UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

              |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                  For the Quarterly Period Ended March 31, 2002

                         Commission File Number: 0-29598




                           MIDWEST BANC HOLDINGS, INC.
             (Exact name of Registrant as specified in its charter.)

         DELAWARE                                     36-3252484
(State or other jurisdiction of          (I.R.S. Employer Identification Number)
 incorporation or organization)

       501 W. NORTH AVE.
     MELROSE PARK, ILLINOIS                              60160
(Address of principal executive offices)               (Zip code)


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

                                 (708) 865-1053
              (Registrant's telephone number, including area code)

         Indicate by checkmark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|


         Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
--------------------------------------------------------------------------------
         CLASS                                 OUTSTANDING AT APRIL 30, 2002
--------------------------------------------------------------------------------
  Common, par value $.01                                  10,740,956
================================================================================

<PAGE>

                           MIDWEST BANC HOLDINGS, INC.

                                    FORM 10-Q

                                TABLE OF CONTENTS



                                                                     Page Number
                                                                     -----------
                                     PART I


Item 1.  Financial Statements..................................................1

Item 2.  Management's Discussion and Analysis of Financial Condition
              and Results of Operations.......................................10


Item 3.  Quantitative and Qualitative Disclosures About Market Risk...........22


                                     PART II

Item 1.  Legal Proceedings....................................................24

Item 2.  Changes in Securities and Use of Proceeds............................24

Item 3.  Defaults upon Senior Securities......................................24

Item 4.  Submission of Matters to a Vote of Security Holders..................24

Item 5.  Other Information....................................................24

Item 6.  Exhibits and Reports on Form 8-K.....................................24

Form 10-Q  Signature Page.....................................................25

                                       i

<PAGE>

                           MIDWEST BANC HOLDINGS, INC.
                     CONSOLIDATED BALANCE SHEETS (UNAUDITED)
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>

                                                                               MARCH 31,        DECEMBER 31,
                                                                                 2002               2001
                                                                               ---------        ------------
<S>                                                                           <C>                <C>
ASSETS
Cash and cash equivalents                                                     $   49,558         $   49,812
Securities available-for-sale                                                    682,110            683,474
Securities held-to-maturity                                                       21,175             21,445
Loans                                                                          1,042,253          1,003,386
Allowance for loan losses                                                        (10,628)           (10,135)
                                                                              ----------         ----------
   Net loans                                                                   1,031,625            993,251
Cash value of life insurance                                                      19,788             19,554
Premises and equipment, net                                                       19,337             19,477
Other real estate                                                                    340                355
Goodwill                                                                           4,536              3,524
Other assets                                                                      20,641             19,530
                                                                              ----------         ----------
      Total assets                                                            $1,849,110         $1,810,422
                                                                              ==========         ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits
   Non-interest-bearing                                                       $  118,571         $  134,707
   Interest-bearing                                                            1,184,010          1,076,813
                                                                              ----------         ----------
      Total deposits                                                           1,302,581          1,211,520
Federal funds purchased                                                           18,375             24,350
Securities sold under agreements to repurchase                                   146,315            146,800
Advances from the Federal Home Loan Bank                                         237,500            244,500
Junior subordinated debt                                                          20,000             20,000
Note payable                                                                       7,000              6,500
Due to broker                                                                          -             46,432
Other liabilities                                                                 17,162             14,106
                                                                              ----------         ----------
      Total liabilities                                                        1,748,933          1,714,208
STOCKHOLDERS' EQUITY
Preferred stock                                                                        -                  -
Common stock                                                                         114                114
Surplus                                                                           29,484             29,587
Retained earnings                                                                 81,958             77,256
Accumulated other comprehensive loss                                              (2,242)            (1,057)
Treasury stock, at cost                                                           (9,137)            (9,686)
                                                                              ----------         ----------
      Total stockholders' equity                                                 100,177             96,214
                                                                              ----------         ----------
        Total liabilities and stockholders' equity                            $1,849,110         $1,810,422
                                                                              ==========         ==========
</TABLE>

     See accompanying notes to unaudited consolidated financial statements.

                                     PAGE 1
<PAGE>

                           MIDWEST BANC HOLDINGS, INC.
                  CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
                   THREE MONTHS ENDED MARCH 31, 2002 AND 2001
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>

                                                                                              2002          2001
                                                                                              ----          ----
<S>                                                                                          <C>           <C>
INTEREST INCOME
Loans                                                                                        $17,844       $19,620
Securities
   Taxable                                                                                     9,822         8,552
   Exempt from federal income taxes                                                              387           403
Trading account securities                                                                         -             -
Federal funds sold and other short term investments                                               30            72
                                                                                             -------       -------
      Total interest income                                                                   28,083        28,647

INTEREST EXPENSE
Deposits                                                                                       8,576        12,967
Advances from the Federal Home Loan Bank                                                       3,303         3,323
Notes payable and other borrowings                                                                54           107
Federal funds purchased and securities sold under agreements to repurchase                       943           428
Junior subordinated debt                                                                         374           500
                                                                                             -------       -------
      Total interest expense                                                                  13,250        17,325
                                                                                             -------       -------
Net interest income                                                                           14,833        11,322

   Provision for loan losses                                                                     662           509
                                                                                             -------       -------
Net interest income after provision for loan losses                                           14,171        10,813

OTHER INCOME
Service charges on deposits                                                                    1,306           956
Net gains on securities transactions                                                             537           270
Net trading account profits                                                                      345           161
Option Income                                                                                    532             -
Mortgage loan origination fees                                                                   142            87
Insurance and brokerage commissions                                                              146           135
Trust income                                                                                     149           213
Increase in cash surrender value of life insurance                                               234           234
Other income                                                                                     169           145
                                                                                             -------       -------
      Total other income                                                                       3,560         2,201

OTHER EXPENSES
Salaries and employee benefits                                                                 4,999         4,452
Occupancy and equipment                                                                        1,157         1,233
Professional services                                                                            661           410
Marketing                                                                                        271           191
Other expenses                                                                                 1,110         1,085
                                                                                             -------       -------
      Total other expenses                                                                     8,198         7,371
                                                                                             -------       -------

Income before income taxes                                                                     9,533         5,643

Provision for income taxes                                                                     3,220         1,781
                                                                                             -------       -------
NET INCOME                                                                                   $ 6,313       $ 3,862
                                                                                             =======       =======
Basic earnings per share                                                                     $  0.59       $  0.36
                                                                                             =======       =======
Diluted earnings per share                                                                   $  0.58       $  0.36
                                                                                             =======       =======
</TABLE>

     See accompanying notes to unaudited consolidated financial statements.

                                     PAGE 2
<PAGE>

                           MIDWEST BANC HOLDINGS, INC.
           CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
                   THREE MONTHS ENDED MARCH 31, 2002 AND 2001
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                                 2002         2001
                                                                                 ----         ----
<S>                                                                             <C>          <C>
Net Income                                                                      $6,313       $3,862

Net increase (decrease) in fair value of securities classified as
  available-for-sale, net of income taxes and reclassification
  adjustments                                                                   (1,185)       3,224
                                                                                ------       ------
Comprehensive Income                                                            $5,128       $7,086
                                                                                ======       ======
</TABLE>

     See accompanying notes to unaudited consolidated financial statements.

                                     PAGE 3
<PAGE>

                           MIDWEST BANC HOLDINGS, INC.
           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
                   THREE MONTHS ENDED MARCH 31, 2002 AND 2001
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>

                                                                           ACCUMULATED
                                                                              OTHER                       TOTAL
                                      COMMON                 RETAINED     COMPREHENSIVE   TREASURY    STOCKHOLDERS'
                                       STOCK      SURPLUS    EARNINGS     INCOME (LOSS)     STOCK        EQUITY
                                      ------      -------    --------     -------------   --------    -------------
<S>                                     <C>       <C>         <C>            <C>          <C>            <C>
Balance, January 1, 2001                $114      $29,654     $65,814        $(3,861)     $(9,145)       $ 82,576
Cash dividends declared ($0.15
   per share)                              -            -      (1,611)             -            -          (1,611)
Comprehensive income
   Net income                              -            -       3,862              -            -           3,862
   Net increase in fair value
       of securities classified as
       available-for-sale, net of
       income taxes and
       reclassification
       adjustments                         -            -           -          3,224            -           3,224
                                                                                                         --------
       Total comprehensive income                                                                           7,086
                                        ----      -------     -------        -------     -------         --------
Balance, March 31, 2001                 $114      $29,654     $68,065        $  (637)    $(9,145)        $ 88,051
                                        ====      =======     =======        =======     =======         ========

Balance, January 1, 2002                $114      $29,587     $77,256        $(1,057)     $(9,686)       $ 96,214
Cash dividends declared ($0.15
   per share)                              -            -      (1,611)             -            -          (1,611)
Purchase of 10,000 shares of
   treasury stock                          -            -           -              -         (204)           (204)
Issuance of common stock upon
   acquisition and exercise of
   stock options, net of tax
   benefit                                 -         (103)          -              -          753             650
Comprehensive income
   Net income                              -            -       6,313              -            -           6,313
   Net decrease in fair value of
      securities classified as
      available-for-sale, net
      of income taxes and
      reclassification
      adjustments                          -            -           -         (1,185)           -          (1,185)
                                                                                                         --------
         Total comprehensive income                                                                         5,128
                                        ----      -------     -------        -------      -------        --------
Balance, March 31, 2002                 $114      $29,484     $81,958        $(2,242)     $(9,137)       $100,177
                                        ====      =======     =======        =======      =======        ========
</TABLE>

     See accompanying notes to unaudited consolidated financial statements.

                                     PAGE 4
<PAGE>

                           MIDWEST BANC HOLDINGS, INC.
                CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                   THREE MONTHS ENDED MARCH 31, 2002 AND 2001
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                                         2002              2001
                                                                                      ---------           -------
<S>                                                                                   <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net income                                                                         $   6,313           $ 3,862
   Adjustments to reconcile net income to net cash provided by
     operating activities
      Depreciation                                                                          575               665
      Provision for loan losses                                                             662               509
      Proceeds from sales of trading account securities, net                                345               161
      Net gain on sale of securities available-for-sale                                    (537)             (270)
      Net gain on sales of trading account securities                                      (345)             (161)
      Federal Home Loan Bank stock dividend                                                (193)             (234)
      Net change in real estate loans held for sale                                       1,890            (1,429)
      Increase in cash surrender value of life insurance                                   (234)             (256)
      Loss on sale of other real estate                                                       -                 4
      Deferred income taxes                                                                   -                 -
      Change in other assets                                                               (134)            1,409
      Change in other liabilities                                                         3,056             1,576
                                                                                      ---------           -------
        Net cash from operating activities                                               11,398             5,836

CASH FLOWS FROM INVESTING ACTIVITIES
   Sales and maturities of securities available-for-sale                                 57,251            58,331
   Principal payments on securities                                                      44,938            33,029
   Purchase of securities available-for-sale                                           (148,489)          (85,024)
   Maturities of securities held-to-maturity                                                270               415
   Net increase in loans                                                                (40,926)          (48,945)
   Acquisition, net                                                                      (1,008)                -
   Proceeds from sale of other real estate                                                    -               995
   Property and equipment expenditures, net                                                (435)             (167)
                                                                                      ---------           -------
      Net cash from investing activities                                                (88,399)          (41,366)

CASH FLOWS FROM FINANCING ACTIVITIES
   Net increase in deposits                                                              91,061            38,802
   Borrowings                                                                             2,000             5,000
   Repayment of borrowings                                                               (8,500)             (300)
   Dividends paid                                                                        (1,608)           (1,611)
   Change in securities sold under agreements to repurchase
       and federal funds purchased                                                       (6,460)            3,474
   Treasury stock activity, net                                                             254                 -
                                                                                      ---------           -------
      Net cash from financing activities                                                 76,747            45,365
                                                                                      ---------           -------
Increase (decrease) in cash and cash equivalents                                           (254)            9,835

Cash and cash equivalents at beginning of period                                         49,812            46,556
                                                                                      ---------           -------
Cash and cash equivalents at end of period                                            $  49,558           $56,391
                                                                                      =========           =======
Supplemental disclosures
    Cash paid during the year for
        Interest                                                                      $  12,330           $16,825
        Income Taxes                                                                        550               410
    Amount due from broker for sales of securities                                            -             1,117
</TABLE>

     See accompanying notes to unaudited consolidated financial statements.

                                     PAGE 5
<PAGE>

NOTE 1 - BASIS OF PRESENTATION

         The consolidated financial information of Midwest Banc Holdings, Inc.
(the "Company") included herein is unaudited; however, such information reflects
all adjustments (consisting only of normal recurring adjustments) which are, in
the opinion of management, necessary for a fair presentation for the interim
periods. The financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X.

         The annualized results of operations for the three months ended March
31, 2002 are not necessarily indicative of the results expected for the full
year ending December 31, 2002.


NOTE 2 - EARNINGS PER SHARE

         For purposes of per share calculations, the Company had 10,740,956
shares of common stock outstanding at March 31, 2002, 10,712,392 shares of
common stock outstanding at December 31, 2001, and 10,740,392 shares of common
stock outstanding at March 31, 2001. Basic earnings per share for the three
months ended March 31, 2002 and 2001 were computed by dividing net income by the
weighted average number of shares outstanding. Diluted earnings per share for
the three months ended March 31, 2002 and 2001 were computed by dividing net
income by the weighted average number of shares outstanding, adjusted for the
dilutive effect of the outstanding stock options. Computations for basic and
diluted earnings per share are provided below.

                                                     FOR THE THREE MONTHS
                                                        ENDED MARCH 31,
                                                      2002          2001
                                                      ----          ----
                                           (IN THOUSANDS, EXCEPT PER SHARE DATA)

BASIC
   Net income                                        $ 6,313     $ 3,862
                                                     =======     =======
   Weighted average common shares
      outstanding                                     10,718      10,740
                                                     -------     -------
   Basic earnings per common share                   $  0.59     $  0.36
                                                     =======     =======
DILUTED
   Net income                                        $ 6,313     $ 3,862
                                                     =======     =======
   Weighted average common shares
      outstanding                                     10,718      10,740
   Diluted effect of stock options                       199          85
                                                     -------     -------
   Dilutive average common shares                     10,917      10,825
                                                     =======     =======
   Diluted earnings per common share                 $  0.58     $  0.36
                                                     =======     =======

                                     PAGE 6
<PAGE>

         Options to purchase 156,000 shares at a price of $22.35 and 136,500
shares at a price of $17.88 were outstanding at March 31, 2002 and March 31,
2001, respectively, but were not included in the computation of diluted earnings
per share because the options' exercise price was greater than the average
market price of the common stock for the related period and were, therefore,
antidilutive.

NOTE 3 - STOCK OPTIONS

         During the first quarter of 2002, 156,000 stock options were granted at
an exercise price of $22.35. In addition, during the first quarter of 2002,
there were 33,469 options exercised. The total stock options outstanding were
798,059 at March 31, 2002 with exercise prices ranging between $8.13 and $22.35
and expiration dates between 2006 and 2012.

NOTE 4 - ISSUANCE OF TRUST PREFERRED SECURITIES

         In May 2000, the Company formed MBHI Capital Trust I (the "Trust"). The
Trust is a statutory business trust formed under the laws of the State of
Delaware and is wholly owned by the Company. In June 2000, the Trust issued 10%
preferred securities with an aggregate liquidation amount of $20,000,000 ($25
per preferred security) to third-party investors in an underwritten public
offering. The Company also issued 10% junior subordinated debentures aggregating
$20,000,000 to the Trust. The junior subordinated debentures are the sole assets
of the Trust. The junior subordinated debentures and the preferred securities
pay interest and dividends, respectively, on a quarterly basis. The junior
subordinated debentures will mature on June 7, 2030, at which time the preferred
securities must be redeemed. The junior subordinated debentures and preferred
securities can be redeemed contemporaneously, in whole or in part, beginning
June 7, 2005 at a redemption price of $25 per preferred security. The Company
has provided a full, irrevocable, and unconditional guarantee on a subordinated
basis of the obligations of the Trust under the preferred securities in the
event of the occurrence of an event of default, as defined in such guarantee.
Debt issuance costs totaling $270,000 and underwriting fees of $700,000 were
capitalized related to the offering and are being amortized over the estimated
life of the junior subordinated debentures.

NOTE 5 - HEDGING ACTIVITIES

         The Company is involved in certain derivative transactions that are
intended to protect the fair value of certain assets or liabilities and to
improve the predictability of certain future transactions. The Company's Board
has implemented policy guidelines and parameters for these types of
transactions. All derivative instruments are recorded at their fair values and
the change in the fair value of a derivative is included in other income. If
derivative instruments are designated as hedges of fair values, both the change
in the fair value of the hedge and the hedged item are included in current
earnings. Fair value adjustments related to cash flow hedges are recorded in
other comprehensive income and reclassified to earnings when the hedged
transaction is reflected in earnings. Ineffective portions of hedges are
reflected in earnings as they occur.

         In January 2002, the Company entered into a plain vanilla interest rate
swap with a counterparty in order to convert its $20 million trust preferred
securities and related subordinated debentures from a 10% fixed rate instrument
into floating rate debt. The plain vanilla interest rate swap has a notional
amount of $20 million and was written to the call date on the trust preferred
securities, which is June 7, 2005. The Company will pay the interest quarterly
at a rate equal to the three-month LIBOR rate. The counterparty will pay a fixed
rate of 4.59% for the term of the agreement. The Company has documented this to
be a fair value hedge of the subordinated debentures and reflects the change in
the fair value of the swap as an adjustment to income, which, to the extent

                                     PAGE 7
<PAGE>

of its effectiveness, offsets the change in the fair value of the debentures.
There was no expense recorded for ineffectiveness during the period ended March
31, 2002. The average yield on the debentures was reduced from 10.00% to 7.60%
during the first quarter, resulting in a reduction of interest expense of
$125,000.

         The Company also buys and sells various covered put and call options,
with terms less than 90 days, on mortgage-backed securities. At December 31,
2001, the Company had bought or sold various covered put and call options, with
terms less than 90 days, on mortgage-backed securities in the notional amount of
$60 million. These options have either expired or have been exercised. The
Company had no covered put or call options outstanding at March 31, 2002.

NOTE 6 - RECENT REGULATORY DEVELOPMENTS

         On November 12, 1999, the Gramm-Leach-Bliley Act ("the GLB Act") was
enacted. The GLB Act amended or repealed certain provisions of the
Glass-Steagall Act and other legislation that restricted the ability of bank
holding companies, securities firms, and insurance companies to affiliate with
one another. The GLB Act establishes a comprehensive framework to permit
affiliations among commercial banks, insurance companies and securities firms.
Further, the GLB Act expanded the range of activities in which bank holding
companies may engage by allowing certain well managed and well capitalized bank
holding companies to be designated as "financial holding companies." In
addition, the GLB Act contains provisions intended to safeguard consumer
financial information in the hands of financial service providers by, among
other things, requiring such entities to disclose their privacy policies to
their customers and allowing customers to "opt out" of having their financial
service providers disclose their confidential financial information to
non-affiliated third parties, subject to certain exceptions. Final regulations
implementing the new financial privacy regulations become effective during 2002.
Similar to most other consumer-oriented laws, the regulations contain some
specific prohibitions and require timely disclosures of certain information. The
Company has devoted what it believes are sufficient resources to comply with
these new requirements. It is not anticipated that the GLB Act will have a
material adverse effect on the operations or prospects of the Company and its
subsidiaries. However, to the extent the GLB Act permits banks, securities firms
and insurance companies to affiliate, the financial services industry may
experience further consolidation. This consolidation could result in a growing
number of larger financial institutions that offer a wider variety of financial
services than the Company currently offers and that can aggressively compete in
the markets the Company currently serves.

                                     PAGE 8
<PAGE>

NOTE 7 - NEW ACCOUNTING STANDARDS

         In 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets," which requires that goodwill no longer be amortized to earnings, but
instead be reviewed for impairment. The amortization of goodwill ceases upon
adoption of SFAS No. 142, which for most companies, will be January 1, 2002. A
portion of the goodwill recorded by the Company is related to a branch
acquisition. This goodwill will continue to be accounted for under SFAS No. 72,
"Accounting for Certain Acquisitions of Banking or Thrift Institutions,"
(excluded from the scope from SFAS No. 142) and continue to be amortized to
expense. The impact of this standard on the periods ended March 31, 2002 and
2001 was as follows:

                                            2002          2001

Reported Net Income                        $6,313        $3,862
Add back: Goodwill Amortization                 -            55
                                           ------        ------
Adjusted Net Income                        $6,313        $3,917
                                           ======        ======
BASIC EARNINGS PER SHARE:
Reported net income                         $0.59         $0.36
Goodwill amortization                           -             -
                                           ------        ------
Adjusted Net Income                         $0.59         $0.36
                                           ======        ======
DILUTED EARNINGS PER SHARE:
Reported net income                         $0.58         $0.36
Goodwill amortization                           -             -
                                           ------        ------
Adjusted Net Income                         $0.58         $0.36
                                           ======        ======

                                     PAGE 9
<PAGE>

                ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


                   RESULTS OF OPERATIONS - THREE MONTHS ENDED
                             MARCH 31, 2002 AND 2001

         Consolidated net income for the first quarter of 2002 was $6.3 million,
or $0.59 and $0.58 per basic and diluted share, respectively, a 63.5% increase
compared to $3.9 million, or $0.36 per basic and diluted share, for the first
quarter of 2001. Basic and diluted earnings per share for the three months ended
March 31, 2002 were 63.9% and 61.1%, respectively, higher than for the
comparable period in 2001.

         Net interest income increased 31.0% to $14.8 million in the first
quarter of 2002 compared to $11.3 million in the first quarter of 2001.
Excluding gains on securities and trading account profits, other income
increased 49.4% to $2.7 million in the first quarter of 2002 compared to $1.8
million in the first quarter of 2001. Other expenses increased 10.9% to $8.2
million in the first quarter of 2002 compared to $7.4 million in the first
quarter of 2001.

Net Interest Income
-------------------

         Net interest income was $14.8 million and $11.3 million during the
three months ended March 31, 2002 and 2001, respectively, an increase of 31.0%.
The Company's net interest margin (tax equivalent net interest income as a
percentage of earning assets) was 3.59% for the three months ended March 31,
2002 compared to 3.41% for the comparable period in 2001. Net interest income
increased because the decrease in average rates paid on deposits and borrowings
was greater than the decrease in the yields on earning assets. This decrease in
yields was a result of the 11 rate reductions by the Federal Reserve during
2001.

         The average loan yield was 6.99% during the first quarter of 2002, a
decrease of 24.5% from 9.26% during the comparable period in 2001. Average loan
balances increased $175.9 million, or 20.7%, to $1.0 billion during March 31,
2002 from $851.3 million during March 31, 2001. The decrease in the average loan
yield is attributed to the rate reductions experienced in the prior year. The
Company's net interest income and net income is dependent in part on stable
interest rates. During the first quarter of 2002, interest rates were stable.
Increased interest rates may have a negative impact on the Company's net
interest income and net income. The net interest margin improved to 3.59% in the
first quarter 2002 compared to 3.41% in the first quarter of 2001 and 3.33% in
the fourth quarter of 2001.

         Yields on securities were 6.22%, a decrease of 11.1% from 7.00% during
the comparable period in 2001. A decrease in mortgage rates has sparked an
increase in mortgage refinancing which has accelerated the prepayment speeds of
the Company's mortgage-backed securities and increased amortization expense for
these bonds.

         Yields on earning assets decreased 20.6% to 6.64% during the first
quarter of 2002 compared to 8.36% for the first quarter of 2001. Average earning
assets, however, increased to $1.7 billion for the three months ended March 31,
2002 from $1.4 billion during the first quarter of 2001. The decrease in yields
on earning assets was offset by a decrease of 38.2% in average rates paid on
deposits and borrowings. Average rates on deposits decreased 43.2% to 3.02% for
the three months ended March 31, 2002 from 5.32% for the comparable period in
2001. Average rates on borrowings were 4.26% for the first quarter of 2002
compared to 5.91% in the comparable period in 2001.

                                    PAGE 10
<PAGE>

         In the first quarter of 2002, $257.3 million in certificates of deposit
matured at a weighted average rate of 4.60%, and the average yield for the
quarter declined from 4.64% to 3.76%. In addition, in January 2002, the Company
entered into a plain vanilla interest rate swap with a counterparty in order to
convert its $20 million trust preferred securities and related junior
subordinated debentures from a 10.00% fixed rate instrument into floating rate
debt. The average yield on the $20 million trust preferred securities and
related junior subordinated debentures was 7.60% for the first quarter of 2002.
See Note 5 to the unaudited consolidated financial statements. The Company
expects net interest income and net interest margin to continue to improve
during the second quarter of 2002 compared to the first quarter.

         The net interest margin calculation for the three months ended March
31, 2002 and 2001 is shown below (interest income and average rate on
non-taxable securities and loans are reflected on a tax equivalent basis,
assuming a 35% tax rate for 2002 and 2001 and adjusted for the dividends
received deduction where applicable):

<TABLE>
<CAPTION>

                                                       2002                                   2001
                                        ------------------------------------    ---------------------------------
                                         AVERAGE                   AVERAGE      AVERAGE                   AVERAGE
                                         BALANCE     INTEREST       RATE        BALANCE     INTEREST       RATE
                                         -------     --------      -------      -------     --------      -------
                                                                 (DOLLARS IN THOUSANDS)
<S>                                     <C>             <C>            <C>     <C>           <C>             <C>
INTEREST-EARNING ASSETS
-----------------------
 Federal funds sold                     $    7,871      $    30        1.52%   $    5,339    $    72         5.39%
 Securities taxable                        658,992       10,202        6.19       507,380      8,871         6.99
 Securities tax-exempt                      34,987          595        6.80        35,315        620         7.02
 Commercial loans(1)                       226,317        3,550        6.27       207,359      4,786         9.23
 Commercial real estate loans(1)           629,426       11,297        7.18       470,541     11,134         9.46
 Agricultural loans(1)                      49,670          874        7.04        48,343      1,033         8.55
 Consumer real estate loans(1)             108,842        1,943        7.14       110,690      2,417         8.73
 Consumer installment loans(1)              12,886          287        8.91        14,318        335         9.36
                                        ----------      -------        ----    ----------    -------         ----
                                        $1,728,991      $28,778        6.64%   $1,399,285    $29,268         8.36%
                                        ==========      =======        ====    ==========    =======         ====
INTEREST-BEARING LIABILITIES
----------------------------
 Interest-bearing demand deposits       $  135,315      $   516        1.53%   $  124,262    $ 1,017         3.27%
 Money-market demand deposits
   and savings deposits                    261,136        1,096        1.68       266,289      2,738         4.11
 Time deposits less than $100,000          528,235        5,154        3.90       454,658      7,145         6.29
 Time deposits greater than $100,000       130,234        1,098        3.37        75,979      1,190         6.26
 Public funds                               80,096          712        3.56        54,343        877         6.46
 Federal funds purchased
   and repurchase agreements               170,402          943        2.21        28,509        428         6.01
 FHLB advances                             241,411        3,303        5.47       241,278      3,323         5.51
 Notes payable and other borrowings         26,833          428        6.38        25,117        607         9.67
                                        ----------      -------        ----    ----------    -------         ----
                                        $1,573,662      $13,250        3.36%   $1,270,435    $17,325         5.44%
                                        ==========      =======        ====    ==========    =======         ====
 Net Interest Income                                    $15,528        3.28%                 $11,943         2.92%
                                                        =======        ====                  =======         ====
 Net Interest Margin                                                   3.59%                                 3.41%
                                                                       ====                                  ====
</TABLE>

(1)      Nonaccrual loans are included in the average balances, however these
         loans are not earning any interest.

                                    PAGE 11
<PAGE>

Provision for Loan Losses
-------------------------

         The Company's provision for loan losses was $662,000 for the first
quarter of 2002 compared to $509,000 for the similar period in 2001. This
increase was primarily due to the increase in charge-offs and nonperforming
loans during the quarter.

         The allowance for loan losses as a percentage of total loans was 1.02%
at March 31, 2002 and 1.01% at December 31, 2001.

Other Income
------------

         Other income, excluding securities gains, was $2.7 million for the
three months ended March 31, 2002, an increase of $908,000, or 51.3%, over the
comparable period in 2001. The other income to average assets ratio was 0.60%
for the three months ended March 31, 2002 compared to 0.48% for the same period
in 2001. The increase in other income was due to the increases in service
charges on deposits, option fee income, mortgage loan origination fees, and
other non-interest income.

         Service charges and fees increased 36.6%, or $350,000, to $1.3 million
in the first quarter of 2002 from $956,000 in the first quarter of 2001. Service
charges and fees include service charges on deposit accounts, which are expected
to increase with future deposit growth.

         Insurance and investment brokerage commissions increased $11,000 from
$135,000 for the first quarter of 2001 to $146,000 for the first quarter of
2002. Investment brokerage activities are expected to be expanded to many of the
Company's banking center locations in the near future. In March 2002, the
Company acquired the assets of Service 1st Financial Corp. through its newly
formed subsidiary, Midwest Financial and Investment Services, Inc. This
subsidiary provides securities brokerage services to both bank and non-bank
customers. The Company anticipates that investment brokerage commissions will
increase in the future through this subsidiary.

         Mortgage loan origination fees increased 63.2% to $142,000 during the
first quarter of 2002 from the comparable period in 2001. The increase is due in
large part to the decline in mortgage rates and increased refinancing activity.
The Company places most mortgages originated into the secondary market.

         Trust income decreased 30.1%, or $64,000, to $149,000 for the first
quarter of 2002 compared to $213,000 for the comparable period in 2001. Estate
trust income decreased $63,000 for the first quarter of 2002 from the comparable
period in 2001. Trust income is in part derived from the market value of trust
assets under management. Trust assets under management were $179.2 million at
March 31, 2002.

         The Company purchased bank owned life insurance ("BOLI") policies in
June 2000. The increase in cash surrender value of life insurance was $234,000
during the first quarter of 2002. The increase in cash surrender value of life
insurance is not included in interest income. Management currently intends to
use the increase in cash surrender value of life insurance to offset increased
employee benefits expense.

                                    PAGE 12
<PAGE>

         The Company manages its securities available-for-sale portfolio and
trading account portfolio on a total return basis. In this respect, management
regularly reviews the performance of its securities and sells specific
securities to provide opportunities to enhance net interest income and net
interest margin, and when possible it will recognize gains on the sale of
securities. The Company has a long history of managing its securities in this
manner. Trading account profits result from trading strategies that are utilized
to supplement narrowing bond yields during periods of interest rate volatility.
Net trading account profits were $345,000 and $161,000 during the first quarter
of 2002 and 2001, respectively. Sales of securities available-for-sale resulted
in net gains of $537,000 in the first quarter of 2002 compared to $270,000 for
the comparable period in 2001. Securities available-for-sale are held in a
manner which allows for their sale in response to changes in interest rates,
liquidity needs, or significant prepayment risk.

         Option income was $532,000 for the three months ended March 31, 2002.
At December 31, 2001, the Company had bought or sold various covered put and
call options, with terms less than 90 days, on mortgage-backed securities. These
covered options have either expired or have been exercised. The Company had no
covered put or call options outstanding at March 31, 2002. See Note 5 to the
unaudited consolidated financial statements.

Other Expenses
--------------

         Total other expenses increased 11.2%, or $827,000, to $8.2 million
during the first quarter of 2002 compared to $7.4 million for the comparable
period in 2001. The other expenses to average assets ratio was 1.83% for the
three months ended March 31, 2002 compared to 2.02% for the same period in 2001.
The efficiency ratio was 44.63% for the three months ended March 31, 2002
compared to 52.75% for the same period in 2001.

         Salary and benefit expenses increased 12.3%, or $547,000, to $5.0
million for the first quarter of 2002 compared to $4.5 million for the
comparable period in 2001. The number of full-time equivalent employees was 377
at March 31, 2002 compared to 350 as of March 31, 2001. Increased full-time
staff positions, enhanced benefit programs, and increased health insurance costs
have resulted in the increase in salaries and employee benefits.

         Occupancy expenses decreased $76,000, or 6.2%, to $1.2 million during
the first quarter of 2002 compared to the comparable period in 2001. This
decrease was due to the decrease in furniture and equipment depreciation during
the first quarter of 2002 compared to the similar period in 2001.

         Expenses, other than salary and employee benefits and occupancy,
increased $356,000, or 21.1%, to $2.0 million in the first quarter of 2002 from
$1.7 million for the comparable period in 2001. The increase in expenses was due
primarily to outsourcing arrangements, marketing expenses, and postage and
courier expenses.

Income Taxes
------------

         The Company recorded income tax expense of $3.2 million, or 33.8% of
income, and $1.8 million, or 31.6% of income, for the quarters ended March 31,
2002 and 2001, respectively.

                                    PAGE 13
<PAGE>

FINANCIAL CONDITION

Loans
-----

         Total loans increased $38.9 million, or 3.9%, at March 31, 2002 from
$1.0 billion at December 31, 2001. Loan demand has been stable during the first
three months of 2002, but there is no guarantee that loan demand will continue
to be robust in future periods. Commercial loans increased $3.9 million, or
1.8%, to $224.7 million at March 31, 2002 compared to $220.7 million at December
31, 2001. Commercial real estate loans increased 6.1%, or $37.4 million, to
$649.0 million at March 31, 2002 from $611.6 million at December 31, 2001.
Agricultural loans increased 3.0%, or $1.5 million, to $50.2 million at March
31, 2002 from $48.8 million at December 31, 2001.

         Consumer real estate loans decreased $3.8 million, or 3.5%, to $105.5
million at March 31, 2002 from $109.3 million at December 31, 2001. Consumer
loans decreased $139,000, or 1.1%, to $12.9 million at March 31, 2002 compared
to $13.0 million at December 31, 2001.

         Most residential mortgage loans the Company originates are sold in the
secondary market. At any point in time, loans will be at various stages of the
mortgage banking process. Included as part of consumer real estate loans are
loans held for sale, which were $3.4 million at December 31, 2001 and $1.5
million at March 31, 2002. The carrying value of these loans approximated their
market value at that time.

         Based upon the Company's business strategy to increase loans, it is
anticipated that commercial and commercial real estate loans will continue to
represent an increasing percentage of earning assets during 2002.

Allowance for Loan Losses
-------------------------

         An allowance for loan losses has been established to provide for those
loans that may not be repaid in their entirety for a variety of reasons. The
allowance is maintained at a level considered by management to be adequate to
provide for probable incurred losses. The allowance is increased by provisions
charged to earnings and is reduced by chargeoffs, net of recoveries. The
provision for loan losses is based upon past loan loss experience and
management's evaluation of the loan portfolio under current economic conditions.
Loans are charged to the allowance for loan losses when, and to the extent, they
are deemed by management to be uncollectible. The allowance for loan losses is
composed of allocations for specific loans and a historical portion for all
other loans.

                                    PAGE 14
<PAGE>

         Following is a summary of changes in the allowance for loan losses for
the three months ended March 31:

                                                2002             2001
                                                ----             ----
                                               (DOLLARS IN THOUSANDS)

Balance, January 1                           $10,135           $8,593
Provision charged to operations                  662              509
Loans charged-off                               (264)            (106)
Recoveries                                        95               44
                                             -------           ------
Balance, March 31                            $10,628           $9,040
                                             =======           ======

         The Company recognizes that credit losses will be experienced and the
risk of loss will vary with, among other things, general economic conditions;
the type of loan being made; the creditworthiness of the borrower over the term
of the loan and in the case of a collateralized loan, the quality of the
collateral for such loan. The allowance for loan losses represents the Company's
estimate of the allowance necessary to provide for probable losses in the
portfolio. In making this determination, the Company analyzes the ultimate
collectibility of the loans in its portfolio by incorporating feedback provided
by internal loan staff, an independent loan review function, and information
provided by examinations performed by regulatory agencies. The Company makes an
ongoing evaluation as to the adequacy of the allowance for loan losses.

         On a quarterly basis, management of the Banks meets to review the
adequacy of the allowance for loan losses. Each loan officer grades these
individual commercial credits, and the Company's independent loan review
function validates the officers' grades. In the event that loan review
downgrades a loan, it is included in the allowance analysis at the lower grade.
The grading system is in compliance with the regulatory classifications, and the
allowance is allocated to the loans based on the regulatory grading, except in
instances where there are known differences (e.g. collateral value is nominal).

         The analysis of the allowance for loan losses is comprised of three
components: specific credit allocation; general portfolio allocation; and
subjectively by determined allocation. The specific credit allocation includes a
detailed review of the credit in accordance with SFAS Nos. 114 and 118, and an
allocation is made based on this analysis. The general portfolio allocation
consists of an assigned reserve percentage based on the credit rating of the
loan. The subjective portion is determined based on loan history and the
Company's evaluation of various factors including current economic conditions
and trends in the portfolio including delinquencies and impairments, as well as
changes in the composition of the portfolio.

         The allowance for loan losses is based on estimates, and ultimate
losses will vary from current estimates. These estimates are reviewed quarterly,
and as adjustments, either positive or negative, become necessary, a
corresponding increase or decrease is made in the provision for loan losses. The
methodology used to determine the adequacy of the allowance for loan losses is
consistent with prior periods.

         The allowance for loan losses as a percentage of total loans was 1.02%
as of March 31, 2002 and 1.01% at December 31, 2001. In management's judgment,
an adequate allowance for loan losses has been established.

                                    PAGE 15
<PAGE>

Nonaccrual and Nonperforming Loans
----------------------------------

         Nonaccrual loans increased to $1.9 million at March 31, 2002 from $1.8
million at December 31, 2001. Most of the nonaccrual loans are related to
several commercial loans, which are being addressed by specific workout plans at
this time.

         Nonperforming loans include nonaccrual loans and accruing loans, which
are 90 days or more delinquent. Typically, these loans have adequate collateral
protection or personal guaranties to provide a source of repayment to the Bank.
Nonperforming loans were $2.9 million at March 31, 2002 compared to $2.4 million
at December 31, 2001 and $2.0 million at March 31, 2001. Nonperforming loans
were 0.27%, 0.24%, and 0.23% of total loans at March 31, 2002, December 31, 2001
and March 31, 2001, respectively. Nonperforming loans were 0.17%, 0.15%, and
0.14% of total assets at March 31, 2002, December 31, 2001 and March 31, 2001,
respectively. The allowance for loan losses to nonperforming loans ratio was
3.73x, 4.28x, and 4.57x at March 31, 2002, December 31, 2001, and March 31,
2001, respectively.

         Other real estate owned was $340,000, $355,000, and $154,000 at March
31, 2002, December 31, 2001 and March 31, 2001, respectively.

Securities
----------

         The Company manages its securities portfolio to provide a source of
both liquidity and earnings. Each Bank has its own asset/liability committee,
which develops current investment policies based upon its operating needs and
market circumstances. The investment policy is reviewed by senior financial
management of the Company in terms of its objectives, investment guidelines and
consistency with overall Company performance and risk management goals. Each
Bank's investment policy is formally reviewed and approved annually by its board
of directors. The asset/liability committee of each Bank is responsible for
reporting and monitoring compliance with the investment policy. Reports are
provided to each Bank's board of directors and the Board of Directors of the
Company on a regular basis.

         Securities available-for-sale are carried at fair value, with related
unrealized net gains or losses, net of deferred income taxes, recorded as an
adjustment to equity capital. At March 31, 2002, unrealized losses, net of taxes
on securities available-for-sale, were $2.2 million compared to $1.1 million at
December 31, 2001. The increase in net unrealized losses on securities
available-for-sale resulted in a $1.2 million decrease in book equity.

         Securities available-for-sale decreased to $682.1 million at March 31,
2002 from $683.5 million at December 31, 2001. U.S. government agency
mortgage-backed securities decreased 1.2%, or $7.4 million, from $596.1 million
at December 31, 2001 to $588.7 million at March 31, 2002. Equity securities
decreased $88,000 from $72.2 million at December 31, 2001 to $72.1 million at
March 31, 2002. Equity securities included capital securities of United States
Agencies, bond-rated or credit equivalent community banks, and the Federal Home
Loan Bank as well as Federal Reserve Bank stock at March 31, 2002. Obligations
of state and political subdivisions increased $5.6 million to $18.6 million at
March 31, 2002 from 13.0 million at December 31, 2001.

                                    PAGE 16
<PAGE>

         All fixed and adjustable rate mortgage pools contain a certain amount
of risk related to the uncertainty of prepayments of the underlying mortgages.
Interest rate changes have a direct impact upon prepayment rates. The Company
uses computer simulation models to test the average life and yield volatility of
adjustable rate mortgage pools and collateralized mortgage obligations under
various interest rate assumptions to monitor volatility. Stress tests are
performed quarterly.

         Securities held-to-maturity decreased $270,000, or 1.3%, from $21.4
million at December 31, 2001 to $21.2 million at March 31, 2002.

         There were no trading account securities held at March 31, 2002 or
December 31, 2001. The Company holds trading account securities on a short-term
basis based on market and liquidity conditions.

Other Assets
------------

         The Company's investment in bank-owned life insurance ("BOLI")
increased by $234,000 as the cash surrender value of the insurance increased.
The BOLI is intended to provide funding for future employee benefit expense.

Deposits and Borrowed Funds
---------------------------

         Total deposits of $1.3 billion at March 31, 2002 represented an
increase of $91.1 million, or 7.5%, from $1.2 billion at December 31, 2001.
Non-interest-bearing deposits were $118.6 million at March 31, 2002,
approximately $16.1 million lower than the $134.7 million level at December 31,
2001. Over the same period, interest-bearing deposits increased 10.0%, or $107.2
million. Certificates of deposit under $100,000 increased $83.9 million from
December 31, 2001 to March 31, 2002.

         The Company's membership in the Federal Home Loan Bank System gives it
the ability to borrow funds from the Federal Home Loan Bank of Chicago for
short- or long-term purposes under a variety of programs. The advances were used
to fund growth and permit the Company's bank subsidiaries to extend term
maturities, reduce funding costs and manage interest rate risk exposures more
effectively.

         Federal Home Loan Bank advances were $237.5 million at March 31, 2002
and $244.5 million at December 31, 2001. The weighted average rate for Federal
Home Loan Bank advances was 5.47% during the three months ended March 31, 2002
with a range of maturities on such advances between one and ten years.

                                    PAGE 17
<PAGE>

         Borrowed funds at March 31, 2002 and December 31, 2001 are listed
below:

                                                     2002           2001
                                                     ----           ----
                                                      (DOLLARS IN THOUSANDS)
Federal Home Loan Bank (FHLB) advances to
 bank subsidiaries                                 $237,500       $244,500
Revolving line of credit  ($25,000,000
 available)                                           7,000          6,500
                                                   --------       --------
 Total                                             $244,500       $251,000
                                                   ========       ========

         The Company has a credit agreement with a correspondent bank (the
"Credit Agreement"), which provides the Company with a revolving line of credit
with a maximum availability of $25.0 million. This revolving line of credit
matures on January 30, 2004.

         Amounts outstanding under the Company's revolving line of credit
represent borrowings incurred to provide capital contributions to the Banks to
support their growth. The Company makes interest payments, at its option, at the
30-, 60-, 90-, or 180-day London Inter-Bank Offered Rate ("LIBOR") plus 95 basis
points or the prime rate less 25 basis points.

         The Company also utilizes securities sold under repurchase agreements
as a source of funds. Most local municipalities and some other organizations
must have funds insured or collateralized as a matter of their own policies.
Repurchase agreements provide a source of funds and do not increase the
Company's reserve requirement. Although the balance of repurchase agreements is
subject to variation, particularly seasonal variation, the account relationships
represented by these balances are principally local and have been maintained for
relatively long periods of time. The Company had $146.3 million in securities
sold under repurchase agreements at March 31, 2002 compared to $146.8 at
December 31, 2001. The Company had $18.4 million in federal funds purchased at
March 31, 2002 compared to $24.4 million at December 31, 2001.

         In addition, in June 2000, the Company issued 10% junior subordinated
debentures aggregating $20,000,000 to MBHI Capital Trust I, a wholly-owned
subsidiary of the Company. The junior subordinated debentures pay interest on a
quarterly basis and will mature on June 7, 2030. The junior subordinated
debentures can be redeemed in whole or in part, beginning June 7, 2005.
In January 2002, the Company entered into a plain vanilla interest rate swap
converting the junior subordinated debentures from a fixed rate instrument
to floating rate debt.  See Note 5 to unaudited consolidated financial
statements.

Capital Resources
-----------------

         Stockholders' equity increased $4.0 million, or 4.1%, from $96.2
million at December 31, 2001 to $100.2 million at March 31, 2002. The increase
was due to cumulative earnings during the three months ended March 31, 2002
exceeding dividends declared and offsetting a reduction of $1.2 million, net of
tax, in the fair value of securities available-for-sale.

                                    PAGE 18
<PAGE>

The Company and its four subsidiary banks (the "Banks") are subject to
regulatory capital requirements administered by federal banking agencies.
Capital adequacy guidelines and prompt corrective action regulations involve
quantitative measures of assets, liabilities and certain off-balance-sheet items
calculated under regulatory accounting practices. Capital amounts and
classifications are also subject to qualitative judgments by regulators about
components, risk weightings and other factors, and the regulators can lower
classifications in certain areas. Failure to meet various capital requirements
can initiate regulatory action that could have a direct material effect on the
Company's financial statements.

         The prompt corrective action regulations provide five classifications,
including well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized and critically undercapitalized, however these
terms are not used to represent overall financial condition. If adequately
capitalized, regulatory approval is required to accept brokered deposits. If
undercapitalized, capital distributions are limited, as is asset growth and
expansion, and plans for capital restoration are required.

         The Company and each of the Banks were categorized as well capitalized
as of March 31, 2002. Management is not aware of any conditions or events since
the most recent regulatory notification that would change the Company's or the
Banks' categories.

                                    PAGE 19
<PAGE>

         Capital levels and minimum required levels (dollars in thousands):

<TABLE>
<CAPTION>

                                                                        AT MARCH 31, 2002
                                                  -----------------------------------------------------------------
                                                                         MINIMUM REQUIRED       MINIMUM REQUIRED
                                                       ACTUAL          FOR CAPITAL ADEQUACY  TO BE WELL CAPITALIZED
                                                  ------------------   --------------------  ----------------------
                                                  AMOUNT       RATIO      AMOUNT      RATIO     AMOUNT      RATIO
                                                  ------       -----      ------      -----     ------      -----
                                                                         (IN THOUSANDS)
<S>                                               <C>          <C>        <C>         <C>      <C>           <C>
 Total capital to risk-weighted assets
 Company                                          $128,578     10.7%      $96,026     8.0%     $120,032      10.0%
 Midwest Bank and Trust Company                     57,160     10.7        42,781     8.0        53,476      10.0
 Midwest Bank of Hinsdale                           31,267     10.6        23,648     8.0        29,560      10.0
 Midwest Bank of McHenry County                     27,523     12.0        18,354     8.0        22,943      10.0
 Midwest Bank of Western Illinois                   17,131     12.3        11,129     8.0        13,911      10.0

 Tier I capital to risk-weighted assets
 Company                                           117,883      9.8        48,013     4.0        72,019       6.0
 Midwest Bank and Trust Company                     52,585      9.8        21,390     4.0        32,085       6.0
 Midwest Bank of Hinsdale                           28,659      9.7        11,824     4.0        17,736       6.0
 Midwest Bank of McHenry County                     25,290     11.0         9,177     4.0        13,766       6.0
 Midwest Bank of Western Illinois                   15,783     11.3         5,564     4.0         8,347       6.0

 Tier I capital to average assets
 Company                                           117,883      6.5        72,627     4.0        90,784       5.0
 Midwest Bank and Trust Company                     52,585      6.8        31,142     4.0        38,928       5.0
 Midwest Bank of Hinsdale                           28,659      6.7        17,021     4.0        21,276       5.0
 Midwest Bank of McHenry County                     25,290      6.9        14,615     4.0        18,269       5.0
 Midwest Bank of Western Illinois                   15,783      6.5         9,681     4.0        12,101       5.0

                                                                        AT DECEMBER 31, 2001
                                                  -----------------------------------------------------------------
                                                                         MINIMUM REQUIRED       MINIMUM REQUIRED
                                                       ACTUAL          FOR CAPITAL ADEQUACY  TO BE WELL CAPITALIZED
                                                  ------------------   --------------------  ----------------------
                                                  AMOUNT       RATIO      AMOUNT      RATIO     AMOUNT      RATIO
                                                  ------       -----      ------      -----     ------      -----
                                                                         (IN THOUSANDS)
 Total capital to risk-weighted assets
 Company                                          $123,984     10.8%      $91,628     8.0%     $114,535      10.0%
 Midwest Bank and Trust Company                     55,041     11.2        39,307     8.0        49,134      10.0
 Midwest Bank of Hinsdale                           28,610     10.1        22,724     8.0        28,404      10.0
 Midwest Bank of McHenry County                     26,345     11.6        18,244     8.0        22,803      10.0
 Midwest Bank of Western Illinois                   16,307     11.6        11,256     8.0        14,069      10.0

 Tier I capital to risk-weighted assets
 Company                                           113,747      9.9        45,814     4.0        68,721       6.0
 Midwest Bank and Trust Company                     50,648     10.3        19,654     4.0        29,480       6.0
 Midwest Bank of Hinsdale                           26,095      9.2        11,362     4.0        17,043       6.0
 Midwest Bank of McHenry County                     24,265     10.6         9,122     4.0        13,683       6.0
 Midwest Bank of Western Illinois                   15,004     10.7         5,628     4.0         8,442       6.0

 Tier I capital to average assets
 Company                                           113,747      6.6        68,652     4.0        85,815       5.0
 Midwest Bank and Trust Company                     50,648      7.0        29,110     4.0        36,388       5.0
 Midwest Bank of Hinsdale                           26,095      6.7        15,484     4.0        19,354       5.0
 Midwest Bank of McHenry County                     24,265      6.8        14,254     4.0        17,818       5.0
 Midwest Bank of Western Illinois                   15,004      6.3         9,589     4.0        11,986       5.0
</TABLE>

                                    PAGE 20
<PAGE>

Liquidity
---------

         Liquidity measures the ability of the Company to meet maturing
obligations and its existing commitments, to withstand fluctuations in deposit
levels, to fund its operations, and to provide for customers' credit needs. The
liquidity of the Company principally depends on cash flows from operating
activities, investment in and maturity of assets, changes in balances of
deposits and borrowings, and its ability to borrow funds in the money or capital
markets.

         Net cash inflows provided by operations were $11.4 million for the
three months ended March 31, 2002 compared to inflows of $5.8 million for the
comparable period in 2001. Net cash outflows from investing activities were
$88.4 million in the first three months of 2002 compared to a net cash outflow
of $41.4 million for the comparable period in 2001. Cash inflows from financing
activities for the three months ended March 31, 2002 were $76.7 million compared
to a net inflow of $45.4 million in the comparable period during 2001.

         In the event of short-term liquidity needs, the Banks may purchase
federal funds from correspondent banks. In addition, the Company has established
repurchase agreements and brokered certificates of deposit arrangements with
various financial sources. The Company's membership in the Federal Home Loan
Bank System gives it the ability to borrow funds from the Federal Home Loan Bank
of Chicago for short- or long-term purposes under a variety of programs.

         Interest received net of interest paid was a principal source of
operating cash inflows for the three months ended March 31, 2002 and March 31,
2001, respectively. Management of investing and financing activities and market
conditions determines the level and the stability of net interest cash flows.
Management's policy is to mitigate the impact of changes in market interest
rates to the extent possible so that balance sheet growth is the principal
determinant of growth in net interest cash flows.

                                    PAGE 21
<PAGE>

                ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES
                                ABOUT MARKET RISK

Interest Rate Sensitivity Analysis
----------------------------------

         The Company's overall interest rate sensitivity is demonstrated by net
interest income analysis. Net interest income analysis measures the change in
net interest income in the event of hypothetical changes in interest rates. This
analysis assesses the risk of change in net interest income in the event of
sudden and sustained 1.0% to 2.0% increases and decreases in market interest
rates. The table below presents the Company's projected changes in net interest
income for the various rate shock levels at March 31, 2002.

                           AMOUNT           $ CHANGE         % CHANGE
                           ------           --------         --------
                                     (DOLLARS IN THOUSANDS)

          +200 bp          $70,320           $(1,464)         (2.04)%
          +100 bp           71,097              (686)         (0.96)
             Base           71,783                 -              -
          -100 bp           72,040               256           0.36
          -200 bp           71,626              (158)         (0.22)

         As shown above, at March 31, 2002, the effect of an immediate 200 basis
point increase in interest rates would decrease the Company's net interest
income by 2.04%, or $1.5 million. The effect of an immediate 200 basis point
reduction in rates would decrease the Company's net interest income by 0.22%, or
$158,000.

         The projected changes in the Company's net interest income for the
various rate shock levels at December 31, 2001 were the following:

                           AMOUNT           $ CHANGE         % CHANGE
                           ------           --------         --------
                                     (DOLLARS IN THOUSANDS)

          +200 bp          $64,675           $(2,951)         (4.36)%
          +100 bp           64,550            (3,076)         (4.55)
             Base           67,626                 -              -
          -100 bp           69,487             1,861           2.75
          -200 bp           69,191             1,565           2.31

         Changes in the mix of earning assets and interest-bearing liabilities
increased the Company's liability sensitivity during the past twelve months.

         Computations of the prospective effects of hypothetical interest rate
changes are based on numerous assumptions, including relative levels of market
interest rates, loan prepayments, and deposit decay rates, and should not be
relied upon as indicative of actual results. Actual values may differ from those
projections set forth above, should market conditions vary from assumptions used
in preparing the analyses. Further, the computations do not contemplate any
actions the Company may undertake in response to changes in interest rates.

                                    PAGE 22
<PAGE>

               SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES
                          LITIGATION REFORM ACT OF 1995

         This report 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. The Company intends such
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995 and is including this statement for purposes of these safe harbor
provisions. Forward-looking statements, which are based on certain assumptions
and describe future plans, strategies, and expectations of the Company, are
generally identifiable by use of the words "believe," "expect," "intend,"
"anticipate," "estimate," "project," or similar expressions. The Company's
ability to predict results or the actual effect of future plans or strategies is
inherently uncertain. Factors which could have a material adverse effect on the
operations and future prospects of the Company and its subsidiaries, including
its ability to implement its growth strategies, include, but are not limited to,
changes in interest rates; general economic conditions; legislative or
regulatory changes; monetary and fiscal policies of the U.S. government,
including policies of the U.S. Treasury and the Federal Reserve Board; possible
administrative or enforcement action or similar direction of federal or state
banking regulators in connection with any material failure of any of the Banks
to comply with applicable banking laws, rules and regulations; the quality or
composition of the loan or investment portfolios; demand for loan products;
deposit flows; competition; demand for financial services in the Company's
market area and accounting principles, policies and guidelines. These risks and
uncertainties should be considered in evaluating forward-looking statements and
undue reliance should not be placed on such statements.

                                    PAGE 23
<PAGE>

                                     PART II

ITEM 1.  LEGAL PROCEEDINGS

         There are no material pending legal proceedings to which the Company or
its subsidiaries are a party other than ordinary routine litigation incidental
to their respective businesses.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

         None

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         None

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         None

ITEM 5.  OTHER INFORMATION

         None

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Exhibits

         The following exhibits are either filed as part of this report or are
incorporated herein by reference:

         3.1      Restated Certificate of Incorporation, as amended
                  (incorporated by reference to Registrant's Registration
                  Statement on Form S-1, Registration No. 333-42827).
         3.2      Restated By-laws, as amended (incorporated by reference to
                  Registrant's Quarterly Report on Form 10-Q for the quarter
                  ended June 30, 1998, File No. 0-29652).
         3.3      Amendment of Restated By-laws (incorporated by reference to
                  Registrant's Quarterly Report on Form 10-Q for the quarter
                  ended June 30, 2000, File No. 0-29598).
         4.1      Specimen Common Stock Certificate (incorporated by reference
                  to Registrant's Registration Statement on Form S-1,
                  Registration No. 333-42827).
         4.2      Certain instruments defining the rights of the holders of
                  long-term debt of the Company and certain of its subsidiaries,
                  none of which authorize a total amount of indebtedness in
                  excess of 10% of the total assets of the Company and its
                  subsidiaries on a consolidated basis, have not been filed as
                  Exhibits. The Company hereby agrees to furnish a copy of any
                  of these agreements to the SEC upon request.

         (b)      Reports on Form 8-K
                  Current Report on Form 8-K dated January
                  17, 2002, filed with the SEC on January 17, 2002.

                                    PAGE 24
<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

Date:    April 30, 2002

                                    MIDWEST BANC HOLDINGS, INC.
                                    (Registrant)

                                    By: /s/ Brad A. Luecke
                                       -----------------------------------------
                                       Brad A. Luecke,
                                       President and Chief Executive Officer

                                    By: /s/ Daniel R. Kadolph
                                       -----------------------------------------
                                       Daniel R. Kadolph,
                                       Senior Vice President and
                                       Chief Financial Officer

                                    PAGE 25