,741,389  1,494,614
 Borrowings            584,345    442,255
 Stockholders'
  equity               289,477    215,186
 Tangible
  stockholders'
  equity (10)          210,910    214,295
 Average equity
  (year-to-date)       239,476    152,575


Share Data:
 Common shares
  outstanding           24,796     21,793
 Basic                  22,886     18,824
 Diluted -
  continuing
  operations            23,279     18,824
 Diluted -
  discontinued
  operations            23,279     19,104
 Diluted                23,279     18,824



(1) Core net income is net income excluding the balance sheet
    repositioning charges, the gain on sale of subsidiary, and one-time
    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
                                     ------------------
                           September    June    March   December September
                              30,        30,      31,       31,      30,
                             2006       2006     2006      2005     2005
                          --------  --------  --------  --------  --------
Net income (loss)         $  5,982  $  2,890  $  5,941  $  6,670  $ 11,542
Gain on sale of
 subsidiary, net of tax          -         -         -         -    (6,881)
Loss on U.S. Agency debt
 securities, net of tax          -         -         -         -     1,968
Charge from prepayment of
 FHLB advances, net of tax       -         -         -         -         -
Charge from unwinding
 swaps, net of tax               -         -         -         -         -
Charge from redemption of
 trust preferred
 securities, net of tax          -         -         -         -         -
One-time merger related
 charges, net of tax           961         -         -         -         -
                          --------  --------  --------  --------  --------
Core net income           $  6,943  $  2,890  $  5,941  $  6,670  $  6,629
                          ========  ========  ========  ========  ========

                         Nine Months Ended
                         ------------------
                         September September
                             30,      30,
                            2006     2005
                         --------  --------
Net income (loss)        $ 14,813  $   (726)
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
One-time merger related
 charges, net of tax          961          -
                         --------  ---------
Core net income          $ 15,774  $  13,366
                         ========  =========

Core income from continuing operations is income from continuing
operations excluding the balance sheet repositioning charges and one-time
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
                                        ------------------
                           September  June     March   December September
                              30,      30,       31,       31,      30,
                             2006     2006      2006      2005     2005
                          --------  --------  --------  --------  --------

Income (loss) from
 continuing operations    $  5,982  $  2,890  $  5,941  $  6,670  $  5,913
Loss on U.S. Agency debt
 securities, net of tax          -         -         -         -         -
Charge from prepayment
 of FHLB advances,
 net of tax                      -         -         -         -         -
Charge from unwinding
 swaps, net of tax               -         -         -         -         -
Charge from redemption
 of trust preferred
 securities, net of tax          -         -         -         -         -
One-time merger related
 charges, net of tax           961         -         -         -         -
                          --------  --------  --------  --------  --------
Core income from
 continuing operations    $  6,943  $  2,890  $  5,941  $  6,670  $  5,913
                          ========  ========  ========  ========  ========

                           Nine Months Ended
                          ------------------
                          September September
                             30,      30,
                            2006     2005
                          --------  --------
Income (loss) from
 continuing operations     $ 14,813 $ (8,259)
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
One-time merger related
 charges, net of tax            961        -
                           -------- --------
Core income from
 continuing operations     $ 15,774 $ 10,746
                           ======== ========



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

                      September    June      March     December   September
                         30,        30,        31,        31,       30,
                        2006       2006       2006       2005      2005
                     ---------- ---------  ---------- ---------  ---------
Investment
 securities          $  692,876 $ 675,585  $  693,674 $ 747,388  $ 751,342
Federal funds and
 other short-term
 investments              2,647    52,152      14,965    12,270      5,440
Net due from broker      15,109    (8,203)     24,810    (1,301)    (6,852)
                     ---------- ---------  ---------- ---------  ---------
Total investment
 securities and other
 related assets      $  710,632 $ 719,534  $  733,449 $ 758,357  $ 749,930
                     ========== =========  ========== =========  =========


(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 one-time 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 is
      more reflective of current trends.  The following tables reconciles
      reported noninterest expense to core noninterest expenses for the
      periods presented:




                                 Three Months Ended
                                 ------------------
                 September     June       March      December    September
                    30,         30,         31,         31,         30,
                   2006        2006        2006        2005         2005
                ----------  ----------  ----------  ----------  ----------
Noninterest
 expenses       $   17,194  $   13,041  $   11,885  $   10,864  $   11,277
One-time merger
 related charges    (1,595)          -           -           -           -
                ----------  ----------  ----------  ----------  ----------
Core noninterest
 expenses       $   15,599  $   13,041  $   11,885  $   10,864  $   11,277
                ==========  ==========  ==========  ==========  ==========

                             Nine Months Ended
                             -----------------
                         September 30, September 30,
                            2006           2005
                         ----------    ----------
Noninterest expenses     $   42,120    $   49,663
Charge from prepayment
 of FHLB advances                 -        (9,547)
Charge from unwinding
 swaps                            -        (3,578)
Charge from redemption
 of trust preferred
 securities                       -          (516)
One-time merger related
 charges                     (1,595)            -
                         ----------    ----------
Core noninterest
 Expenses               $    40,525    $   36,022
                         ==========    ==========

(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:

  Quarter-to-date            3Q06      2Q06      1Q06      4Q05      3Q05
  Net interest income      $ 21,393  $ 17,553  $ 17,161  $ 17,716  $ 16,423
  Tax equivalent adjustment
   to net interest income     1,194       943       929       858       681
                           --------  --------  --------  --------  --------
  Net interest income,
   tax equivalent basis    $ 22,587  $ 18,496  $ 18,090  $ 18,574  $ 17,104
                           ========  ========  ========  ========  ========

  Year-to-date               3Q06      3Q05
  Net interest income      $ 56,107  $ 43,731
  Tax equivalent adjustment
   to net interest income     3,066     1,770
                           --------  --------
  Net interest income, tax
   equivalent basis        $ 59,173  $ 45,501
                           ========  ========

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

                           3Q06      2Q06       1Q06       4Q05       3Q05
  Stockholders' equity    $289,477  $213,112  $219,187  $216,126  $137,423
  Goodwill                  78,567       891       891       891       891
                          --------  --------  --------  --------  --------
  Tangible stockholders'
   equity                 $210,910  $212,221  $218,296  $215,235  $136,532
                          --------  --------  --------  --------  --------

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

                           3Q06       2Q06      1Q06      4Q05      3Q05
  Accumulated other
   comprehensive loss    $ (6,561) $ (16,380) $ (9,682) $ (7,606) $ (3,937)

Contact Information

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