Midwest Banc Holdings, Inc. Reports Q4 and Full Year Results

Share Name	Share Symbol	Market	Type
Midwest Banc Hlds (MM)	NASDAQ:MBHI	NASDAQ	Common Stock

Midwest Banc Hlds (MM) (NASDAQ:MBHI)
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Midwest Banc Holdings, Inc. (the "Company") (NASDAQ:MBHI), the holding company for Midwest Bank and Trust Company (the “Bank” or “Midwest Bank”), reported results for the fourth quarter of 2009 and for the full year 2009. These results are unaudited as our independent auditors are still in the process of completing their audit of our financial statements for the year ended December 31, 2009.

“After my arrival in May 2009, we immediately began to work to restructure and restore our capital. We have reduced costs aggressively, optimized our balance sheet to preserve regulatory capital, tightened underwriting standards, built a strong loan workout area in anticipation of growth in problem loans, and crafted and announced a credible Capital Plan. Our execution philosophy has shunned denial. Instead, we embraced full transparency in our communications with all stakeholders and the reality of the state of the economy, depressed real estate valuations and their impact on our loan book,” said Midwest CEO Roberto R. Herencia.

“We have been working diligently to achieve our Capital Plan. Its execution requires the restructuring of a complex capital structure in order to attract new common equity or a merger partner in the worst capital and economic environment in 75 years. We have been undeterred in our pursuit of the Capital Plan with the support of our people, customers and bank regulators. We are up to the challenge, redoubling our efforts and proceeding vigorously.”

“On January 22, 2010, we announced the success of our exchange offer, a critical component of our Capital Plan. An overwhelming 82 percent of the depositary shareholders of the Series A Preferred tendered their shares. This successful exchange will now facilitate the execution of the remaining building blocks of the plan: the conversion of the U.S. Treasury’s TARP preferred equity investment into common equity, the restructure of subordinated and senior debt with our primary lender, and final discussions with potential equity investors and merger partners.”

“I am proud to be part of this 50 year old community bank. Our energy is aimed at completing the remaining elements of our Capital Plan. Our vision is to build a new foundation for Midwest that will support long term growth and profitability. We serve a large and diverse group of communities that require our help, now more than ever,” said Herencia. “Supporting our communities, its residents and businesses, is top of mind for Midwest Bank. We are helping by being responsible lenders, supporting customers who are able to grow and create jobs and working with our troubled borrowers who need assistance in order to get ahead. Post Capital Plan, we envision being a more vibrant and willing lender in support of our communities and their efforts to create jobs.”

The Company reported a net loss of $119.7 million for the fourth quarter of 2009 compared to net income of $4.4 million in the fourth quarter of 2008, and a net loss of $41.3 million for the third quarter of 2009. On a per share basis, the net loss per share for the quarter was $4.30, compared to net income per share of $0.11 in the fourth quarter of 2008 and net loss per share of $1.52 in the third quarter of 2009. Results for the fourth quarter include a $98.0 million provision for loan losses which, after deducting $52.7 million of net loan charge-offs, increased the allowance for loan losses to 5.6 percent of loans at December 31, 2009 from 3.4 percent at September 30, 2009. Fourth quarter results also include a $14.0 million impairment charge for goodwill.

The Company recorded a net loss of $242.7 million for the year ended December 31, 2009 compared to a net loss of $158.3 million for 2008. On a per share basis, net loss per share for the year was $8.89, compared to a net loss per share of $5.82 in 2008. The provision for loan losses was $167.7 million for the year ended December 31, 2009, an increase of $95.9 million or 133.7 percent compared to the 2008 provision of $71.8 million. The full-year provision for loan losses, combined with $83.3 million of net loan charge-offs for 2009, resulted in an allowance for loan losses of $128.8 million, or 5.6 percent of loans at December 31, 2009 versus $44.4 million, or 1.8 percent of loans at December 31, 2008. The 2009 results include a $14.0 million impairment charge for goodwill. The 2008 results included $82.1 million of pre-tax losses on FHLMC and FNMA preferred stock and an $80.0 million impairment charge for goodwill.

“In connection with the execution of the Capital Plan and with the assistance of independent outside parties, management has performed cumulative loan loss studies under various methodologies and assumptions, including highly stressed scenarios, in order to determine our capital needs. We have also found these studies to be quite useful in assessing trends, managing, and planning for problem loans. We continue to closely monitor our loan portfolio and aggressively take action to resolve issues as they arise,” said Herencia.

Capital Plan Execution

On July 28, 2009, the Company announced that it had developed a detailed capital plan and timeline for execution (the “Capital Plan”). The Capital Plan was adopted in order to, among other things, improve the Company’s common equity capital and raise additional capital to enable it to better withstand and respond to adverse market conditions and serve as a platform for future growth and profitability.
On December 3, 2009, we launched the exchange offer for our Series A preferred stock. The final exchange ratio was set at 7.0886 shares of common stock for each depositary share of the Series A Preferred. On January 21, 2010, we accepted for exchange 1,414,941 depositary shares, representing approximately 82 percent of the 1,725,000 depositary shares outstanding prior to the exchange offer. The exchange offer generated approximately $35.4 million of additional common equity. The Company issued 10,029,946 shares of common stock for the 1,414,941 shares tendered in the exchange.
We are in advanced discussions with the U.S. Treasury related to converting to common stock the $84.8 million of outstanding preferred stock issued to the U.S. Treasury under its Capital Purchase Program in 2008. The U.S. Treasury previously delivered to us a letter expressing its willingness to consent to such a transaction, and we are currently in the final stages of negotiating the definitive terms of this transaction.
As previously announced, on October 22, 2009, the Company entered into a Forbearance Agreement with its senior lender effective through March 31, 2010. Management believes that the Forbearance Agreement provides the Company sufficient time to complete all major elements of the Capital Plan. The Company is also in advanced negotiations with its senior lender to restructure close to $80 million in subordinated and senior debt.
The Company is also pursuing, as the final component of the Capital Plan, a new common equity raise, the proceeds of which would be used for general corporate purposes, including injecting capital into the Bank, or a merger with another bank holding company.

“The thesis behind our Capital Plan is straightforward: Midwest is capable of attracting new common equity investment because it operates an attractive and scalable banking franchise, has a capable new management team, and its sizable loan loss reserves and tangible common equity, post restructuring under the Plan, are sufficient to absorb cumulative loan losses in this cycle under an adverse economic scenario,” Herencia said. “We have been able to prove the first two premises of our thesis in our interactions with potential investors and the progress to date of the Capital Plan. We believe our negotiations with Treasury and our senior lender will pave the way to facilitating a final decision by one of the equity investors who has expressed serious interest in Midwest.”

Q4 Significant Events

As anticipated, on December 18, 2009, we formally entered into a written agreement (the "Agreement") with the Federal Reserve Bank of Chicago and the Illinois Department of Financial and Professional Regulation, Division of Banking. The Agreement is consistent with the expected regulatory actions that we previously disclosed, and we have already completed many of the steps referenced in the Agreement. We have been working diligently to address matters they have identified and look forward to resolving them with the regulators as quickly as possible.
At December 31, 2009, the Bank was undercapitalized according to regulatory standards with a 6.41 percent total risk-based capital ratio and a 3.41 percent Tier 1 leverage ratio. These ratios must be 8.00 percent and 4.00 percent, respectively, for a bank to be considered adequately capitalized. As a consequence of the Bank being undercapitalized, the Bank will, among other things, be prohibited from renewing or accepting new brokered deposits, making capital distributions to the Company, and be subject to limits on asset growth and expansion. In July, we announced our Capital Plan designed to strengthen our capital position. As noted above, we made significant progress with the exchange of over 82 percent of the depositary shares of our Series A preferred into common, continued negotiations with the U.S. Treasury and further discussions with potential outside investors to invest additional equity capital into our Company.
The level of the provision for loan losses recognized was 186 percent of net charge-offs in the fourth quarter and 215 percent in the third quarter. Management believes we are recognizing losses in our portfolio through charge-offs as credit developments warrant. The fact that our provisions are still well over our charge-offs shows proactive management in the recent difficult credit environment.
The Company determined activities in the fourth quarter including the written agreement from the regulators and the decline in the Bank's regulatory capital position to undercapitalized constituted triggering events requiring an interim goodwill impairment test. As a result of that test, the Company recorded a $14.0 million goodwill impairment in the quarter.
Liquidity remains high at the Bank. Liquid assets increased by $95.0 million during the quarter to $419.5 million.

Loan Portfolio

Average total loans decreased $108.9 million during the fourth quarter of 2009. From September 30, 2009 to December 31, 2009, loans outstanding declined $133.8 million, with almost half of this decline due to gross charge-offs of $53.3 million and transfers to foreclosed properties of $8.7 million. The average yield on loans was 5.01 percent in the fourth quarter, compared to 5.32 percent in the third quarter, with 83 percent of all loans tied to prime having interest rate floors in place and 79 percent of those loans currently at their floors. Most of the decline in loan yield was due to the increase in non-accrual loans.

The table below presents the loan portfolio, including the loan balances, amounts and remaining percentage availability and total loan commitments.

Loan Portfolio As of December 31, 2009 ($ in millions) Total Total Percent Loan Type Balance Availability Commitment Availability Land $ 102.6 $ 7.2 $ 109.8 6.6 percent Land Development, Residential 17.1 1.0 18.1 5.5 Land Development, Commercial 13.3 0.7 14.0 5.0 Land Development, Teardown 7.6 - 7.6 - Condominium 64.8 8.6 73.4 11.7 Residential Construction 52.6 4.5 57.1 7.9 Commercial Construction 27.4 0.9 28.3 3.2 Residential Non-Builder 6.5 0.7 7.2 9.7 Letters of Credit - 0.8 0.8 100.0 Other 1.2 - 1.2 - Total Const. & Land Development 293.1 24.4 317.5 7.7 1-4 Residential 68.5 0.1 68.6 0.1 1-4 ARM 37.0 - 37.0 - Total Residential 105.5 0.1 105.6 0.1 Home Equity Fixed 17.6 - 17.6 - Home Equity Floating 201.6 86.7 288.3 30.1 Total Home Equity 219.2 86.7 305.9 28.3 CRE - Non-Owner Occupied 719.9 19.1 739.0 2.6 CRE - Owner Occupied 521.4 5.8 527.2 1.1 Total CRE 1,241.3 24.9 1,266.2 2.0 Commercial & Industrial 450.8 260.5 711.3 36.6 Agricultural 5.9 1.3 7.2 18.1 Consumer 5.5 1.9 7.4 25.7 Overdrafts, Settlement, Miscellaneous (1.0 ) Total Portfolio $ 2,320.3 $ 399.8 $ 2,721.1 14.7 percent

Total construction and land development loan commitments are 92.3 percent funded.
Land and land development loans represent 6.1 percent of the loan portfolio.

Asset Quality

In response to cumulative loan loss analyses performed in the second quarter of 2009 by expert loan review parties and internal staff, significant steps have been taken to improve the management of asset quality and problem loans. Under the leadership of a new Chief Risk Officer appointed in the fourth quarter of 2009, these efforts have resulted in tighter loan underwriting criteria, credit policy changes and a more disciplined loan approval and renewal process. Progress has been made in a short period to create a culture that rewards the early identification of problems, the appropriate downgrade of loan risk ratings and the free flow and timeliness of information shared between lending and credit risk personnel.

Portfolio management practices have been enhanced through more frequent and rigorous loan portfolio reviews for both performing and non-performing assets. In addition, the measurement and tracking of loan exceptions have been improved.

Importantly, the Bank has built a quality loan workout team over the last two quarters composed of internal senior lending and loan review personnel and outside workout experts with strong real estate background. The Bank has successfully leveraged its workout capacity by recruiting a third party, real estate workout expert firm to assist with the management of the largest and most complex real estate exposures. The creation and expansion of the workout group, together with weekly problem loan reviews, has provided the Bank with the ability to identify and manage problem loans at an earlier point in the cycle than was previously the case. This group provides the critical resources needed to restructure, collect, and maximize recoveries of problem credits.

In the fourth quarter, we recorded a provision for credit losses of $98.8 million and recognized net loan charge-offs totaling $52.7 million. Non-accrual loans increased $79.9 million, or 41 percent during the fourth quarter to $273.8 million, representing 11.8 percent of loans.

The table below presents certain loan quality information, including loan balance by type, amounts and percentage by past due and non-accrual status, amount of specific reserve, and full year gross charge-off amounts.

Loan Quality ($ in millions) 2009 As of December 31, 2009 Gross 30-89 Days Past Due Non-Accrual Specific Charged- Loan Type Balance ($) Percent ($) Percent Reserve Off Land $ 102.6 $ 9.9 9.6 percent $ 37.0 36.1 percent $ 11.9 $ 12.2 Land Development, Residential 17.1 - - 2.1 12.3 0.5 1.1 Land Development, Commercial 13.3 - - 1.3 9.8 - 1.5 Land Development, Teardown 7.6 - - 7.6 100.0 3.6 - Condominium 64.8 - - 27.7 42.7 10.2 4.3 Residential Construction 52.6 0.5 1.0 20.1 38.2 6.1 10.0 Commercial Construction 27.4 - - 13.2 48.2 5.3 1.0 Residential Non-Builder 6.5 - - 1.0 15.4 0.5 - Letters of Credit - - - - - - - Other 1.2 - - - - - - Total Const. & Land Development 293.1 10.4 3.5 110.0 37.5 38.1 30.1 1-4 Residential 68.5 1.5 2.2 12.6 18.4 1.8 0.6 1-4 ARM 37.0 2.4 6.5 - - - 1.9 Total Residential 105.5 3.9 3.7 12.6 11.9 1.8 2.5 Home Equity Fixed 17.6 0.3 1.7 0.3 1.7 - 0.1 Home Equity Floating 201.6 2.7 1.3 - - - 1.4 Total Home Equity 219.2 3.0 1.4 0.3 0.1 - 1.5 CRE - Non-Owner Occupied 719.9 13.8 1.9 110.5 15.3 21.9 18.7 CRE - Owner Occupied 521.4 10.5 2.0 19.6 3.8 2.2 4.1 Total CRE 1,241.3 24.3 2.0 130.1 10.5 24.1 22.8 Commercial & Industrial 450.8 21.2 4.7 20.7 4.6 5.5 28.2 Agricultural 5.9 - - - - - - Consumer 5.5 0.1 1.8 - - - 0.1 Overdrafts, Settlement, Miscellaneous (1.0 ) - - - - - 0.3 Total Portfolio $ 2,320.3 $ 62.9 2.7 percent $ 273.7 11.8 percent $ 69.5 $ 85.5

Non-accrual loans in the commercial real estate portfolio increased $51.0 million or 64 percent from the third quarter. The largest contributing sub-category within commercial real estate was non-owner occupied which increased $53.8 million. Non-accrual owner occupied commercial real estate loans decreased by $2.8 million due to charge-offs and transfers to foreclosed properties.

Non-accrual loans in the construction and land development portfolio increased $29.2 million or 36 percent from the third quarter. The largest contributing sub-categories within construction and land development were: condominium, which increased $20.0 million; land, which increased $12.0 million; and commercial construction, which increased $9.3 million. Other non-accrual construction and land development sub-categories decreased with the greatest decline in residential construction loans, which decreased by $10.0 million, due to charge-offs and transfers to foreclosed properties.

Credit Quality and the Allowance for Loan Losses

The length and breadth of the economic downturn, including record high unemployment and vacancy rates, is continuing to put pressure on our borrowers, reducing both their ability to support their borrowings from a cash flow perspective and the value of property pledged as collateral for those borrowings in the case of default. With a large concentration of our loan portfolio in commercial real estate, the Company experienced continued deterioration in its portfolio during the fourth quarter as both delinquencies on our commercial real estate loans increased and declines in related collateral values continued. In response, the Company has strengthened credit quality oversight and fine tuned probability and severity loss estimates.

Non-accrual loans increased $79.9 million or 41 percent in the fourth quarter of 2009 to $273.8 million or 11.8 percent of loans, from $193.9 million or 7.9 percent of loans at September 30, 2009. Although non-accrual growth of $79.9 million during the fourth quarter would appear to indicate a downward trend when compared to the $98.9 million previous 2009 quarter increase, loans transferred into non-accrual status were $140 million during the fourth quarter of 2009 compared to $113 million the previous quarter. The larger quarterly transfers into non-accrual status were partially offset by increases in both charge-offs and transfers to foreclosed properties. Fourth quarter gross charge-offs were $53.3 million compared to $17.7 million in the third quarter and transfers to foreclosed properties were $8.7 million in the fourth quarter compared to $4.3 million in the previous quarter.

The allowance for loan losses at December 31, 2009 was $128.8 million or 5.6 percent of loans compared to $83.5 million and 3.4 percent of loans as of September 30, 2009. The allowance for loan losses as a percent of loans and partial charge-offs was 8.98 percent at December 31, 2009 compared to 5.07 percent as of September 30, 2009. The provision for loan losses (charge to income) for the fourth quarter was $98.0 million compared to $36.7 million in the previous quarter. The increase in the allowance for loan losses and $98.0 million provision for loan losses for the fourth quarter were primarily driven by an increase in non-accrual loans, and further deterioration in real estate collateral values supporting these loans.

The provision is determined by estimating the period end allowance for loan losses needed by examination of the current loan portfolio, and then deducting the previous ending allowance balance and net charge-offs during the current period.

In computing our allowance for loan losses, loans are segmented into pools with similar characteristics (collateral) and the allowance for these loans is estimated based upon Company historical loss experience adjusted for additional risks due to current portfolio characteristics including internal risk ratings, collateral type and location, and uncertainties in our market.

Non-accrual loans with balances over $300,000 are removed from the above pools and evaluated separately based upon estimated collateral values and/or cash flows available for debt service. Those estimated specific reserves are added to the estimates of losses by pool to compute the entire allowance.

As a result of the large influx of loans moving into non-accrual status during the fourth quarter, loans being evaluated for specific reserves increased by $70.7 million or 37 percent in the quarter and represented 11.3 percent of total loans at December 31, 2009, up from 7.8 percent at September 30, 2009. Specific reserves for those loans were $69.5 million or 26.5 percent of their respective loan balances as of December 31, 2009, compared to $59.4 million or 31.0 percent at the previous quarter end. The decrease in the specific reserves as a percent of loans evaluated individually from 31.0 percent to 26.5 percent was predominately the result of charging-off amounts considered uncollectible rather than improving collateral values or declining total loss estimates. Adding previously recorded partial charge-offs on these separately evaluated loans to their period end specific reserves indicates the Company’s total loss estimates on those loans increased to 45 percent on December 31, 2009 from 35 percent as of September 30, 2009, primarily due to larger decreases in estimated collateral values, especially in commercial real estate. Although ultimate disposition of these specific credits cannot be predicted with certainty, management believes the total loss estimate is sufficient to capture the credit risk at this point in the credit cycle.

Liquidity

The Bank’s overall liquidity position improved, partially due to a $28.8 million reduction in the securities portfolio and a $68.9 million reduction in loans during the fourth quarter, net of gross charge-offs and transfers to OREO. Liquid assets, including excess reserves on deposit at the Federal Reserve Bank and unencumbered securities, increased by $95.0 million during the quarter to $419.5 million. Total deposits increased by $14.9 million or 0.6 percent compared to the third quarter.

Net Interest Margin

Net interest margin decreased 9 basis points from 1.83 percent in the third quarter to 1.74 percent in the fourth quarter. A majority of this decline was attributable to average loan volume decline and the impact of non-accrual loan interest reversals. Net interest reversals related to the $79.9 million increase in non-accrual loans and a decrease in interest income associated with the $133.8 million decline in the loan portfolio contributed to the $1.2 million decline in our net interest income. Our net interest margin was positively impacted by an increase in yield on the securities portfolio and the decline in cost of deposits.

Noninterest Income

Noninterest income for fourth quarter 2009 declined to $2.8 million from $3.7 million in the third quarter 2009. The sale of an investment in the third quarter also reduced noninterest income by $0.4 million for the fourth quarter; there was a decrease in securities gains of $0.2 million from the third quarter to the fourth quarter.

Noninterest Expense

Noninterest expense for fourth quarter 2009 was $24.5 million, excluding a goodwill impairment charge of $14.0 million, compared to $22.5 million in third quarter 2009. The increase in noninterest expense of $2.0 million in the fourth quarter primarily reflects the impact of higher FDIC expense of $1.8 million. Non-reimbursable loan expenses related to impaired loans and insurance costs increased $0.8 million in the fourth quarter. Partially offsetting some of these costs was the impact of staff reductions and suspension of the 401(k) match, which began in the third quarter.

Financial Results

Diluted earnings (loss) per share was ($4.30) for fourth quarter and ($8.89) for twelve months ended Dec. 31, 2009
- Compared to ($1.52) for third quarter 2009
- Compared to $0.11 for fourth quarter 2008
- Compared to ($5.82) for twelve months ended Dec. 31, 2008
Net income (loss) was ($119.7) million for fourth quarter and ($242.7) million for twelve months ended Dec. 31, 2009
- Compared to ($41.3) million for third quarter 2009
- Compared to $4.4 million for fourth quarter 2008
- Compared to ($158.3) million for twelve months ended Dec. 31, 2008
Net interest margin was 1.74 percent for fourth quarter and 2.16 percent for twelve months ended Dec. 31, 2009
- Compared to 1.83 percent for third quarter 2009
- Compared to 2.51 percent for fourth quarter 2008
- Compared to 2.75 percent for twelve months ended Dec. 31, 2008

Loans and Loan Quality

Loans in fourth quarter 2009 decreased
- $133.8 million compared to third quarter 2009
Annualized net charge-off rate was 8.73 percent for fourth quarter 2009
- Compared to 2.71 percent for third quarter 2009
- Compared to 2.39 percent for fourth quarter 2008
Non-accrual loans at Dec. 31, 2009 were $273.8 million or 11.80 percent of loans
- Compared to 7.90 percent at Sept. 30, 2009
- Compared to 2.43 percent at Dec. 31, 2008
Nonperforming assets at Dec. 31, 2009 were $312.4 million, or 13.31 percent of loan-related assets
- Compared to 8.91 percent at Sept. 30, 2009
- Compared to 3.34 percent at Dec. 31, 2008
Nonperforming assets at Dec. 31, 2009 were $312.4 million, or 9.09 percent of total assets
- Compared to 6.22 percent at Sept. 30, 2009
- Compared to 2.36 percent at Dec. 31, 2008
Allowance for loan losses at Dec. 31, 2009 was 5.55 percent of loans
- Compared to 3.40 percent at Sept. 30, 2009
- Compared to 1.77 percent at Dec. 31, 2008

Allowance for loan losses to non-accrual loans was 47 percent at Dec. 31, 2009
- Compared to 43 percent at Sept. 30, 2009
- Compared to 73 percent at Dec. 31, 2008

Delinquencies 30-89 days were 2.71 percent of loans at Dec. 31, 2009
- Compared to 3.24 percent at Sept. 30, 2009
- Compared to 1.03 percent at Dec. 31, 2008

Capital Ratios at the Bank as of Dec. 31, 2009:

-- Tier 1 common risk-based

5.10

percent

-- Tier 1 risk-based 5.10 -- Total risk-based 6.41 -- Tier 1 leverage 3.41

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

About Midwest

We are a half century old community bank with $3.4 billion in assets at December 31, 2009. We have two principal operating subsidiaries; Midwest Bank and Trust Company and Midwest Financial and Investment Services, Inc. Midwest Bank has 26 locations serving the diverse needs of both urban and suburban Chicagoland businesses and consumers through its Commercial Banking, Wealth Management, Corporate Trust and Retail Banking areas.

Forward-Looking Statements

This press release contains certain "Forward-Looking Statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and should be reviewed in conjunction with the company's Annual Report on Form 10-K, recent S-4 filings and other publicly available information regarding the company, copies of which are available from the company upon request. Such publicly available information sets forth certain risks and uncertainties related to the company's business which should be considered in evaluating "Forward-Looking Statements."

Financial Highlights Midwest Banc Holdings, Inc. (In thousands, except per share data and percentages) Three Months Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31,

2009

2008

Income Statement Data: Net (loss) income $ (119,659 )

(41,267 )

(76,467 )

(5,320 )

4,429 Per Share Data: Basic and diluted (loss) earnings (11) $ (4.30 )

(1.52 )

(2.78 )

(0.27 )

0.11 Cash dividends declared — — — — — Book value (2.39 ) 2.02 3.45 6.38 6.56 “If converted” book value(10) (0.78 ) 3.22 4.53 7.18 7.35 Tangible book value(1) (5.14 ) (1.25 ) 0.15 3.05 3.21 “If converted” tangible book value(1)(10) (3.27 ) 0.26 1.53 4.16 4.31 Stock price at period end 0.36 0.71 0.75 1.01 1.40 Share Data: Common shares outstanding – at period end 28,121 28,116 27,944 27,929 27,893 Basic - average 28,116 27,953 27,926 27,925 27,863 Diluted - average 28,116 27,953 27,926 27,925 27,863 Selected Financial Ratios: Return on average assets (13.39 ) percent (4.49 ) percent (8.38 ) percent (0.59 ) percent 0.49 percent Return on average equity (301.80 ) (78.30 ) (103.60 ) (7.12 ) 7.17 Net interest margin (tax equivalent) 1.74 1.83 2.52 2.63 2.51 Efficiency ratio(2)(3) 198 98 97 84 103 Dividend payout ratio (11) — — — — — Loans to deposits at period end 90 96 101 102 104 Loans to assets at period end 68 69 72 70 70 Equity to assets at period end 1.64 5.09 6.15 8.11 8.57

Tangible equity to tangible assets at period end(1)(4)

(0.62 ) 2.56 3.66 5.75 6.11 Full time equivalent employees 416 420 497 542 536 Balance Sheet Data: Total earning assets $ 3,343,911

3,392,458

3,382,725

3,339,448

3,195,408 Average earning assets 3,395,916 3,476,611 3,344,103 3,268,589 3,219,078 Average assets 3,544,702 3,650,053 3,660,670 3,648,873 3,590,313 Average loans 2,396,233 2,505,134 2,584,757 2,543,770 2,499,802 Average securities 603,607 639,588 669,494 688,334 668,830 Average deposits 2,579,616 2,630,148 2,529,526 2,474,262 2,478,948 Tangible shareholders’ equity(1) (20,777 ) 88,413 127,272 208,098 212,289 Average equity 157,301 209,097 296,055 303,019 245,795 See footnotes at end of statements, tables and schedules. Financial Highlights Midwest Banc Holdings, Inc. (In thousands, except per share data and percentages) Twelve Months Ended Dec. 31, Dec. 31,

2009

2008

Income Statement Data: Net loss $ (242,713 ) $ (158,273 ) Per Share Data: Basic and diluted loss $ (8.89 ) $ (5.82 ) Cash dividends declared — 0.26 Share Data: Common shares outstanding – at period end 28,121 27,893 Basic - average 27,982 27,854 Diluted - average 27,982 27,854 Selected Financial Ratios: Return on average assets (6.69 )

percent

(4.32 ) percent Return on average equity (100.76 ) (46.65 ) Net interest margin (tax equivalent) 2.16 2.75 Efficiency ratio(2)(3) 113 144 Dividend payout ratio — N/M Full time equivalent employees 416 536 Balance Sheet Data: Total earning assets $ 3,343,911 $ 3,195,408 Average earning assets 3,371,942 3,258,393 Average assets 3,625,855 3,661,209 Average loans 2,507,063 2,483,070 Average securities 649,995 728,028 Average deposits 2,553,886 2,422,651 Tangible shareholders’ equity(1) (20,777 ) 212,289 Average equity 240,880 339,261 N/M - Not meaningful. See footnotes at end of statements, tables and schedules. Statement of Income Midwest Banc Holdings, Inc. (In thousands, except per share data and percentages) Three Months Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31,

2009

2008

Interest Income Loans $ 29,989 $ 33,294 $ 35,348 $ 34,549 $ 35,558 Securities Taxable 2,099 1,488 4,663 6,940 7,381 Exempt from federal income taxes 1 29 406 550 551 Dividends from FRB and FHLB stock 160 160 170 190 190 Short-term investments 196 164 75 37 54 Total interest income 32,445 35,135 40,662 42,266 43,734 Interest Expense Deposits 9,928 11,385 12,210 13,685 15,524

Federal funds purchased and FRB discount window advances

— — 20 29 14 Securities sold under repurchase agreements 3,264 3,264 3,229 3,205 3,264 Advances from the FHLB 3,066 3,065 3,035 3,029 3,126 Junior subordinated debentures 439 497 615 739 911 Revolving note payable 159 158 88 43 204 Term note payable 673 679 266 282 616 Subordinated debt 144 145 144 152 243 Total interest expense 17,673 19,193 19,607 21,164 23,902 Net interest income 14,772 15,942 21,055 21,102 19,832

Provision for credit losses (13)

98,750 37,450 20,750 13,253 20,275

Net interest income after provision for credit losses

(83,978 ) (21,508 ) 305 7,849 (443 ) Noninterest Income Service charges on deposit accounts 1,841 2,013 1,953 1,894 1,908 Gains on securities transactions 161 386 4,251 — — Impairment loss on securities — — (740 ) — — Insurance and brokerage commissions 220 268 338 320 333 Trust fees 306 337 296 282 241 Increase in CSV of life insurance — — 490 842 875 Gain on sale of property — — — — — Other 307 653 707 5 375 Total noninterest income 2,835 3,657 7,295 3,343 3,732 Noninterest Expense Salaries and employee benefits 8,616 8,948 11,859 11,083 13,819 Occupancy and equipment 3,275 3,175 3,356 3,245 3,511 Professional services 2,680 2,838 1,890 2,102 3,240 Marketing 111 201 339 688 842 Foreclosed properties 3,420 3,098 450 345 66 Amortization of intangible assets 573 573 573 573 590 Merger related charges — — — — — Loss on extinguishment of debt — — — — — Goodwill impairment charge 14,000 — — — — FDIC insurance 3,310 1,550 3,261 1,175 504 Other 2,552 2,067 2,692 2,297 2,831 Total noninterest expense 38,537 22,450 24,420 21,508 25,403 Loss before income taxes (119,680 ) (40,301 ) (16,820 ) (10,316 ) (22,114 ) Provision (benefit) for income taxes (21 ) 966 59,647 (4,996 ) (26,543 ) Net (Loss) Income $ (119,659 ) $ (41,267 ) $ (76,467 ) $ (5,320 ) $ 4,429 Net (loss) income available to common shareholders (11) $ (121,014 ) $ (42,556 ) $ (77,757 ) $ (7,443 ) $ 3,138 Basic and diluted (loss) earnings per share (11) $ (4.30 ) $ (1.52 ) $ (2.78 ) $ (0.27 ) $ 0.11 Cash dividends declared per share $ — $ — $ — $ — $ — Top line revenue (5) $ 17,607 $ 19,599 $ 28,350 $ 24,445 $ 23,564 Noninterest income to top line revenue 16

percent

See footnotes at end of statements, tables and schedules. Statement of Income Midwest Banc Holdings, Inc. (In thousands, except per share data and percentages) Twelve Months Ended Dec. 31, Dec. 31, Increase Increase

2009

2008

(Decrease)

Interest Income Loans $ 133,180 $ 151,120 $ (17,940 ) (11.9 ) percent Securities Taxable 15,190 33,157 (17,967 ) (54.2 ) Exempt from federal income taxes 986 2,316 (1,330 ) (57.4 ) Dividends from FRB and FHLB stock 680 741 (61 ) (8.2 ) Short-term investments 472 327 145 44.3 Total interest income 150,508 187,661 (37,153 ) (19.8 ) Interest Expense Deposits 47,208 66,025 (18,817 ) (28.5 )

Federal funds purchased and FRB discount window advances

49 2,064 (2,015 ) (97.6 ) Securities sold under repurchase agreements 12,962 13,262 (300 ) (2.3 ) Advances from the FHLB 12,195 11,824 371 3.1 Junior subordinated debentures 2,290 3,696 (1,406 ) (38.0 ) Revolving note payable 448 474 (26 ) (5.5 ) Term note payable 1,900 2,643 (743 ) (28.1 ) Subordinated debt 585 707 (122 ) (17.3 ) Total interest expense 77,637 100,695 (23,058 ) (22.9 ) Net interest income 72,871 86,966 (14,095 ) (16.2 ) Provision for credit losses(13) 170,203 72,642 97,561 134.3

Net interest income after provision for credit losses

(97,332 ) 14,324 (111,656 ) (779.5 ) Noninterest Income Service charges on deposit accounts 7,701 7,742 (41 ) (0.5 ) Gains (losses) on securities transactions 4,798 (16,596 ) 21,394 (128.9 ) Impairment loss on securities (740 ) (65,387 ) 64,647 (98.9 ) Losses on sales of loans — (75 ) 75 (100.0 ) Insurance and brokerage commissions 1,146 2,024 (878 ) (43.4 ) Trust fees 1,221 1,623 (402 ) (24.8 ) Increase in CSV of life insurance 1,332 3,509 (2,177 ) (62.0 ) Gain on sale of property — 15,196 (15,196 ) (100.0 ) Other 1,672 1,368 304 22.2 Total noninterest income (loss) 17,130 (50,596 ) 67,726 (133.9 ) Noninterest Expense Salaries and employee benefits 40,506 50,389 (9,883 ) (19.6 ) Occupancy and equipment 13,051 12,714 337 2.7 Professional services 9,510 8,590 920 10.7 Marketing 1,339 2,706 (1,367 ) (50.5 ) Foreclosed properties 7,313 332 6,981 2,102.7 Amortization of intangible assets 2,292 2,361 (69 ) (2.9 ) Merger related charges — 271 (271 ) (100.0 ) Loss on extinguishment of debt — 7,121 (7,121 ) (100.0 ) Goodwill impairment charge 14,000 80,000 (80,000 ) (100.0 ) FDIC insurance 9,296 2,603 6,693 257.1 Other 9,608 9,987 (379 ) (3.8 ) Total noninterest expense 106,915 177,074 (84,159 ) (47.5 ) Loss before income taxes (187,117 ) (213,346 ) 40,229 (18.9 ) Provision (benefit) for income taxes 55,596 (55,073 ) 110,669 (200.9 ) Net Loss $ (242,713 ) $ (158,273 ) $ (70,440 ) 44.5 percent Net loss available to common shareholders $ (248,770 ) $ (162,001 ) $ (86,769 ) 53.6 percent Basic and diluted loss per share $ (8.89 ) $ (5.82 ) $ (3.07 ) 52.7 percent Cash dividends declared per share $ — $ 0.26 $ (0.26 ) (100.0 ) percent Top line revenue (5) $ 90,001 $ 36,370 $ 53,631 147.5 percent Noninterest income to top line revenue 19

percent

N/M N/M - Not meaningful. See footnotes at end of statements, tables and schedules. Balance Sheet Midwest Banc Holdings, Inc. (In thousands, unless otherwise noted) Dec. 31, Sept. 30, June 30, March 31, Dec. 31,

2009

2008

Assets Cash $ 27,644 $ 32,278 $ 36,965 $ 56,516 $ 61,330 Short-term investments 414,466 295,162 160,538 1,762 1,735 Securities available-for-sale 581,474 615,543 633,282 685,858 621,949 Securities held-to-maturity - - - 29,082 30,267 Total securities 581,474 615,543 633,282 714,940 652,216 Federal Reserve and FHLB stock, at cost 27,652 27,652 29,648 31,698 31,698 Loans 2,320,319 2,454,101 2,559,257 2,591,048 2,509,759 Allowance for loan losses (128,800 ) (83,506 ) (63,893 ) (53,011 ) (44,432 ) Net loans 2,191,519 2,370,595 2,495,364 2,538,037 2,465,327 Cash value of life insurance — — — 85,517 84,675 Premises and equipment 39,769 40,589 40,795 38,528 38,313 Foreclosed properties 26,917 20,980 19,588 18,534 12,018 Goodwill and other intangibles 77,253 91,826 92,399 92,972 93,546 Other 48,851 49,505 60,620 134,560 129,354 Total assets $ 3,435,545 $ 3,544,130 $ 3,569,199 $ 3,713,064 $ 3,570,212 Liabilities and Shareholders' Equity Liabilities Deposits Noninterest-bearing $ 349,796 $ 330,901 $ 336,347 $ 343,422 $ 334,495 Interest-bearing 2,220,315 2,224,288 2,202,143 2,200,583 2,078,296 Total deposits 2,570,111 2,555,189 2,538,490 2,544,005 2,412,791 Federal funds purchased & FRB discount window — — — 55,000 — Securities sold under repurchase agreements 297,650 297,650 297,650 297,650 297,650 FHLB advances 340,000 340,000 340,000 340,000 380,000 Junior subordinated debentures 60,828 60,828 60,824 60,807 60,791 Revolving note payable 8,600 8,600 8,600 8,600 8,600 Term note payable 55,000 55,000 55,000 55,000 55,000 Subordinated debt 15,000 15,000 15,000 15,000 15,000 Total borrowings 777,078 777,078 777,074 832,057 817,041 Other 31,880 31,624 33,964 35,932 34,546 Total liabilities 3,379,069 3,363,891 3,349,528 3,411,994 3,264,378 Shareholders’ Equity Preferred equity 123,670 123,436 123,206 122,976 122,748 Common equity (67,194 ) 56,803 96,465 178,094 183,086 Total shareholders' equity 56,476 180,239 219,671 301,070 305,834 Total liabilities and shareholders' equity $ 3,435,545 $ 3,544,130 $ 3,569,199 $ 3,713,064 $ 3,570,212 Loan Portfolio Composition – Source of Repayment

Dec. 31, 2009

Dec. 31, 2008

Percent of Percent of

($ in millions)

Total

($ in millions)

Total

Commercial $ 972 42 $ 1,090 43 Construction 293 13 366 15 Commercial real estate 726 31 730 29 Consumer 225 10 201 8 Residential mortgage 105 4 123 5 Total loans, gross excluding deferred fees $ 2,321 100 $ 2,510 100 Net Interest Margin Midwest Banc Holdings, Inc. (In thousands, except percentages) For the Three Months Ended

Dec. 31, 2009

Sept. 30, 2009

Dec. 31, 2008

Average Average Average Average Average Average

Balance

Rate

Balance

Rate

Balance

Rate

Interest-Earning Assets: Short-term investments $ 368,424 0.21 percent $ 303,890 0.22 percent $ 18,748 1.15 percent Securities: Taxable(6) 603,533 1.39 637,198 0.93 610,160 4.84 Exempt from federal income taxes(6) 74 5.41 2,390 4.85 58,670 5.78 Total securities 603,607 1.39 639,588 0.95 668,830 4.92 FRB and FHLB stock 27,652 2.31 27,999 2.29 31,698 2.40 Loans (7)(8)(9) 2,396,233 5.01 2,505,134 5.32 2,499,802 5.70 Total interest-earning assets $ 3,395,916 3.82 percent $ 3,476,611 4.04 percent $ 3,219,078 5.48

percent

Noninterest-Earning Assets: Cash $ 35,439 $ 34,903 $ 63,352 Premises and equipment 40,412 40,705 38,208 Allowance for loan losses (88,657 ) (67,605 ) (41,522 ) Other 161,592 165,439 311,197 Total noninterest-earning assets 148,786 173,442 371,235 Total assets $ 3,544,702 $ 3,650,053 $ 3,590,313 Interest-Bearing Liabilities: Deposits: Interest-bearing demand deposits $ 177,039 0.40 percent $ 179,094 0.46 percent $ 176,803 0.72 percent Money-market demand and savings accounts 342,499 0.82 344,203 0.80 334,217 0.94 Time deposits 1,717,023 2.11 1,765,654 2.38 1,637,302 3.52 Total interest-bearing deposits 2,236,561 1.78 2,288,951 1.99 2,148,322 2.89 Borrowings: Fed funds purch & repurchase agreements 297,687 4.39 297,693 4.39 305,242 4.30 FHLB advances 340,000 3.61 340,000 3.61 380,000 3.29 Junior subordinated debentures 60,828 2.89 60,827 3.27 60,783 6.00 Revolving note payable 8,600 7.40 8,600 7.35 17,470 4.67 Term note payable 55,000 4.89 55,000 4.94 55,000 4.48 Subordinated debt 15,000 3.84 15,000 3.87 15,000 6.48 Total borrowings 777,115 3.99 777,120 4.02 833,495 4.02 Total interest-bearing liabilities $ 3,013,676 2.35 percent $ 3,066,071 2.50 percent $ 2,981,817 3.21 percent Noninterest-Bearing Liabilities: Noninterest-bearing demand deposits $ 343,055 $ 341,197 $ 330,626 Other liabilities 30,670 33,688 32,075 Total noninterest-bearing liabilities 373,725 374,885 362,701 Shareholders’ equity 157,301 209,097 245,795 Total liabilities and shareholders’ equity $ 3,544,702 $ 3,650,053 $ 3,590,313 Net interest margin (tax equivalent)(6)(9) 1.74 percent 1.83 percent 2.51 percent See footnotes at end of statements, tables and schedules. Net Interest Margin Midwest Banc Holdings, Inc. (In thousands, except percentages) For the Twelve Months Ended

Dec. 31, 2009

Dec. 31, 2008

Average Average Average Average

Balance

Rate

Balance

Rate

Interest-Earning Assets: Short-term investments $ 185,487 0.25 percent $ 17,320 1.89 percent Securities: Taxable(6) 624,215 2.43 667,324 5.14 Exempt from federal income taxes(6) 25,780 3.82 60,704 5.87 Total securities 649,995 2.49 728,028 5.20 FRB and FHLB stock 29,397 2.31 29,975 2.47 Loans (7)(8)(9) 2,507,063 5.31 2,483,070 6.10 Total interest-earning assets $ 3,371,942 4.46 percent $ 3,258,393 5.84 percent Noninterest-Earning Assets: Cash $ 45,724 $ 57,303 Premises and equipment 39,663 39,018 Allowance for loan losses (65,366 ) (28,093 ) Other 233,892 334,588 Total noninterest-earning assets 253,913 402,816 Total assets $ 3,625,855 $ 3,661,209 Interest-Bearing Liabilities: Deposits: Interest-bearing demand deposits $ 176,930 0.49 percent $ 200,869 0.98 percent Money-market demand and savings accounts 349,278 0.82 384,496 1.30 Time deposits 1,690,432 2.57 1,511,182 3.91 Total interest-bearing deposits 2,216,640 2.13 2,096,547 3.15 Borrowings: Fed funds purch & repurchase agreements 312,052 4.17 390,399 3.93 FHLB advances 346,329 3.52 335,039 3.53 Junior subordinated debentures 60,818 3.77 60,758 6.08 Revolving note payable 8,600 5.21 10,550 4.49 Term note payable 55,000 3.45 58,689 4.50 Subordinated debt 15,000 3.90 11,311 6.25 Total borrowings 797,799 3.81 866,746 4.00 Total interest-bearing liabilities $ 3,014,439 2.58 percent $ 2,963,293 3.40 percent Noninterest-Bearing Liabilities: Noninterest-bearing demand deposits $ 337,246 $ 326,104 Other liabilities 33,290 32,551 Total noninterest-bearing liabilities 370,536 358,655 Shareholders’ equity 240,880 339,261 Total liabilities and shareholders’ equity $ 3,625,855 $ 3,661,209 Net interest margin (tax equivalent)(6)(9) 2.16 percent 2.75 percent See footnotes at end of statements, tables and schedules. Credit Risk Management Midwest Banc Holdings, Inc. (In thousands, except percentages) Three Months Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31,

2009

2008

Loan Quality Nonaccrual loans (12) $ 273,823 $ 193,877 $ 95,023 $ 80,332 $ 61,104 Troubled debt restructuring 11,635 5,763 11,006 11,006 11,006 Nonperforming loans 285,458 199,640 106,029 91,338 72,110 Foreclosed properties 26,917 20,980 19,588 18,534 12,018 Nonperforming assets $ 312,375 $ 220,620 $ 125,617 $ 109,872 $ 84,128 Specific allowance on nonperforming loans $ 69,494 $ 38,779 $ 13,997 $ 11,578 $ 4,546 Partial chargeoffs taken on nonperforming loans 87,482 43,050 34,427 32,431 42,058

Total specific allowance and partial charge-offs taken on nonperforming loans

$ 156,976 $ 81,829 $ 48,424 $ 44,009 $ 46,604 90+ days past due and accruing $ — $ — $ — $ — $ — Loans $ 2,320,319 $ 2,454,101 $ 2,559,257 $ 2,591,048 $ 2,509,759 Loan-related assets $ 2,347,236 $ 2,475,081 $ 2,578,845 $ 2,609,582 $ 2,521,777 Nonaccrual loans to loans 11.80 percent 7.90 percent 3.71 percent 3.10 percent 2.43 percent Nonperforming assets to loan-related assets 13.31 percent 8.91 percent 4.87 percent 4.21 percent 3.34 percent Nonperforming assets to total assets 9.09 percent 6.22 percent 3.52 percent 2.96 percent 2.36 percent Allowance for Loan Losses Beginning balance $ 83,506 $ 63,893 $ 53,011 $ 44,432 $ 39,428 Provision for loan losses (13) 98,000 36,700 20,000 13,000 20,000 Net charge-offs (recoveries) 52,706 17,087 9,118 4,421 14,996 Ending balance $ 128,800 $ 83,506 $ 63,893 $ 53,011 $ 44,432 Net charge-offs to average loans 8.73 percent 2.71 percent 1.41 percent 0.70 percent 2.39 percent Delinquencies 30 – 89 days to loans 2.71 percent 3.24 percent 2.18 percent 1.48 percent 1.03 percent Allowance for loan losses to Loans at period end 5.55 percent 3.40 percent 2.50 percent 2.05 percent 1.77 percent Loans at period end and partial charge-offs 8.98 percent 5.07 percent 3.79 percent 3.26 percent 3.39 percent Nonaccrual loans 47 percent 43 percent 67 percent 66 percent 73 percent Nonaccrual loans including partial charge-offs taken 60 percent 53 percent 76 percent 76 percent 84 percent

Specific allowance and partial chargeoffs taken as a percentage of nonperforming loans, plus partial charge-off taken

42.09 percent 33.72 percent 34.48 percent 35.56 percent 40.82 percent Footnotes Midwest Banc Holdings, Inc. (In thousands) (1) Shareholders’ equity less goodwill and net core deposit intangible and other intangibles. Dec. 31, Sept. 30, June 30, March 31, Dec. 31,

2009

2008

Shareholders’ equity $ 56,476 $ 180,239 $ 219,671 $ 301,070 $ 305,834 Core deposit intangible & other intangibles, net (12,391 ) (12,964 ) (13,537 ) (14,110 ) (14,683 ) Goodwill (64,862 ) (78,862 ) (78,862 ) (78,862 ) (78,862 ) Tangible shareholders’ equity $ (20,777 ) $ 88,413 $ 127,272 $ 208,098 $ 212,289 (2) Excludes net gains or losses on securities transactions. (3)

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

(4) Total assets less goodwill and net core deposit intangible and other intangibles. Dec. 31, Sept. 30, June 30, March 31, Dec. 31,

2009

2008

Total assets $ 3,435,545 $ 3,544,130 $ 3,569,199 $ 3,713,064 $ 3,570,212 Core deposit intangible & other intangibles, net (12,391 ) (12,964 ) (13,537 ) (14,110 ) (14,683 ) Goodwill (64,862 ) (78,862 ) (78,862 ) (78,862 ) (78,862 ) Tangible assets $ 3,358,292 $ 3,452,304 $ 3,476,800 $ 3,620,092 $ 3,476,667 (5) Includes net interest income and noninterest income. (6)

Adjusted for 35 percent tax rate and for the dividends-received deduction where applicable, except for the 2009 periods as a result of the Company's current tax position.

(7) Nonaccrual loans are included in the average balance; however, these loans are not earning any interest. (8) Includes loan fees. (9) Reconciliation of reported net interest income to tax equivalent net interest income. Three Months Ended Dec. 31, Sept. 30, Dec. 31,

2009

2008

Net interest income $ 14,772 $ 15,942 $ 19,832 Tax equivalent adjustment to net interest income — — 363 Net interest income, tax equivalent basis $ 14,772 $ 15,942 $ 20,195 Twelve Months Ended Dec. 31, Dec. 31,

2009

2008

Net interest income $ 72,871 $ 86,966 Tax equivalent adjustment to net interest income — 2,621 Net interest income, tax equivalent basis $ 72,871 $ 89,587 (10) Reconciliation of common equity to shareholders’ equity. Dec. 31, Sept. 30, June 30, March 31, Dec. 31,

2009

2008

Preferred equity $ 123,670 $ 123,436 $ 123,206 $ 122,976 $ 122,748 Common equity (67,194 ) 56,803 96,465 178,094 183,086 Shareholders’ equity $ 56,476 $ 180,239 $ 219,671 $ 301,070 $ 305,834 Reconciliation of tangible common equity to tangible shareholders’ equity. Dec. 31, Sept. 30, June 30, March 31, Dec. 31,

2009

2008

Preferred equity $ 123,670 $ 123,436 $ 123,206 $ 122,976 $ 122,748 Tangible common equity (144,447 ) (35,023 ) 4,066 85,122 89,541 Tangible shareholders’ equity $ (20,777 ) $ 88,413 $ 127,272 $ 208,098 $ 212,289 Reconciliation of common shares outstanding at period end to “if converted” shares outstanding. Dec. 31, Sept. 30, June 30, March 31, Dec. 31,

2009

2008

Common shares outstanding 28,121 28,116 27,944 27,929 27,893 Resulting common shares if preferred shares were converted 2,875 2,875 2,875 2,875 2,875 “If converted” shares outstanding 30,996 30,991 30,819 30,804 30,768 (11)

Prior periods with earnings were re-stated as required by ASC 260-10-55, which was effective on January 1, 2009, to allocate earnings available to common shareholders to restricted shares of common stock that are considered participating securities.

(12) Includes troubled debt restructuring loans of $9.7 million and $11.5 million at December 31, 2009 and September 30, 2009, respectively. (13) The provision for credit losses includes the provision for loan losses and the provision for unfunded commitment losses as follows. Three Months Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31,

2009

2008

Provision for loan losses $ 98,000 $ 36,700 $ 20,000 $ 13,000 $ 20,000 Provision for unfunded commitments losses 750 750 750 253 275 Provision for credit losses $ 98,750 $ 37,450 $ 20,750 $ 13,253 $ 20,275 Twelve Months Ended Dec. 31, Dec. 31,

2009

2008

Provision for loan losses $ 167,700 $ 71,765 Provision for unfunded commitments losses 2,503 877 Provision for credit losses $ 170,203 $ 72,642

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MBHI Midwest Banc Hlds (MM)