SOURCE: Midwest Banc Holdings, Inc.

January 28, 2008 22:20 ET

Midwest Banc (MBHI) Reports Fourth Quarter Earnings

MELROSE PARK, IL--(Marketwire - January 28, 2008) - Midwest Banc Holdings, Inc. (MBHI) (NASDAQ: MBHI) today reported diluted earnings per share of $.14 and core diluted earnings of $.17, excluding merger-related charges, for the fourth quarter. This compares to $.20 for the third quarter and $.12 for the same quarter in the prior year. Full year diluted earnings per share were $.72 compared to $.75 in 2006, and core diluted earnings per share were $.75 compared to $.79 in 2006.

Overview

"I am pleased with the Northwest Suburban merger integration, our success with capital raising and our commercial and industrial loan growth. Now our main focus in 2008 is on growing quality earnings in a predictable manner," stated Jim Giancola, CEO. "We are not at all involved in any of the subprime mortgage mess that is plaguing some banks. However, our stock price, like that of all community banks, is clearly being hurt by the problems in the banking sector."

Midwest's performance during the fourth quarter included these very positive achievements.

--  Completed the acquisition and integration of Northwest Suburban
    Bancorp, Inc. (NWSB) which increased total assets by 18%
--  Raised $41.4 million in capital through a convertible preferred stock
    offering in a very challenging equity market
--  Increased average loans from third quarter by 6% annualized, excluding
    the loans acquired from NWSB, in spite of the slowing economy.  When NWSB
    loans are included, total loans increased 23%.
--  Reduced total nonperforming assets to 2.08% of loan-related assets at
    quarter end compared to 2.34% at September 2007 and 2.33% at December 2006.
    

The carrying cost of the previously disclosed Large Problem Credit continues to have a substantial negative impact on earnings, reducing net income by approximately $.10 per diluted share in 2007 and $.03 per diluted share for the fourth quarter.

Midwest completed its acquisition of NWSB on October 1 and successfully completed the technology conversion shortly thereafter. With $553 million in assets, NWSB brings us five banking offices in complementary locations to our existing franchise in the affluent northwest suburbs.

Loan Growth

Average loans increased by $464 million, or 23%, from third to fourth quarter; $439 million of the increase is attributable to the NWSB acquisition. Excluding the loans acquired through Northwest Suburban, loans grew by $28 million or 6% annualized and $88 million or 5% annualized compared to September 30, 2007 and December 31, 2006, respectively.

During the quarter we revised our classification of commercial loans vs. commercial real estate loans, changing our prior practice of classifying any loan to a business that took real estate as collateral as a commercial real estate loan. Our new presentation recognizes that loans to owner-occupied businesses engaged in manufacturing, sales and services are commercial loans regardless of whether there is real estate taken as collateral. These loans generally have a lower risk profile than traditional commercial real estate loans. They are primarily dependent on an existing borrower's cash flow for repayment, not real estate sales. All loans related to income producing properties and properties intended to be sold will continue to be classified as commercial real estate loans. Completing this project involved a loan-by-loan review of all of our commercial and commercial real estate loans. Our loan portfolio composition at December 31, 2007 under this improved source of repayment classification and prior collateral based classification systems was as follows:

                             Source of       Collateral-
                             Repayment          Based
         Commercial              41%               19%
         Commercial real
          estate                 24                44
         Construction            18                18
         Residential
          mortgage               10                11
         Consumer                 7                 8
                                ---               ---
          Total loans, gross    100%              100%

Net Interest Margin

Midwest experienced severe short-term downward pressure on its margin in the quarter and it moved down 17 basis points from the prior quarter. Average borrowings increased $159 million or 23% in the quarter in order to fund growth. Notes payable on average increased by $81 million, primarily due to the cash requirements of the October 1, 2007 NWSB acquisition. Short-term LIBOR rates, which most of our borrowings are indexed to, lagged decreases in the prime rate. As a consequence of these movements, our average borrowing rate increased 24 basis points from the previous quarter while average loan yields declined 28 basis points. While we worked hard to reduce the more controllable average deposit rates by 20 basis points, it was not enough to offset the effects of the loan yield / borrowing costs mismatch. LIBOR has been declining and is anticipated to continue its decline in the near term. We expect relief to our margin in the first quarter of 2008 as the borrowing side benefits from these decreasing LIBOR rates.

Although Midwest continued its organic growth, we were able to reduce balances outstanding on our notes payable toward the latter part of the quarter as a result of our convertible preferred stock offering. Average junior subordinated debentures outstanding for the quarter were up $1.1 million over the previous quarter but period end balances decreased $5.1 million from September 30 to December 31 as $10.3 million was added on October 1 from the NWSB merger and $15.5 million was paid off in mid-November.

Loan Quality Stable

Net outstandings for the Large Problem Credit have remained constant during the fourth quarter at $29 million and represent 59% of our total nonaccrual loans at December 31, 2007. 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. While the current carrying value of these loans at December 31 reflects management's best current estimate of net realizable value, there can be no assurance that additional losses may not be incurred.

The quality of the loan portfolio remained stable in the fourth quarter of 2007. Nonaccrual loans to total loans declined from 2.23% at the end of the third quarter to 1.99% at year end. Nonaccrual loans also declined from the prior year end level of 2.20%. Nonaccrual loans excluding the Large Problem Credit were .83% of loans at year-end 2007, up slightly from .80% at September 30, 2007 but down from the prior year-end level of .89%. There were no loans over 90 days past due but accruing at December 31, 2007. Foreclosed properties decreased slightly from September 30. There were no additions to foreclosed properties in 2007. Loan delinquencies 30-89 days were .48% of loans at December 31, 2007, down slightly from .49% at September 30. Total nonperforming assets to loan-related assets, excluding the Large Problem Credit, were .92% at year-end 2007 compared to .91% at September 30, 2007 and 1.02% at prior year end.

The allowance for loan losses grew by $1.9 million in the fourth quarter of 2007 and was 1.08% of loans outstanding at year end compared to 1.24% of loans outstanding at September 30, 2007. The allowance for loan losses to nonaccrual loans was 54% at December 31, 2007, slightly down from 56% at September 30, 2007. Net chargeoffs for the fourth quarter were $2.3 million or .37% of average loans, up from $645,000 or .13% of loans in the third quarter. Net chargeoffs for the full year 2007 were $4.1 million or .20% of average loans, compared to $9.8 million or .59% of average loans in 2006. The provision for loan losses for the fourth quarter of 2007 was $1.4 million compared to $1.8 million in the third quarter. The provision for loan losses was $4.9 million for the full year 2007 and exceeded net chargeoffs by approximately $752,000. The allowance was increased by $2.8 million as a result of the NWSB acquisition.

Noninterest Income Expansion

Noninterest income increased during the fourth quarter to $4.2 million, an increase of $461,000 over the prior quarter. Service charges on deposits increased by 27% from the previous quarter and average deposits grew by 23%. Service charges on deposits are anticipated to continue to increase in 2008. Trust income increased by 12% during the quarter, while insurance and brokerage commissions decreased by 29%.

On a full year basis, service charges on deposits increased by 17% in 2007, and insurance and brokerage commissions increased by 15%. Trust income increased by $938,000, or 102%, reflecting an entire year's earnings from the trust assets under management previously acquired through the Royal American acquisition on July 1, 2006.

As disclosed previously, we introduced an enhanced sales initiative aimed at increasing cross-selling to both new and existing customers. During the fourth quarter, we launched a marketing campaign aimed at our community bank brand and risk-based pricing for consumer loans.

Noninterest Expense

On a linked-quarter basis, noninterest expenses in the fourth quarter of 2007 were up by $5.2 million or 32%. This increase was mainly attributed to an increase in salaries and benefits expense from the NWSB acquisition, together with $1.3 million in merger-related expenses. The increase also reflected higher occupancy and equipment expense, additional branches from the NWSB acquisition, and increases in professional services fees, loan workout legal fees and consulting expenses.

Midwest's effective tax rate decreased to 8% in the fourth quarter down from 19% in the third quarter. Lower pre-tax income as reduced by merger related expenses was the primary factor in the reduced effective tax rate. Also, an adjustment related to Midwest's 2006 income tax returns increased third quarter income tax expense by $159,000. The core efficiency ratio modestly increased to 69% during the quarter compared to 64% from the prior quarter.

Securities Portfolio and Balance Sheet Management

By strategy, our $748 million investment securities portfolio is held primarily to assist with liquidity management and to be an important component in our system of interest rate risk management. The purpose of our securities portfolio is not to take credit risk or to stretch into exotic investment products. We have no sub-prime or Alt-A mortgage backed securities. All of our $415 million in mortgage backed securities are agency issued, are AAA-rated, and are either pass-throughs or are CMOs. At December 31, the ratings of our securities portfolio were: AAA 87%; AA 12%; and A 1%.

Midwest continues to maintain a high-quality investment securities portfolio, and we have no direct exposure to the risks arising from the effects of the current sub-prime mortgage crisis. At December 31, 2007 we had gross unrealized losses in the available-for-sale portion of the investment portfolio of approximately $26 million, or 5% of the corresponding cost basis, all of which was judged to be temporary as of that date.

We have a portfolio of bank owned life insurance that had a cash surrender value (CSV) of $81 million at year end. The income from increases in CSV was $871,000 in the fourth quarter of 2007 and $3.1 million for the full year. We acquired $13 million in the NWSB acquisition.

At year-end, we had $821 million of funding from various borrowing sources to complement our $2.5 billion in deposits. Overall, the issues of "tight credit" and liquidity concerns that have challenged some financial institutions have not been a problem for Midwest Bank.

We have an aggressive program of modeling the interest rate risk inherent in our balance sheet including simulating various scenarios of market rate changes. At year end we consider our position to be essentially neutral over a twelve-month period although many of our floating rate assets are tied to prime while many funding sources are LIBOR-based. Based upon the recent correction to LIBOR, we expect our net interest margin to improve during the first quarter as funding costs drop faster than asset yields. Over the next twelve months, we expect only a minimal impact to earnings from rate changes in either direction.

Northwest Suburban Bancorp Acquisition

The NWSB acquisition closed on October 1, 2007. This in-market merger brought loans of $439 million, deposits of $471 million and 5 banking offices. Systems were converted on October 26 and on that date all operations were 100% integrated. In making this conversion and integration we incurred $1.3 million in merger-related charges, mainly for technology related expenses and compensation and benefits.

NWSB was fundamentally a small business and consumer bank coupled with a capable group of middle market corporate bankers all serving a valuable and loyal customer base. Through this merger we established a presence in desirable Chicago area communities such as Mount Prospect, now home to our Company's largest branch.

The integration followed a best practices approach. Certain cash management capabilities previously available through strategic partnership are now offered in-house thanks to this merger. NWSB officers now manage our cash management unit which supports the expansion of commercial banking business throughout the Company.

All key personnel of NWSB have been retained. At announcement of the merger we stated that we anticipated $1.3 million of cost savings, after tax, net of the cost of supplemental executive retirement plan and restricted stock awards. Currently, we are on target to achieve our anticipated cost savings by the third quarter of 2008.

Going forward, our main strategies for making this a highly successful merger are to maintain the strong ties with the communities served by NWSB as we respond to the needs of our customers, stay connected to community leaders, and support community initiatives. It is critical we maintain local decision-making as we leverage our associates' strong customer relationships, and a broad array of financial and wealth management services.

Successful Equity Offering

"December was not the best of times to be doing a bank equity offering," reflected Jim Giancola. "However, we were committed to replacing the tangible equity impacted by the NWSB transaction in the same quarter. We feel that we were very effective in explaining that our Large Problem Credit challenge is isolated and not indicative of our current system of making and administering loans. Also, we made it very clear that we have no exposure to the sub-prime mortgage or liquidity challenges of some other banks and large diversified financial institutions."

In December 2007, we raised $41.4 million in equity capital, net of issuance costs, through the issuance of 1,725,000 depositary shares of 7.75% noncumulative redeemable convertible perpetual preferred stock. Each of these shares is convertible into 1.67 common shares or $15 per share at any time by the holder. Five years after the issue date, Midwest can convert the shares using the same ratio if certain conditions are met. This stock trades on the NASDAQ Global Market under the symbol, MBHIP.

The proceeds from the offering were used to reduce balances outstanding on a term note and a revolving line of credit, as well as contributing capital to our bank subsidiary, thus reducing our balance sheet leverage. The capital raise helped maintain our well-capitalized status under regulatory guidelines which had been reduced by the goodwill and other intangibles associated with the NWSB acquisition.

Additionally, the issue is accretive to both our book value and tangible book value per share when such ratios are calculated on an "if converted" basis.

Financial Highlights

On October 1, 2007 Midwest Banc acquired Northwest Suburban Bancorp, Inc. On July 1, 2006 Midwest Banc acquired Royal American Corporation. There were special merger-related charges incurred in the fourth quarter 2007 and third quarter 2006. Therefore, comparisons involving prior periods may be affected by these mergers and these merger-related charges.

Earnings

--  Diluted earnings per share was $.14 for fourth quarter and $.72 for
    twelve months 2007
    -  Compared to $.12 for fourth quarter 2006, a 17% increase
    -  Compared to $.20 for third quarter 2007, a 30% decrease
    -  Compared to $.75 for twelve months 2006, a 4% decrease

--  Core diluted earnings per share was $.17 for fourth quarter and $.75
    for twelve months 2007
    -  Compared to $.12 for fourth quarter 2006, a  42% increase
    -  Compared to $.20 for third quarter 2007,  a 15% decrease
    -  Compared to $.79 for twelve months 2006, a  5% decrease

--  Net income was $4.2 million for fourth quarter and $18.6 million for
    twelve months 2007
    -  Compared to $2.9 million for fourth quarter 2006
    -  Compared to $4.8 million for third quarter 2007
    -  Compared to $17.7 million for twelve months 2006

--  Core net income was $5.0 million for fourth quarter and $19.4 million
    for twelve months 2007
   -  Compared to $2.9 million for fourth quarter 2006
   -  Compared to $4.8 million for third quarter 2007
   -  Compared to $18.7 million for twelve months 2006

--  Core return on average assets was .54% for fourth quarter and .61% for
    twelve months 2007
    -  Compared to .39% for fourth quarter 2006
    -  Compared to .64% for third quarter 2007
    -  Compared to .71% for twelve months 2006

--  Core return on average equity was 5.74% for fourth quarter and 6.39%
    for twelve months 2007
    -  Compared to 4.01% for fourth quarter 2006
    -  Compared to 6.75% for third quarter 2007
    -  Compared to 7.42% for twelve months 2006

--  Net interest margin was 2.93% for fourth quarter and 3.02% for twelve
    months 2007
    -  Compared to 3.08% for fourth quarter 2006
    -  Compared to 3.10% for third quarter 2007
    -  Compared to 3.32% for twelve months 2006

--  Top line revenue increased
    -  $4.5 million compared to fourth quarter 2006
    -  $3.4 million compared to third quarter 2007
    -  $8.3 million compared to twelve months 2006

--  Core efficiency ratio was 69% for fourth quarter and 67% for twelve
    months 2007
    -  Compared to 66% for fourth quarter 2006
    -  Compared to 64% for third quarter 2007
    -  Compared to 59% for twelve months 2006

Loans and Loan Quality

--  Loans in fourth quarter increased
    -  $464 million on an average balance basis compared to third quarter
       2007, a $25 million increase excluding loans acquired through
       Northwest Suburban merger
    -  $467 million at December 31 compared to September 30 a $28 million
       increase excluding loans acquired through Northwest Suburban merger

--  Annualized net charge-off rate was .37% for fourth quarter and .20% for
    twelve months 2007
    -  Compared to 1.62% for fourth quarter 2006
    -  Compared to .59% for twelve months 2006

--  Nonaccrual loans at December 31 were $49.2 million or 1.99% of loans
    -  Compared to 2.23% at September 30
    -  Compared to 2.20% at December 31, 2006

--  Nonaccrual loans (excluding Large Problem Credit) at December 31 were
    $20.2 million or .83% of loans
    -  Compared to .80% at September 30
    -  Compared to .89% at December 31, 2006

--  Nonperforming assets at December 31 were $51.4 million, or 2.08% of
    loan-related assets
    -  Compared to 2.34% at September 30
    -  Compared to 2.33% at December 31, 2006
--  Nonperforming assets (excluding Large Problem Credit) at December 31
    were $22.4 million, or .92% of loan-related assets
    -  Compared to .91% at September 30
    -  Compared to 1.02% at December 31, 2006

--  Allowance for loan losses at December 31 was 1.08% of loans
    -  Compared to 1.24% at September 30
    -  Compared to 1.19% at December 31, 2006

--  Allowance for loan losses to nonaccrual loans was 54% at December 31
    -  Compared to 56% at September 30
    -  Compared to 54% at December 31, 2006

--  Delinquencies 30-89 days to loans were .48% at December 31
    -  Compared to .49% at September 30
    -  Compared to .33% at December 30, 2006

Capital Ratios

--  Capital ratios at December 31
    -  Tier 1 risk-based                   9.21%
    -  Total risk-based                   10.17%
    -  Tier 1 leverage                     7.33%
    -  Equity to assets                   10.16%

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

Hosting a Conference Call

Management will host a conference call and webcast to discuss earnings results on January 29, 2008 at 10:00 am eastern/9:00 am central. We will provide a brief discussion of results and trends followed by responding to questions from investors and analysts who call in.

To participate in the call, dial (800) 860-2442 or (412) 858-4600 for international callers. Alternatively, participants can listen by going to our web site www.midwestbanc.com.

Replays will be available on the web site through April 29, 2008. The audio replay can be accessed through February 8, 2008 at (877) 344-7529 or (412) 317-0088 for international callers. Use pass code 414979#.

Franchise

Midwest Banc Holdings, Inc., headquartered in Melrose Park, IL, with approximately $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. We have 29 banking offices and operate 32 ATMs. Our principal operating subsidiaries are Midwest Bank and Trust Company and Midwest Financial and Investment Services, Inc.

Information on our products and services and locations is available at www.midwestbanc.com.

Forward-Looking Statements

This news release contains "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 the 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    June 30,     March 31,     December
            31, 2007     30, 2007       2007         2007        31, 2006
           -----------  -----------  -----------  -----------  -----------
Income
 Statement
 Data:
  Net
   income  $     4,222  $     4,836  $     5,107  $     4,412  $     2,933
  Core net
   income(1)     5,041        4,836        5,094        4,412        2,933

Per Share
 Data:
  Basic
   and
   diluted
   earn-
   ings    $       .14  $       .20  $       .21  $       .18  $       .12
  Core
   diluted
   earn-
   ings(1)         .17          .20          .21          .18          .12
  Cash
   dividends
   declared        .13          .13          .13          .13          .13
  Book value     12.00        11.69        11.55        11.76        11.65
  "If converted"
   book
   value(11)     12.23        11.69        11.55        11.76        11.65
  Tangible book
   value(2)       5.62         8.02         7.91         8.12         7.97
  "If converted"
   tangible
   book value
   (2)(11)        6.44         8.02         7.91         8.12         7.97
  Stock
   price at
   period end    12.42        14.77        14.50        17.71        23.75
  Average
   stock price   13.34        14.54        16.35        20.25        23.66

Share Data:
  Common shares
   Outstanding
   - at period
   end          27,804       24,406       24,547       24,705       24,663
  Basic -
   average      27,895       24,454       24,638       24,693       24,725
  Diluted -
   average      28,043       24,647       24,828       24,950       25,083

Selected
 Financial
 Ratios:
  Return on
   average
   assets          .45%         .64%         .68%         .60%         .39%
  Core
   return on
   average
   assets(1)       .54          .64          .68          .60          .39
  Return on
   average
   equity         4.80         6.75         7.07         6.20         4.01
  Core
   return on
   average
   equity(1)      5.74         6.75         7.05         6.20         4.01
  Net interest
   margin (tax
   equivalent)    2.93         3.10         3.05         3.01         3.08
  Core
   efficiency
   ratio
   (1)(3)(4)        69           64           66           70           66
  Dividend
   payout
   ratio            91           67           64           74          111
  Loans to
   deposits
   at period end   101          101           96           97           99
  Loans to
   assets
   at period end    67           66           66           65           66
  Equity to
   Assets at
   period end    10.16         9.41         9.38         9.75         9.76
  Tangible
   equity to
   tangible
   assets
   at period
   end(2)(5)      5.62         6.65         6.62         6.94         6.89
  Tier 1
   capital
   to risk-
   weighted
   assets         9.21        11.42        11.76        12.02        11.92
  Total
   capital
   to
   risk-
   weighted
   assets        10.17        12.52        12.81        13.10        12.97
  Tier 1
   leverage
   ratio          7.33         8.99         9.13         9.38         9.34

Full time
 equivalent
 employees         539          460          489          491          494

Balance
 Sheet
 Data:
  Total
   earning
   assets  $ 3,266,461  $ 2,750,334  $ 2,698,762  $ 2,685,977  $ 2,617,894
  Average
   earning
   assets    3,301,501    2,736,154    2,731,527    2,665,044    2,645,898
  Average
   assets    3,721,444    3,020,254    3,013,039    2,966,039    2,946,366
  Average
   loans     2,453,292    1,989,119    1,961,437    1,946,460    1,918,376
  Average
   secur-
   ities       808,774      698,541      726,534      677,001      697,577
  Average
   deposits  2,480,831    2,022,709    2,021,256    1,995,721    1,996,864
  Tangible
   share-
   holders'
   equity(2)   197,713      195,790      194,138      200,711      196,481
  Average
   equity      348,639      284,231      289,760      288,783      289,864



See footnotes at end of statements, tables and schedules.





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


                                                  Twelve Months Ended
                                              ----------------------------
                                              December 31,   December 31,
                                                  2007           2006
                                              -------------  -------------
Income Statement Data:
  Net income                                  $      18,577  $      17,746
  Core net income(1)                                 19,383         18,707

Per Share Data:
  Basic earnings                              $         .72  $         .76
  Diluted earnings                                      .72            .75
  Core diluted earnings                                 .75            .79
  Cash dividends declared                               .52            .51

Share Data:
  Common shares outstanding - at period end          27,804         24,663
  Basic - average                                    25,426         23,348
  Diluted - average                                  25,580         23,790

Selected Financial Ratios:
  Return on average assets                              .58%           .67%
  Core return on average assets(1)                      .61            .71
  Return on average equity                             6.13           7.04
  Core return on average equity(1)                     6.39           7.42
  Net interest margin (tax equivalent)                 3.02           3.32
  Core efficiency ratio(1)(3)(4)                         67             59
  Dividend payout ratio                                  73             68

Full time equivalent employees                          539            494

Balance Sheet Data:
  Total earning assets                        $   3,266,461  $   2,617,894
  Average earning assets                          2,859,965      2,395,894
  Average assets                                  3,181,990      2,635,138
  Average loans                                   2,088,696      1,658,920
  Average securities                                727,998        706,832
  Average deposits                                2,131,164      1,804,037
  Tangible shareholders' equity(2)                  197,713        196,481
  Average equity                                    303,195        252,176



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
                     -----------------------------------------------------

                     December   September   June 30,  March 31,  December
                     31, 2007   30, 2007      2007      2007     31, 2006
                     ---------  ---------  ---------  ---------  ---------
Interest Income

  Loans              $  44,598  $  37,566  $  36,822  $  36,058  $  35,970
  Loans held for
   sale                     --         11         48         30         41
  Securities
    Taxable              9,886      8,611      8,729      7,563      7,450
    Exempt from fed
     income taxes          645        462        462        700        962
  Dividends from FRB
   and FHLB stock          158        227        226        228        218
  Short-term
   investments             150        297        205        187         69
                     ---------  ---------  ---------  ---------  ---------
    Total interest
     income             55,437     47,174     46,492     44,766     44,710
                     ---------  ---------  ---------  ---------  ---------
Interest Expense
  Deposits              21,577     18,634     18,582     17,899     17,495
  Federal funds
   purchased               673         64        393        699        776
  Securities sold
   under repurchase
   agreements            3,443      3,137      2,563      2,159      2,651
  Advances from the
   FHLB                  3,811      3,640      3,670      3,648      3,286
  Junior
   subordinated
   debentures            1,325      1,334      1,315      1,301      1,327
  Notes payable          1,352         18         --         --         --
                     ---------  ---------  ---------  ---------  ---------
    Total interest
     expense            32,181     26,827     26,523     25,706     25,535
                     ---------  ---------  ---------  ---------  ---------

Net interest income     23,256     20,347     19,969     19,060     19,175
Provision for loan
 losses                  1,410      1,800      1,036        645      5,500
                     ---------  ---------  ---------  ---------  ---------
Net interest income
 after provision
 for loan losses        21,846     18,547     18,933     18,415     13,675
Noninterest Income
  Service charges on
   deposit accounts      1,953      1,535      1,575      1,634      1,572
  Gains (losses) on
   securities
   transactions              9          6         31        (14)        42
  Net trading
   profits                  --         --         --         --         --
  Gains on sale
   of loans                  1         41        225        176        270
  Insurance and
   brokerage
   commissions             488        685        541        573        514
  Trust                    508        453        503        393        399
  Increase in CSV of
   life insurance          871        736        703        753        694
  Gain on
   extinguishment
   of debt                  --         --         --         --         --
  Other                    331        244        318        205        299
                     ---------  ---------  ---------  ---------  ---------
    Total
     noninterest
     income              4,161      3,700      3,896      3,720      3,790
                     ---------  ---------  ---------  ---------  ---------
Noninterest Expenses
  Salaries and
   employee benefits    11,665      9,740     10,363     10,447     10,058
  Occupancy and
   equipment             2,740      2,362      2,190      2,190      2,088
  Professional
   services              1,857      1,297      1,108      1,208      1,172
  Marketing                614        538        478        679        591
  Foreclosed
   properties               (2)         4          7         25         75
  Amortization of
   intangible assets       644        409        409        456        461
  Merger related
   charges               1,333         --        (21)        --         --
  Other                  2,574      1,895      2,110      2,076      2,050
                     ---------  ---------  ---------  ---------  ---------
    Total
     noninterest
     expenses           21,425     16,245     16,644     17,081     16,495
                     ---------  ---------  ---------  ---------  ---------
Income before
 income taxes            4,582      6,002      6,185      5,054        970
Provision (benefit)
 for income taxes          360      1,166      1,078        642     (1,963)
                     ---------  ---------  ---------  ---------  ---------
Net Income           $   4,222  $   4,836  $   5,107  $   4,412  $   2,933
                     =========  =========  =========  =========  =========

Net Income available
 to common
 shareholders        $   4,018  $   4,836  $   5,107  $   4,412  $   2,933

Basic and diluted
 earnings per share  $     .14  $     .20  $     .21  $     .18  $     .12
                     =========  =========  =========  =========  =========
Cash dividends
 declared per share  $     .13  $     .13  $     .13  $     .13  $     .13
                     =========  =========  =========  =========  =========

Top line revenue (6) $  27,417  $  24,047  $  23,865  $  22,780  $  22,965
Noninterest income
 to top line revenue        15%        15%        16%        16%        17%





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


                                          Twelve Months Ended
                            ----------------------------------------------

                             December    December    Increase    Increase
                             31, 2007    31, 2006   (Decrease)  (Decrease)
                            ----------- ----------  ----------  ----------

Interest Income
  Loans                     $   155,044 $  123,854  $   31,190          25%
  Loans held for sale                89        125         (36)        (29)
  Securities
    Taxable                      34,789     30,514       4,275          14
    Exempt from federal
     income taxes                 2,269      3,570      (1,301)        (36)
  Dividends from Fed Res
   and FHLB stock                   839        693         146          21
  Short-term investments            839        506         333          66
                            ----------- ----------  ----------  ----------
    Total interest income       193,869    159,262      34,607          22
                            ----------- ----------  ----------  ----------
Interest Expense
  Deposits                       76,692     57,518      19,174          33
  Federal funds purchased         1,829      1,526         303          20
  Securities sold under
   repurchase agreements         11,302     10,387         915           9
  Advances from the FHLB         14,769      9,808       4,961          51
  Junior subordinated
   debentures                     5,275      4,741         534          11
  Notes payable                   1,370         --       1,370         100
                            ----------- ----------  ----------  ----------
    Total interest expense      111,237     83,980      27,257          32
                            ----------- ----------  ----------  ----------
Net interest income              82,632     75,282       7,350          10
Provision for loan losses         4,891     12,050      (7,159)        (59)
                            ----------- ----------  ----------  ----------
Net interest income after
 provision
 for loan losses                 77,741     63,231      14,509          23
Noninterest Income
  Service charges on
   deposit accounts               6,697      5,733         964          17
  Gains (losses) on
   securities transactions           32       (153)        185         121
  Net trading profits                --        624        (624)       (100)
  Gains on sale of loans            443        760        (317)        (42)
  Insurance and brokerage
   commissions                    2,287      1,990         297          15
  Trust                           1,857        919         938         102
  Increase in CSV of life
   insurance                      3,063      2,394         669          28
  Gain on extinguishment
   of debt                           --      1,250      (1,250)       (100)
  Other                           1,098      1,034          64           6
                            ----------- ----------  ----------  ----------
    Total noninterest
     income                      15,477     14,551         926           6
                            ----------- ----------  ----------  ----------
Noninterest Expenses
  Salaries and employee
   benefits                      42,215     34,476       7,739          22
  Occupancy and equipment         9,482      7,076       2,406          34
  Professional services           5,470      4,971         499          10
  Marketing                       2,309      2,049         260          13
  Foreclosed properties              34        311        (277)        (89)
  Amortization of
   intangible assets              1,918      1,223         695          57
  Merger related charges          1,312      1,595        (283)        (18)
  Other                           8,655      6,914       1,741          25
                            ----------- ----------  ----------  ----------
    Total noninterest
     expenses                    71,395     58,615      12,780          22
                            ----------- ----------  ----------  ----------
Income before income taxes       21,823     19,168       2,655          14
Provision for income taxes        3,246      1,422       1,824         128
                            ----------- ----------  ----------  ----------
Net Income                  $    18,577 $   17,746  $      831           5
                            =========== ==========  ==========  ==========

Net Income available to
 common shareholders        $    18,373 $   17,746  $      627           4
                            =========== ==========  ==========  ==========

Basic earnings per share    $       .72 $      .76  $     (.04)         (5)
                            =========== ==========  ==========  ==========
Diluted earnings per share  $       .72 $      .75  $     (.03)         (4)
                            =========== ==========  ==========  ==========
Cash dividends declared
 per share                  $       .52 $      .51  $      .01           2
                            =========== ==========  ==========  ==========



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



             December     September    June 30,    March 31,    December
             31, 2007     30, 2007       2007        2007       31, 2006
           -----------  -----------  -----------  -----------  -----------
Assets
  Cash     $    70,111  $    46,963  $    53,832  $    64,153  $    91,630
  Short-term
   invest-
   ments        14,388       17,241        8,861       24,485        8,902
  Securities
   available-
   for-sale    710,881      660,986      639,087      639,985      589,981
  Securities
   held-to-
   maturity     37,601       40,978       42,110       43,562       45,931
           -----------  -----------  -----------  -----------  -----------
    Total
     secur-
     ities     748,482      701,964      681,197      683,547      635,912
  Fed Res
   and FHLB
   stock,
   at cost      29,264       23,683       23,683       23,592       23,592
  Loans
   held for
   sale             --           --        2,349        3,740        2,672
  Loans      2,474,327    2,007,446    1,982,672    1,950,613    1,946,816
  Allowance
   for loan
   losses      (26,748)     (24,879)     (23,724)     (24,028)     (23,229)
           -----------  -----------  -----------  -----------  -----------
    Net
     loans   2,447,579    1,982,567    1,958,948    1,926,585    1,923,587
  Cash value
   of life
   insurance    81,166       67,412       66,676       65,973       65,220
  Premises and
   equipment    41,821       22,468       22,489       22,282       21,960
  Foreclosed
   properties    2,220        2,246        2,312        2,403        2,640
  Goodwill
   and other
   intang-
   ibles       177,451       89,443       89,437       89,788       90,761
  Other         80,300       78,578      112,510       74,083       75,170
           -----------  -----------  -----------  -----------  -----------
   Total
    Assets $ 3,692,782  $ 3,032,565  $ 3,022,294  $ 2,980,631  $ 2,942,046
           ===========  ===========  ===========  ===========  ===========

Liabilities and Share-holders' Equity

Liabilities
  Deposits
    Non-interest-
     bear-
     ing   $   321,317  $   246,153  $   256,152  $   247,548  $   276,381
    Interest-
     bear-
     ing     2,136,831    1,748,774    1,801,690    1,759,452    1,681,429
           -----------  -----------  -----------  -----------  -----------
    Total
     de-
     posits  2,458,148    1,994,927    2,057,842    2,007,000    1,957,810
  Federal
   funds
   purchased    81,000       12,000       29,000        7,000       66,000
  Securities
   sold under
   repurchase
   agreements  283,400      317,118      282,037      251,070      201,079
  FHLB
   advances    323,439      319,925      269,911      319,897      319,883
  Junior
   subord-
   inated
   debentures   60,724       65,861       65,845       65,828       65,812
  Notes
   payable      72,500        2,500           --           --           --
  Other         38,407       35,001       34,084       39,337       44,220
           -----------  -----------  -----------  -----------  -----------
    Total
     liabil-
     ities   3,317,618    2,747,332    2,738,719    2,690,132    2,654,804
           -----------  -----------  -----------  -----------  -----------

Shareholders'
 Equity

  Preferred
   equity       41,442           --           --           --           --
  Common
   equity      347,639      295,807      295,436      295,614      293,515
  Accumulated
   other
   compre-
   hensive
   loss        (13,917)     (10,574)     (11,861)      (5,115)      (6,273)
           -----------  -----------  -----------  -----------  -----------
    Total
     share-
     holders'
     equity    375,164      285,233      283,575      290,499      287,242
           -----------  -----------  -----------  -----------  -----------
    Total
     liabilities
     and share-
     holders'
     equi-
     ty    $ 3,692,782  $ 3,032,565  $ 3,022,294  $ 2,980,631  $ 2,942,046
           ===========  ===========  ===========  ===========  ===========

Loan
 Portfolio
 Composition
 - Source of
 Repayment
  Commer-
   cial    $ 1,015,799           41%
  Construc-
   tion        444,613           18
  Commercial
   real
   estate      600,451           24
  Consumer     168,955            7
  Residential
   mortgage    244,874           10
           -----------  -----------
    Total
     loans,
     gross $ 2,474,692          100%
           ===========  ===========



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

The following table sets forth the changes in the balance sheet at
December 31, 2007 compared to December 31, 2006 excluding the
Northwest Suburban acquisition on October 1, 2007.

                                                        Excluding Northwest
                                             Northwest Suburban Acquisition
                 December 31,                 Suburban   -----------------
             --------------------           Acquisition      $        %
               2007       2006     $ Change     (a)        Change   Change
             ---------  ---------  ---------  ---------  --------- -------
                                 (Dollars in thousands)
Assets
Cash and
 cash
 equivalents
 (b)         $   84,499 $  100,532 $  (16,033) $  3,489  $ (19,522)   (19)%
Securities
 available-
 for-sale       710,881    589,981    120,900    57,597     63,303     11
Securities
 held-to-
 maturity        37,601     45,931     (8,330)       --     (8,330)   (18)
             ---------- ---------- ---------- ---------  --------- ------
  Total
   securities   748,482    635,912    112,570    57,597     54,973      9
Fed Res and
 FHLB stock,
 at cost         29,264     23,592      5,672     1,503      4,169     18
Loans held
 for sale            --      2,672     (2,672)       --     (2,672)  (100)
Loans         2,474,327  1,946,816    527,511   439,249     88,262      5
Allowance
 for loan
 loss           (26,748)   (23,229)    (3,519)   (2,767)      (752)     3
              ---------- ---------- ---------- --------  --------- ------
Net loans     2,447,579  1,923,587    523,992   436,482     87,510      5
Cash
 surrender
 value of
 life
 insurance       81,166     65,220     15,946    12,887      3,059      5
Premises and
 equipment       41,821     21,960     19,861    19,279        582      3
Foreclosed
 properties       2,220      2,640       (420)       --       (420)   (16)
Goodwill and
 other
 intangibles    177,451     90,761     86,690    88,611     (1,921)    (2)
Other            80,300     75,170      5,130     7,844     (2,714)    (4)
             ---------- ---------- ---------- ---------  --------- ------

 Total
  assets     $3,692,782 $2,942,046 $  750,736  $627,692  $ 123,044      4%
             ========== ========== =========  =========  ========= ======

Liabilities
 and
 Shareholders'
 Equity

Liabilities
Noninterest-
 -bearing     $ 321,317  $ 276,381  $  44,936  $ 65,299  $ (20,363)    (7)%
Interest-
 bearing      2,136,831  1,681,429    455,402   405,361     50,041      3
             ---------- ---------- ---------- ---------  --------- ------
Total
 deposits     2,458,148  1,957,810    500,338   470,660     29,678      2
Federal
 funds
 purchased       81,000     66,000     15,000     6,170      8,830     13
Securities
 sold under
 agreements
 to
 repurchase     283,400    201,079     82,321        --     82,321     41
FHLB
 advances       323,439    319,883      3,556     3,500         56      0
Junior
 subordinated
 debentures      60,724     65,812     (5,088)   10,310    (15,398)   (23)
Notes
 payable         72,500         --     72,500    75,000     (2,500)   100
Other            38,407     44,220     (5,813)    6,915    (12,728)   (29)
             ---------- ---------- ---------- ---------  --------- ------
  Total
   lia-
   bilities   3,317,618  2,654,804    662,814   572,555     90,259      3

Shareholders'
 Equity

Preferred
 equity           41,442         --     41,442       --     41,442    100
Common
 equity          347,639    293,515     54,124   55,137     (1,013)     0
Accumulated
 other
 comprehensive
 loss           (13,917)    (6,273)    (7,644)       --     (7,644)   122
             ---------- ---------- ---------- ---------  --------- ------
Total
 shareholders'
 equity         375,164    287,242     87,922    55,137     32,785     11
             ---------- ---------- ---------- ---------  --------- ------

Total
 liabilities
 and
 shareholders'
 equity      $3,692,782 $2,942,046 $ 750,736  $ 627,692  $ 123,044      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 and capitalized costs of $414 plus
     $75,000 borrowing.





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

                               For the Three Months Ended
             -------------------------------------------------------------
              December 31, 2007   September 30, 2007    December 31, 2006
             -------------------  -------------------  -------------------
               Average   Average    Average    Average   Average    Average
               Balance     Rate     Balance     Rate     Balance     Rate
             -----------  ------  -----------  ------  -----------  ------
Interest-
 Earning
 Assets:
Short-term
 investments $    11,627    5.19% $    23,996    4.95% $     5,223    5.28%
Securities:
  Taxable(7)     742,114    5.61      650,776    5.61      597,167    5.42
  Exempt
   from
   federal
   income
   taxes(7)       66,660    5.96       47,765    5.95      100,410    5.90
             -----------  ------  -----------  ------  -----------  ------
Total
 securities      808,774    5.64      698,541    5.63      697,577    5.48
FRB and FHLB
 stock            27,808    2.27       23,683    3.83       21,885    3.98
Loans held
 for sale             --      --          815    5.40        2,837    5.78
Loans
 (7)(9)(10)    2,453,292    7.29    1,989,119    7.57    1,918,376    7.52
             -----------  ------  -----------  ------  -----------  ------
Total
 interest-
 earning
 assets      $ 3,301,501    6.84% $ 2,736,154    7.00% $ 2,645,898    6.96%

Noninterest-
 Earning
 Assets:
Cash         $    57,080          $    51,487          $    74,087
Premises and
 equipment        41,521               22,404               21,221
Allowance
 for loan
 losses          (26,924)             (24,255)             (25,734)
Other            348,266              234,464              230,554
             -----------          -----------          -----------
Total
 noninterest-
 earning
 assets          419,943              284,100              300,468
             -----------          -----------          -----------
Total assets $ 3,721,444          $ 3,020,254          $ 2,946,366
             ===========          ===========          ===========

Interest-
 Bearing
 Liabilities:
Deposits:
Interest-
 bearing
 demand
 deposits    $   218,213    1.80% $   175,582    1.96% $   155,351    1.65%
Money-market
 demand and
 savings
 account         439,720    2.48      365,985    2.62      401,962    2.60
Time
 deposits
 less than
 $100,000        827,332    5.05      750,642    4.86      721,362    4.71
Time
 deposits of
 $100,000 or
 more            664,327    4.47      474,194    5.28      436,659    5.26
Public funds          --      --           --      --        1,065    4.88
             -----------  ------  -----------  ------  -----------  ------
Total
 interest-
 bearing
 deposits      2,149,592    4.02    1,766,403    4.22    1,716,399    4.08
Borrowings:
Fed funds
 purch &
 repurchase
 agreements      368,073    4.47      307,843    4.16      275,700    4.97
FHLB
 advances        323,433    4.71      307,418    4.74      281,724    4.67
Junior
 subordinated
 debentures       66,935    7.92       65,854    8.10       65,806    8.07
Notes
 payable          82,717    6.54        1,440    5.00           --      --
             -----------  ------  -----------  ------  -----------  ------
Total
 borrowings      841,158    5.04      682,555    4.80      623,230    5.16
             -----------  ------  -----------  ------  -----------  ------
Total
 interest-
 bearing
 liabilities $ 2,990,750    4.32% $ 2,448,958    4.40% $ 2,339,629    4.36%

Noninterest-
 Bearing
 Liabilities:
Noninterest-
 bearing
 demand
 deposits    $   331,239          $   256,306          $   280,465
Other
 liabilities      50,816               30,759               36,408
             -----------          -----------          -----------
Total
 noninterest-
 bearing
 liabilities     382,055              287,065              316,873
             -----------          -----------          -----------
Shareholders'
 equity          348,639              284,231              289,864
             -----------          -----------          -----------
Total
 liabilities
 and
 shareholders'
 equity      $ 3,721,444          $ 3,020,254          $ 2,946,366
             ===========          ===========          ===========

Net interest
 margin (tax
 equivalent)
 (7)(11)                    2.93%                3.10%                3.08%



See footnotes at end of statements, tables and schedules.



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


                                        For the Twelve Months Ended
                                ------------------------------------------
                                  December 31, 2007     December 31, 2006
                                --------------------  --------------------
                                  Average    Average    Average    Average
                                  Balance      Rate     Balance      Rate
                                -----------  -------  -----------  -------
Interest-Earning Assets:
Short-term investments          $    17,124     4.90% $    10,009     5.06%
Securities:
  Taxable(7)                        669,154     5.51      613,485     5.31
  Exempt from federal income
   taxes(7)                          58,844     5.93       93,347     5.88
                                -----------  -------  -----------  -------
Total securities                    727,998     5.55      706,832     5.39
FRB and FHLB stock                   24,697     3.40       18,105     3.83
Loans held for sale                   1,450     6.14        2,028     6.16
Loans (7)(9)(10)                  2,088,696     7.44    1,658,920     7.48
                                -----------  -------  -----------  -------
Total interest-earning assets   $ 2,859,965     6.91% $ 2,395,894     6.83%

Noninterest-Earning Assets:
Cash                            $    57,185           $    61,519
Premises and equipment, net          27,093                21,706
Allowance for loan losses           (24,977)              (22,115)
Other assets                        262,724               178,134
                                -----------           -----------
Total noninterest-earning
 assets                             322,025               239,244
                                -----------           -----------
Total assets                    $ 3,181,990           $ 2,635,138
                                ===========           ===========

Interest-Bearing Liabilities:
Deposits:
Interest-bearing demand
 deposits                       $   182,276     1.85% $   150,503     1.17%
Money-market demand and savings
 accounts                           386,722     2.57      346,933     2.18
Time deposits less than
 $100,000                           761,698     4.87      747,676     4.20
Time deposits of $100,000 or
 more                               525,649     5.00      326,516     4.99
Public funds                             --       --       11,703     4.54
                                -----------  -------  -----------  -------
Total interest-bearing deposits   1,856,345     4.13    1,583,331     3.63
Borrowings:
Fed funds purch & repurchase
 agreements                         304,269     4.32      255,843     4.66
FHLB advances                       317,232     4.66      228,811     4.29
Junior subordinated debentures       66,114     7.98       60,776     7.80
Notes payable and other
 borrowings                          21,212     6.46           --       --
                                -----------  -------  -----------  -------
Total borrowings                    708,827     4.87      545,430     4.85
                                -----------  -------  -----------  -------
Total interest-bearing
 liabilities                    $ 2,565,172     4.34% $ 2,128,761     3.95%

Noninterest-Bearing
 Liabilities:
Noninterest-bearing demand
 deposits                       $   274,819           $   220,706
Other liabilities                    38,804                33,495
                                -----------           -----------
Total noninterest-bearing
 liabilities                        313,623               254,201
                                -----------           -----------
Shareholders' equity                303,195               252,176
                                -----------           -----------
Total liabilities and
 shareholders' equity           $ 3,181,990           $ 2,635,138
                                ===========           ===========

Net interest margin (tax
 equivalent)(7)(11)                             3.02%                 3.32%



See footnotes at end of statements, tables and schedules.





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

                                 Three Months Ended
           ---------------------------------------------------------------

          December 31, September 30,   June 30,    March 31,  December 31,
               2007         2007         2007         2007         2006
           -----------  -----------  -----------  ----------   -----------
Loan Quality
 Nonaccrual
 loans
  Large
   Problem
   Credit  $    28,989  $    28,886  $    28,909  $   26,845   $    25,825
  From
   remainder
   of
   portfolio    20,184       15,795       14,679      14,834        17,001
           -----------  -----------  -----------  ----------   -----------
    Total
     non-
     accrual
     loans $    49,173  $    44,681  $    43,588  $   41,679   $    42,826
           ===========  ===========  ===========  ==========   ===========

Foreclosed
 prop-
 erties    $     2,220  $     2,246  $     2,312  $    2,403   $     2,640
           ===========  ===========  ===========  ==========   ===========
Nonperforming
 assets
  Large
   Problem
   Credit  $    28,989  $    28,886  $    28,909  $   26,845   $    25,825
  From
   remainder
   of port-
   folio        22,404       18,041       16,991      17,237        19,641
           -----------  -----------  -----------  ----------   -----------
   Total
    nonper-
    forming
    assets $    51,393  $    46,927  $    45,900  $   44,082   $    45,466
           ===========  ===========  ===========  ==========   ===========

90+ days
 past due
 and
 accruing  $        --  $        --  $       608  $       25   $        34


Loans
 Large
  Problem
  Credit   $    28,989  $    28,886  $    28,909  $   28,884   $    27,902
 Remainder
  of
  portfolio  2,445,338    1,978,560    1,953,763   1,921,729     1,918,914
           -----------  -----------  -----------  ----------   -----------
   Total
    loans  $ 2,474,327  $ 2,007,446  $ 1,982,672  $1,950,613   $ 1,946,816
           ===========  ===========  ===========  ==========   ===========

Foreclosed
 prop-
 erties    $     2,220  $     2,246  $     2,312  $    2,403   $     2,640
           ===========  ===========  ===========  ==========   ===========

Loan-
 related
 assets
  Large
   Problem
   Credit  $    28,989  $    28,886  $    28,909  $   28,884   $    27,902
  Remainder
   of
   portfolio 2,447,558    1,980,806    1,956,075   1,924,132     1,921,554
           -----------  -----------  -----------  ----------   -----------

   Total
    loan-
    related
    assets $ 2,476,547  $ 2,009,692  $ 1,984,984  $1,953,016   $ 1,949,456
           ===========  ===========  ===========  ==========   ===========

Nonaccrual
 loans to
 loans
  Total           1.99%        2.23%        2.20%       2.14%         2.20%
  Without
   Large
   Problem
   Credit          .83          .80          .75         .77           .89
Nonperforming
 assets to
 loan-related
 assets
  Total           2.08%        2.34%        2.31%       2.26%         2.33%
  Without
   Large
   Problem
   Credit          .92          .91          .87         .90          1.02

Allowance for
 Loan Losses
Beginning
 balance   $    24,879  $    23,724  $    24,028  $   23,229   $    25,542
  Bank
  acquisition    2,767           --           --          --            --
  Provision
   for loan
   losses        1,410        1,800        1,036         645         5,500
  Net charge
   offs
   (recoveries)
   Large
    Problem
    Credit          --           --           --          --         7,500
   From
    remainder
    of
    portfolio    2,308          645        1,340        (154)          313
           -----------  -----------  -----------  ----------   -----------
                 2,308          645        1,340        (154)        7,813
           -----------  -----------  -----------  ----------   -----------
  Ending
   balance $    26,748  $    24,879  $    23,724  $   24,028   $    23,229
           ===========  ===========  ===========  ==========   ===========

Net
 chargeoffs
 (recoveries)
 to average
 loans
  Total            .37%         .13%         .27%       (.03)%        1.62%
  Without
   Large
   Problem
   Credit          .37          .13          .27        (.03)          .06
Delinquencies
 30 - 89 days
 to average
 loans
  Total            .48%         .49%         .63%        .48%          .33%
  Without
   Large
   Problem
   Credit          .48          .49          .63         .48           .33
Allowance
 for loan
 losses to
 Loans at
 period end       1.08%        1.24%        1.20%       1.23%         1.19%
Nonaccrual
 loans              54%          56%          54%         58%           54%





                                   Footnotes
                          Midwest Banc Holdings, Inc.
                                 (In thousands)


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


                                       Three Months Ended
                       ----------------------------------------------------
                        December   September  June 30,  March 31,  December
                        31, 2007   30, 2007     2007      2007     31, 2006
                       ---------- ---------- ---------  ---------- --------

Net Income             $    4,222 $    4,836 $   5,107  $    4,412 $  2,933
Merger related
 charges, net of tax          819         --       (13)         --       --
                       ---------- ---------- ---------  ---------- --------
Core net income        $    5,041 $    4,836 $   5,094  $    4,412 $  2,933
                       ========== ========== =========  ========== ========


                        Twelve Months Ended
                       ---------------------
                        December   December
                        31, 2007   31, 2006
                       ---------- ----------

Net Income             $   18,577 $   17,746
Merger related charges,
 net of tax                   806        961
                       ---------- ----------
Core net income        $   19,383 $   18,707
                       ========== ==========


         Core diluted earnings per share is core net income, reconciled
         above, divided by the diluted shares outstanding for that period.
         Core return on average assets is core net income, reconciled
         above, divided by average assets for that period. Core return on
         average equity is core net income, reconciled above, divided by
         average equity for that period.

         Management believes that core net income, core diluted earnings
         per share, core return on average assets and average equity are
         more useful measures of operating performance since it excludes
         items that are not recurring in nature and are more reflective of
         current trends.


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


                       December   September  June 30,   March 31,  December
                       31, 2007   30, 2007     2007       2007     31, 2006
                      ---------- ---------- ---------- ---------- ---------

Shareholders' equity  $  375,164 $  285,233 $  283,575 $  290,499 $ 287,242
Core deposit
 intangible and
 other intangibles        17,044      9,586      9,812     10,163    11,273
Goodwill                 160,407     79,857     79,625     79,625    79,488
                      ---------- ---------- ---------- ---------- ---------
Tangible
 shareholders' equity $  197,713 $  195,790 $  194,138 $  200,711 $ 196,481
                      ========== ========== ========== ========== =========


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

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

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


                                       Three Months Ended
                      ----------------------------------------------------
                       December   September  June 30,   March 31,  December
                       31, 2007   30, 2007     2007       2007     31, 2006
                      ---------  ---------- ---------- ---------- ---------

Noninterest expenses  $  21,425  $   16,245 $   16,644 $   17,081 $  16,495
Merger related
 charges                 (1,333)         --         21         --        --
                      ---------  ---------- ---------- ---------- ---------
Core noninterest
 expenses             $  20,092  $   16,245 $   16,665 $   17,081 $  16,495
                      =========  ========== ========== ========== =========


                          Twelve Months Ended
                      ----------------------------
                      December 31,   December 31,
                        2007           2006
                      -------------  -------------

Noninterest expenses  $      71,395  $      58,615
Merger related charges       (1,312)        (1,595)
                      -------------  -------------
Core noninterest
 expenses             $      70,083  $      57,020
                      =============  =============


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



                 December    September   June 30,    March 31,   December
                 31, 2007    30, 2007      2007        2007      31, 2006
                ----------- ----------- ----------- ----------- -----------

Total assets    $ 3,692,782 $ 3,032,565 $ 3,022,294 $ 2,980,631 $ 2,942,046
Core deposit
 intangible
 and other
 intangibles         17,044       9,586       9,812      10,163      11,273
Goodwill            160,407      79,857      79,625      79,625      79,488
                ----------- ----------- ----------- ----------- -----------
Tangible assets $ 3,515,331 $ 2,943,122 $ 2,932,857 $ 2,890,843 $ 2,851,285
                =========== =========== =========== =========== ===========


     (6) Includes net interest income and noninterest income.
     (7) Adjusted for 35% tax rate and adjusted for the dividends-received
         deduction where applicable.
     (8) Nonaccrual loans are included in the average balance; however,
         these loans are not earning any interest.
     (9) Includes loan fees.
    (10) Reconciliation of reported net interest income to tax equivalent
         net interest income.



                                                          For the Twelve
                           For the Three Months Ended,     Months Ended,
                          ----------------------------- -------------------
                           December  September December  December  December
                           31, 2007  30, 2007  31, 2006  31, 2007  31, 2006
                          --------- --------- --------- --------- ---------

Net interest income       $  23,256 $  20,347 $  19,175 $  82,632 $  75,282
Tax equivalent adjustment
 to net interest income         960       837     1,220     3,612     4,286
                          --------- --------- --------- --------- ---------
Net interest income, tax
 equivalent basis         $  24,216 $  21,184 $  20,395 $  86,244 $  79,568
                          ========= ========= ========= ========= =========


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


                          December  September  June 30, March 31,  December
                          31, 2007  30, 2007     2007     2007     31, 2006
                          --------- --------- --------- --------- ---------

Preferred equity          $  41,442 $      -- $      -- $      -- $      --
Common equity               333,722   285,233   283,575   290,499   287,242
                          --------- --------- --------- --------- ---------
Shareholders' equity      $ 375,164 $ 285,233 $ 283,575 $ 290,499 $ 287,242
                          ========= ========= ========= ========= =========


Reconciliation of tangible common equity to tangible shareholders' equity.


                          December  September  June 30, March 31, December
                          31, 2007  30, 2007     2007     2007    31, 2006
                          --------- --------- --------- --------- ---------

Preferred equity          $  41,442 $      -- $      -- $      -- $      --
Tangible common equity      156,271   195,790   194,138   200,711   196,481
                          --------- --------- --------- --------- ---------
Tangible shareholders'
 equity                   $ 197,713 $ 195,790 $ 194,138 $ 200,711 $ 196,481
                          ========= ========= ========= ========= =========


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


                          December  September  June 30,  March 31, December
                          31, 2007  30, 2007     2007      2007    31, 2006
                          --------- --------- --------- --------- ---------

Common shares outstanding    27,804    24,406    24,547    24,705    24,663
Resulting common shares
 if preferred shares
 were converted               2,875        --        --        --        --
                          --------- --------- --------- --------- ---------
"If converted" shares
 outstanding                 30,679    24,406    24,547    24,705    24,663
                          ========= ========= ========= ========= =========

Contact Information

  • For further information:
    Daniel R. Kadolph
    Chief Financial Officer
    708-450-6759
    Email Contact