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SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


Form 10-K/A


Amendment No. 1


|   |  |                                              
|-- |  | ---------------------------------------------
|þ  |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
|   |  | OF THE SECURITIES EXCHANGE ACT OF 1934       
|  
|   |  | For the fiscal year ended December 31, 2004  
|  
|OR

|  |  |                                                  
|- |  | -------------------------------------------------
|o |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
|  |  | OF THE SECURITIES EXCHANGE ACT OF 1934           
| 
|  |  | For the transition period
    from           to  

Commission file number 001-13735


Midwest Banc Holdings, Inc.


(Exact name of Registrant as specified in its charter)


|                         |  |                                        
|------------------------ |  | ---------------------------------------
|Delaware                 |  | 36-3252484                             
|(State of Incorporation) |  | (I.R.S. Employer Identification Number)

501 West North Avenue, Melrose Park, Illinois 60160


(Address of principal executive offices including ZIP
Code)


(708) 865-1053


(Registrants telephone number including Area Code)


Securities registered pursuant to Section 12(b) of the
Act:


10.0% Cumulative Trust Preferred Securities, American
Stock Exchange


(And Guarantee with Respect Thereto)


Securities registered pursuant to Section 12(g) of the
Act:


Common Stock, $0.01 par value, Nasdaq National Market


(Title of Class)


þ o


o


þ o






DOCUMENTS INCORPORATED BY REFERENCE












---










MIDWEST BANC HOLDINGS, INC.


FORM 10-K/A


INDEX


|                                                  |  |                                                |     |      |   | 
|------------------------------------------------- |  | ---------------------------------------------- | --- | ---- | - | 
|                                                  |  |                                                |     | Page |  
|                                                  |  |                                                |     | No.  |  
|                                                  |  |                                                |     |      |  
|PART II                                          
|Item 9A.                                          |  | Controls and Procedures                        |     |      | 1 | 
|PART IV                                          
|Item 15.                                          |  | Exhibits and Financial Statement
    Schedules |     |      | 6 | 
|Signature(s) Page                                 |  |                                                | 8-9 |     
|Contents of Consolidated Financial
    Statements |  |                                                | F-1 |     
|Consent of Crowe Chizek and Company LLC          
|Consent of McGladrey & Pullen, LLP               
|Certification of Principal Executive Officer     
|Certification of Principal Financial Officer     
|Certifications                                   



We
are amending the Companys Annual Report on Form 10-K, dated March 9,
2005, for the fiscal year ending December 31, 2004 (the Original Form 10-K),
for the purpose of revising the discussion in Item 9A of Part II relating to the
effectiveness of the Companys disclosure controls and procedures, amending the
discussion in Note 3 to the consolidated financial statements relating to the
Companys securities that are obligations of U.S. government agencies and
mortgage-backed securities, minor technical corrections to
differentiate between U.S. government agencies and U.S.
government-sponsored enities in Notes 4 and 21 to the consolidated
financial statements, and adding the words and 15(d)-15(f) to Paragraph
4 of Exhibit 31 to the Section 302 Certification of both the Chief Executive
Officer and the Chief Financial Officer filed as Exhibits 31.1 and 31.2,
respectively, to the Original Form 10-K.

Other than the revision to Item 9 A, Note 3 to the consolidated financial
statements, and Exhibits 31.1 and 31.2 described above, no revisions have been
made to the Companys consolidated financial statements for the 2004 fiscal year
ended December 31, 2004 or any disclosures contained in the Original Form 10-K.
The filing of this Form 10-K/A shall not be deemed an admission that the
Original Form 10-K, when filed, knowingly included any untrue statement of a
material fact or omitted to state a material fact necessary to make a statement
not misleading.



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PART II




|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures



| |                                                 
| | ------------------------------------------------
| | Evaluation of Disclosure Controls and Procedures







| |                                                                     
| | --------------------------------------------------------------------
| | Managements Report on Internal Control Over
    Financial Reporting









1



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


ON INTERNAL CONTROL OVER FINANCIAL REPORTING


To the Stockholders and Board of Directors 
 Midwest Banc Holdings, Inc. 
 Melrose Park, Illinois












2



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3



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Additional
Information on Internal Control Over Financial Reporting


















| |   |                                                                                                                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Replaced and hired a new Chief Investment Officer.                                                                                                                                                                                                                         
|
| |  | Revised its Investment Policy and Procedures.                                                                                                                                                                                                                              
|
| |  | Sold the floating rate FNMA Series F perpetual preferred
    equity securities that management failed to adequately
    demonstrate as being temporarily impaired in a suitable reliable
    evidential manner acceptable to the Companys independent
    accounting firm.

4



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| |   |                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Expanded its documentation and process for evaluating securities
    that may be or subsequently become other-than-temporary
    impaired for 2005.



5



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PART IV







|         |                                           
|-------- | ------------------------------------------
|Item 15. | Exhibits and Financial Statement Schedules

We
are amending Item 15(a) of the Companys Annual Report on Form 10-K,
dated March 9, 2005, for the fiscal year ended December 31, 2004 (the
Original
Form 10-K), for the sole purpose of adding the words and
15d-15(f) to
Paragraph 4 of Exhibit 31 to the Section 302 certification of both the Chief
Executive Officer (CEO) and the Chief Financial Officer (CFO) filed as
Exhibits 31.1 and 31.2, respectively, to the Original Form 10-K. These words
were inadvertently omitted when the Section 302 certifications were filed with
the Original Form 10-K on March 11, 2005.

Accordingly, we are filing a new currently dated Section 302 certification for
each of the Companys CEO and CFO attached to this Form 10-K/A as Exhibit 31.1
and 31.2, respectively, revised to contain the omitted language.

Index to Financial Statements




Financial Statement Schedules




Exhibits




| |     |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | --- | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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  |  | Amended and Restated By-Laws, filed February 28, 2005
    (incorporated by reference to Registrants Report on
    Form 8-K filed February 28, 2005, File
    No. 001-13735)                                                                                                                                                                                                                                                             
| | 3   | .11 |  | Certificate of Amendment of Restated Certificate of
    Incorporation (incorporated by reference to Registrants
    Form 10-Q for quarter ended June 30, 2002, File
    No. 001-13735)                                                                                                                                                                                                                                                  
| | 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
| | *10 | .3  |  | Midwest Banc Holdings, Inc. 1996 Stock Option Plan
    (incorporated by reference to Registrants Registration
    Statement on Form S-1, Registration No. 333-42827)                                                                                                                                                                                                                                                                    
| | *10 | .3a |  | Amendment to the Midwest Banc Holdings, Inc. 1996 Stock
    Option Plan (incorporated by reference to Registrants
    Annual Report on Form  10-K for the year ended
    December 31, 1998, File No. 0-29652)                                                                                                                                                                                                                           
| | *10 | .4  |  | Form of Transitional Employment Agreements (incorporated by
    reference to Registrants Registration Statement on
    Form S-1, Registration No. 333-42827)                                                                                                                                                                                                                                                                            
| | 10  | .5  |  | Lease dated as of December 24, 1958, between Western
    National Bank of Cicero and Midwest Bank and Trust Company,
    as amended (incorporated by reference to Registrants
    Registration Statement on Form S-1, Registration
    No. 333-42827)                                                                                                                                                                                   
| | 10  | .6  |  | Britannica Centre Lease, dated as of May 1, 1994, between
    Chicago Title and Trust Company, as Trustee under
    Trust Agreement dated November 2, 1977 and known as
    Trust No. 1070932 and Midwest Bank &
    Trust Company (incorporated by reference to
    Registrants Registration Statement on Form S-1,
    Registration No. 333-42827)                                                                                    
| | 10  | .7  |  | Lease dated as of March 20, 1996 between Grove Lodge
    No. 824 Ancient Free and Accepted Masons and Midwest Bank
    of Hinsdale (incorporated by reference to Registrants
    Registration Statement on Form S-1, Registration
    No. 333-42827)                                                                                                                                                                                    
| | 10  | .8  |  | Office Lease, undated, between Grove Lodge No. 824 Ancient
    Free and Accepted Masons and Midwest Bank of Hinsdale
    (incorporated by reference to Registrants Registration
    Statement on Form S-1, Registration No. 333-42827)                                                                                                                                                                                                  
| | *10 | .15 |  | Form of Supplemental Executive Retirement Agreement
    (incorporated by reference to Registrants Form 10-Q
    for the quarter ended September 30, 2001, File
    No. 001-13735)                                                                                                                                                                                                                                                       

6



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| |     |     |  |                                                                                                                                                                                                                                                                                          
| | --- | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | *10 | .16 |  | Form of Transitional Employment Agreement (Executive Officer
    Group) (incorporated by reference to Registrants
    Form 10-Q for the quarter ended September 30, 2001,
    File No. 001-13735)                                                                                       
| | 10  | .19 |  | Agreement and Plan of Reorganization between the Company and Big
    Foot Financial Corp. dated as of July 19, 2002
    (incorporated by reference to Annex A of the
    Registrants Proxy Statement/ Prospectus dated
    October 23, 2002, Registration Statement No. 333-
    100090)
| | 10  | .21 |  | Lease dated as of April 29, 1976, between Sanfilippo,
    Joseph C. and Grace Ann and Fairfield Savings and
    Loan Association, as amended (incorporated by reference to
    Registrants Form 10-K for the year ended
    December 31, 2003, File No. 001-13735)                      
| | 10  | .22 |  | Lease dated as of August 28, 2002 between Glen Oak Plaza
    and Midwest Bank and Trust Company (incorporated by
    reference to Registrants Form 10-K for the year ended
    December 31, 2003, File No. 001-13735)                                                                   
| | 10  | .24 |  | Loan Agreement as of April 8, 2004, between the Company and
    LaSalle Bank National Association (incorporated by reference to
    Registrants Form 10-Q for the year ended
    September 30, 2004, File No. 001-13735)                                                                
| | 10  | .25 |  | Employment Agreement as of September 28, 2004 between the
    Company and the Chief Executive Officer (incorporated by
    reference to Registrants Form 10-Q for the year ended
    September 30, 2004, File No. 001-13735)                                                            
| | 10  | .26 |  | Retirement Agreement as of September 28, 2004 between the
    Company and retiring Chief Executive Officer (incorporated by
    reference to Registrants Form 10-Q for the year ended
    September 30, 2004, File No. 001-13735)                                                       
| | 10  | .27 |  | Midwest Banc Holdings, Inc. Severance Policy as of
    December 20, 2004 (incorporated by reference to
    Registrants Form 8-K dated November 22, 2004,
    File No. 001-13735)                                                                                                        
| | 10  | .28 |  | Officer Compensation (incorporated by reference to
Registrants Form 10-K for the year ended December 31,
2004, File No. 001-13735)                                                                                                                                                      
| | 10  | .29 |  | Director Compensation (incorporated by reference to
Registrants Form 10-K for the year ended December 31,
2004, File No. 001-13735)                                                                                                                                                     
| | 21  | .1  |  | Subsidiaries (incorporated by reference to
Registrants Form 10-K for the year ended December 31,
2004, File No. 001-13735)                                                                                                                                                              
| | 23  | .1  |  | Consent of Crowe Chizek and Company LLC                                                                                                                                                                                                                                                  
| | 23  | .2  |  | Consent of McGladrey & Pullen, LLP                                                                                                                                                                                                                                                       
| | 24  | .1  |  | Power of Attorney (incorporated by reference to
Registrants Form 10-K for the year ended December 31,
2004, File No. 001-13735)                                                                                                                                                         
| | 31  | .1  |  | Rule 13a-14(a) Certification of Principal Executive Officer                                                                                                                                                                                                                              
| | 31  | .2  |  | Rule 13a-14(a) Certification of Principal Financial Officer                                                                                                                                                                                                                              
| | 32  | .1  |  | Certification Pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002, from the Companys Chief Executive Officer and
    Chief Financial Officer                                                                               






|  |                                                                                                             
|- | ------------------------------------------------------------------------------------------------------------
|* | Indicates management contracts or compensatory plans or
    arrangements required to be filed as an exhibit.

7



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SIGNATURES






| |                                
| | -------------------------------
| | Midwest Banc
    Holdings, Inc.



| |     |                      
| | --- | ---------------------
| | By: | /s/ James J. Giancola

| |                                      
| | -------------------------------------
| |                                      
| | James J. Giancola                    
| | President and Chief Executive Officer





|                                           |  |                                                  |  |              |  | 
|------------------------------------------ |  | ------------------------------------------------ |  | ------------ |  | 
|Signature                                  |  | Title                                            |  | Date        
|                                           |  |                                                  |  |             
|                                          
|*E.V.
    Silveri                          |  | Chairman of the Board, Director                  |  |             
|                                          
|/s/ James J. GiancolaJames
    J. Giancola |  | President, Chief Executive Officer, and Director |  | May 20, 2005
|                                          
|*Angelo
    A. DiPaolo                     |  | Director                                         |  |             
|                                          
|*Gerald
    F. Hartley                     |  | Director                                         |  |             
|                                          
|*Daniel
    Nagle                          |  | Director                                         |  |             
|                                          
|*Joseph
    Rizza                          |  | Director                                         |  |             
|                                          
|*LeRoy
    Rosasco                         |  | Director                                         |  |             

8



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|                                           |  |                                                                                    |  |              |  | 
|------------------------------------------ |  | ---------------------------------------------------------------------------------- |  | ------------ |  | 
|Signature                                  |  | Title                                                                              |  | Date        
|                                           |  |                                                                                    |  |             
|                                          
|*Robert
    D. Small                       |  | Director                                                                           |  |             
|                                          
|*Leon
    Wolin                            |  | Director                                                                           |  |             
|                                          
|/s/ Daniel R. KadolphDaniel
    R. Kadolph |  | Senior Vice President,
    Chief Financial Officer, Comptroller,
    and Treasurer |  | May 20, 2005

* Signed per power of attorney



|       |  |                       |  |  | 
|------ |  | --------------------- |  |  | 
|By:    |  | /s/ James J. Giancola |  |  | 
|Name:  |  | James J. Giancola     |  |  | 
|Title: |  | Attorney-in-fact      |  |  | 
|Date:  |  | May 20, 2005          |  |  | 

9



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MIDWEST BANC HOLDINGS, INC.





CONSOLIDATED FINANCIAL STATEMENTS


December 31, 2004, 2003, and 2002


CONTENTS


|                                                          |                                                 |      |    
|--------------------------------------------------------- | ----------------------------------------------- | ---- | ---
|FINANCIAL STATEMENTS                                      |                                                 |     
|                                                          | CONSOLIDATED BALANCE SHEETS                     |      | F-2
|                                                          | CONSOLIDATED STATEMENTS OF INCOME               |      | F-3
|                                                          | CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY |      | F-4
|                                                          | CONSOLIDATED STATEMENTS OF CASH FLOWS           |      | F-5
|                                                          | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS      |      | F-7
|REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS |                                                 | F-39

F-1



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MIDWEST BANC HOLDINGS, INC.


CONSOLIDATED BALANCE SHEETS


|                                                                             |                                                                                                    |                            |                                            |           |           |           |           |           |           |           | 
|---------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------- | -------------------------- | ------------------------------------------ | --------- | --------- | --------- | --------- | --------- | --------- | --------- | 
|                                                                             |                                                                                                    | December 31,               |                                           
|                                                                             |                                                                                                    |                            |                                           
|                                                                             |                                                                                                    | 2004                       |                                            |           | 2003      |          
|                                                                             |                                                                                                    |                            |                                            |           |           |          
|                                                                             |                                                                                                    | (In thousands except share |                                           
|                                                                             |                                                                                                    | and per share data)        |                                           
|ASSETS                                                                      
|Cash and cash equivalents                                                    |                                                                                                    | $                          | 243,431                                    |           |           | $         | 196,157   |          
|Securities available-for-sale                                                |                                                                                                    |                            | 548,211                                    |           |           |           | 796,140   |          
|Securities held-to-maturity (fair value: 2004 - $89,800;
    2003 - $57,239) |                                                                                                    |                            | 89,733                                     |           |           |           | 56,074    |          
|Loans                                                                        |                                                                                                    |                            | 1,230,400                                  |           |           |           | 1,081,296 |          
|Allowance for loan losses                                                    |                                                                                                    |                            | (17,961                                    | )         |           |           | (15,714   | )        
|                                                                             |                                                                                                    |                            |                                            |           |           |          
|                                                                             | Net loans                                                                                          |                            |                                            | 1,212,439 |           |           |           | 1,065,582 |          
|Cash value of life insurance                                                 |                                                                                                    |                            | 49,500                                     |           |           |           | 24,906    |          
|Premises and equipment, net                                                  |                                                                                                    |                            | 27,521                                     |           |           |           | 27,376    |          
|Other real estate                                                            |                                                                                                    |                            | 8,224                                      |           |           |           | 6,942     |          
|Core deposit and other intangibles, net                                      |                                                                                                    |                            | 2,217                                      |           |           |           | 2,790     |          
|Goodwill                                                                     |                                                                                                    |                            | 4,360                                      |           |           |           | 4,360     |          
|Due from broker                                                              |                                                                                                    |                            |                                           |           |           |           | 40,477    |          
|Other assets                                                                 |                                                                                                    |                            | 51,177                                     |           |           |           | 43,345    |          
|                                                                             |                                                                                                    |                            |                                            |           |           |          
|                                                                             | Total assets                                                                                       |                            | $                                          | 2,236,813 |           |           | $         | 2,264,149 |          
|                                                                             |                                                                                                    |                            |                                            |           |           |          
|                                                                            
|LIABILITIES AND STOCKHOLDERS EQUITY                                        
|Liabilities                                                                  |                                                                                                    |                            |                                            |           |           |           |           |          
|                                                                             | Deposits                                                                                           |                            |                                            |           |           |           |           |           |          
|                                                                             |                                                                                                    | Non-interest-bearing       |                                            | $         | 176,995   |           |           | $         | 160,668   |          
|                                                                             |                                                                                                    | Interest-bearing           |                                            |           | 1,505,426 |           |           |           | 1,425,743 |          
|                                                                             |                                                                                                    |                            |                                            |           |           |          
|                                                                             |                                                                                                    |                            | Total deposits                             |           |           | 1,682,421 |           |           |           | 1,586,411 | 
|                                                                             | Securities sold under agreements to repurchase                                                     |                            |                                            | 198,401   |           |           |           | 202,699   |          
|                                                                             | Advances from the Federal Home Loan Bank                                                           |                            |                                            | 133,628   |           |           |           | 253,461   |          
|                                                                             | Junior subordinated debt owed to unconsolidated trusts                                             |                            |                                            | 55,672    |           |           |           | 54,000    |          
|                                                                             | Notes payable                                                                                      |                            |                                            |          |           |           |           | 2,000     |          
|                                                                             | Other liabilities                                                                                  |                            |                                            | 29,268    |           |           |           | 22,497    |          
|                                                                             |                                                                                                    |                            |                                            |           |           |          
|                                                                             |                                                                                                    |                            | Total liabilities                          |           |           | 2,099,390 |           |           |           | 2,121,068 | 
|                                                                             |                                                                                                    |                            |                                            |           |           |          
|Stockholders equity                                                         |                                                                                                    |                            |                                            |           |           |           |           |          
|                                                                             | Preferred stock, $.01 par value, 1,000,000 shares
    authorized; none issued                      |                            |                                            |          |           |           |           |          |          
|                                                                             | Common stock, $.01 par value, 24,000,000 shares
    authorized; 18,668,140 issued in 2004 and 2003 |                            |                                            | 187       |           |           |           | 187       |          
|                                                                             | Surplus                                                                                            |                            |                                            | 65,781    |           |           |           | 64,330    |          
|                                                                             | Retained earnings                                                                                  |                            |                                            | 95,829    |           |           |           | 102,041   |          
|                                                                             | Unearned stock-based compensation                                                                  |                            |                                            | (2,642    | )         |           |           |          |          
|                                                                             | Accumulated other comprehensive loss                                                               |                            |                                            | (16,457   | )         |           |           | (15,824   | )        
|                                                                             | Treasury stock, at cost (2004 - 586,413 shares,
    2003 - 806,934 shares)                         |                            |                                            | (5,275    | )         |           |           | (7,653    | )        
|                                                                             |                                                                                                    |                            |                                            |           |           |          
|                                                                             |                                                                                                    | Total stockholders equity |                                            |           | 137,423   |           |           |           | 143,081   |          
|                                                                             |                                                                                                    |                            |                                            |           |           |          
|                                                                             |                                                                                                    |                            | Total liabilities and stockholders equity |           | $         | 2,236,813 |           |           | $         | 2,264,149 | 
|                                                                             |                                                                                                    |                            |                                            |           |           |          



F-2



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MIDWEST BANC HOLDINGS, INC.


CONSOLIDATED STATEMENTS OF INCOME


|                                                    |                                                        |                                       |        |         |         |   |        |        |         |   |        |        |         | 
|--------------------------------------------------- | ------------------------------------------------------ | ------------------------------------- | ------ | ------- | ------- | - | ------ | ------ | ------- | - | ------ | ------ | ------- | 
|                                                    |                                                        | Year Ended December 31,               |       
|                                                    |                                                        |                                       |       
|                                                    |                                                        | 2004                                  |        |         | 2003    |   |        | 2002   |        
|                                                    |                                                        |                                       |        |         |         |   |        |        |        
|                                                    |                                                        | (In thousands, except per share data) |       
|Interest income                                     |                                                        |                                       |        |         |         |   |        |        |         |   |        |       
|                                                    | Loans                                                  |                                       | $      | 67,656  |         |   | $      | 72,210 |         |   | $      | 74,433 |        
|                                                    | Securities                                             |                                       |        |         |         |   |        |        |         |   |        |        |        
|                                                    |                                                        | Taxable                               |        |         | 33,857  |   |        |        | 36,492  |   |        |        | 35,529  | 
|                                                    |                                                        | Exempt from federal income taxes      |        |         | 780     |   |        |        | 3,111   |   |        |        | 2,621   | 
|                                                    | Trading securities                                     |                                       |        | 1,736   |         |   |        | 19     |         |   |        |       |        
|                                                    | Federal funds sold and other short-term investments    |                                       |        | 1,378   |         |   |        | 247    |         |   |        | 138    |        
|                                                    |                                                        |                                       |        |         |         |   |        |        |        
|                                                    |                                                        | Total interest income                 |        |         | 105,407 |   |        |        | 112,079 |   |        |        | 112,721 | 
|                                                    |                                                        |                                       |        |         |         |   |        |        |        
|Interest expense                                    |                                                        |                                       |        |         |         |   |        |        |         |   |        |       
|                                                    | Deposits                                               |                                       |        | 30,602  |         |   |        | 30,065 |         |   |        | 34,036 |        
|                                                    | Federal funds purchased                                |                                       |        | 134     |         |   |        | 163    |         |   |        | 313    |        
|                                                    | Securities sold under agreements to repurchase         |                                       |        | 5,530   |         |   |        | 5,948  |         |   |        | 4,205  |        
|                                                    | Advances from the Federal Home Loan Bank               |                                       |        | 7,916   |         |   |        | 10,862 |         |   |        | 13,004 |        
|                                                    | Junior subordinated debt owed to unconsolidated trusts |                                       |        | 3,547   |         |   |        | 2,589  |         |   |        | 1,556  |        
|                                                    | Notes payable                                          |                                       |        | 20      |         |   |        | 170    |         |   |        | 205    |        
|                                                    |                                                        |                                       |        |         |         |   |        |        |        
|                                                    |                                                        | Total interest expense                |        |         | 47,749  |   |        |        | 49,797  |   |        |        | 53,319  | 
|                                                    |                                                        |                                       |        |         |         |   |        |        |        
|Net interest income                                 |                                                        |                                       | 57,658 |         |         |   | 62,282 |        |         |   | 59,402 |       
|Provision for loan losses                           |                                                        |                                       | 4,224  |         |         |   | 10,205 |        |         |   | 18,532 |       
|                                                    |                                                        |                                       |        |         |         |   |        |        |        
|Net interest income after provision for loan losses |                                                        |                                       | 53,434 |         |         |   | 52,077 |        |         |   | 40,870 |       
|                                                    |                                                        |                                       |        |         |         |   |        |        |        
|Other income                                        |                                                        |                                       |        |         |         |   |        |        |         |   |        |       
|                                                    | Service charges on deposit accounts                    |                                       |        | 5,938   |         |   |        | 5,855  |         |   |        | 5,691  |        
|                                                    | Net gains (losses) on securities transactions          |                                       |        | (4,480  | )       |   |        | 5,340  |         |   |        | 1,522  |        
|                                                    | Impairment loss on equity securities                   |                                       |        | (10,098 | )       |   |        |       |         |   |        |       |        
|                                                    | Net trading profits                                    |                                       |        | 414     |         |   |        | 6,334  |         |   |        | 2,288  |        
|                                                    | Gains on sale of loans                                 |                                       |        | 537     |         |   |        | 1,021  |         |   |        | 650    |        
|                                                    | Insurance and brokerage commissions                    |                                       |        | 2,125   |         |   |        | 2,244  |         |   |        | 1,490  |        
|                                                    | Trust income                                           |                                       |        | 608     |         |   |        | 574    |         |   |        | 572    |        
|                                                    | Increase in cash surrender value of life insurance     |                                       |        | 1,594   |         |   |        | 959    |         |   |        | 1,080  |        
|                                                    | Other income                                           |                                       |        | 862     |         |   |        | 759    |         |   |        | 715    |        
|                                                    |                                                        |                                       |        |         |         |   |        |        |        
|                                                    |                                                        | Total other income                    |        |         | (2,500  | ) |        |        | 23,086  |   |        |        | 14,008  | 
|                                                    |                                                        |                                       |        |         |         |   |        |        |        
|Other expenses                                      |                                                        |                                       |        |         |         |   |        |        |         |   |        |       
|                                                    | Salaries and employee benefits                         |                                       |        | 27,683  |         |   |        | 24,156 |         |   |        | 20,659 |        
|                                                    | Occupancy and equipment                                |                                       |        | 6,968   |         |   |        | 6,495  |         |   |        | 4,818  |        
|                                                    | Professional services                                  |                                       |        | 4,906   |         |   |        | 4,493  |         |   |        | 2,825  |        
|                                                    | Prepayment fees on FHLB advances                       |                                       |        | 4,215   |         |   |        |       |         |   |        |       |        
|                                                    | Other expenses                                         |                                       |        | 8,961   |         |   |        | 8,351  |         |   |        | 5,607  |        
|                                                    |                                                        |                                       |        |         |         |   |        |        |        
|                                                    |                                                        | Total other expenses                  |        |         | 52,733  |   |        |        | 43,495  |   |        |        | 33,909  | 
|                                                    |                                                        |                                       |        |         |         |   |        |        |        
|Income (loss) before income taxes                   |                                                        |                                       | (1,799 | )       |         |   | 31,668 |        |         |   | 20,969 |       
|Provision for income taxes                          |                                                        |                                       | (4,175 | )       |         |   | 8,887  |        |         |   | 4,661  |       
|                                                    |                                                        |                                       |        |         |         |   |        |        |        
|Net income                                          |                                                        | $                                     | 2,376  |         |         | $ | 22,781 |        |         | $ | 16,308 |       
|                                                    |                                                        |                                       |        |         |         |   |        |        |        
|Basic earnings per share                            |                                                        | $                                     | 0.13   |         |         | $ | 1.28   |        |         | $ | 1.01   |       
|                                                    |                                                        |                                       |        |         |         |   |        |        |        
|Diluted earnings per share                          |                                                        | $                                     | 0.13   |         |         | $ | 1.25   |        |         | $ | 0.99   |       
|                                                    |                                                        |                                       |        |         |         |   |        |        |        
|Cash dividends declared per common share            |                                                        | $                                     | 0.48   |         |         | $ | 0.44   |        |         | $ | 0.40   |       
|                                                    |                                                        |                                       |        |         |         |   |        |        |        



F-3



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##### Table of Contents



MIDWEST BANC HOLDINGS, INC.


CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY


|                                                                                                                                                                                            |                                                                                                                                         |                                                 |     |   |         |   |          |          |  |             |              |        |               |               |        |          |       |   |               |         |   |   |        |   |  |   |         |         |        |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------- | --- | - | ------- | - | -------- | -------- |  | ----------- | ------------ | ------ | ------------- | ------------- | ------ | -------- | ----- | - | ------------- | ------- | - | - | ------ | - |  | - | ------- | ------- | ------ | -
|                                                                                                                                                                                            |                                                                                                                                         |                                                 |     |   |         |   |          |          |  | Accumulated |              |        |               |               |       
|                                                                                                                                                                                            |                                                                                                                                         |                                                 |     |   |         |   |          | Unearned |  |             | Other        |        |               |               |        | Total    |      
|                                                                                                                                                                                            |                                                                                                                                         | Common                                          |     |   |         |   | Retained |          |  | Stock-based |              |        | Comprehensive |               |        | Treasury |       |   | Stockholders |        
|                                                                                                                                                                                            |                                                                                                                                         | Stock                                           |     |   | Surplus |   |          | Earnings |  |             | Compensation |        |               | Income (Loss) |        |          | Stock |   |               | Equity  |  
|                                                                                                                                                                                            |                                                                                                                                         |                                                 |     |   |         |   |          |          |  |             |              |        |               |               |        |          |       |   |               |         |  
|                                                                                                                                                                                            |                                                                                                                                         | (In thousands, except share and per share data) |    
|Balance, January 1, 2002                                                                                                                                                                    |                                                                                                                                         | $                                               | 114 |   |         | $ | 29,587   |          |  | $           | 77,256       |        |               | $             |       |          |       | $ | (1,057        | )       |   | $ | (9,686 | ) |  | $ | 96,214  |        
|Issuance of 5,689,660 shares of stock in conjunction with a
    three for two stock split                                                                                                   |                                                                                                                                         |                                                 | 57  |   |         |   | (57      | )        |  |             |             |        |               |               |       |          |       |   |              |         |   |   |       |   |  |   |        |        
|Cash dividends declared ($.40 per share)                                                                                                                                                    |                                                                                                                                         |                                                 |    |   |         |   |         |          |  |             | (6,459       | )      |               |               |       |          |       |   |              |         |   |   |       |   |  |   | (6,459  | )      
|Purchase of 35,000 shares of treasury stock                                                                                                                                                 |                                                                                                                                         |                                                 |    |   |         |   |         |          |  |             |             |        |               |               |       |          |       |   |              |         |   |   | (576   | ) |  |   | (576    | )      
|Issuance of 12,846 shares of common stock upon acquisition
    of Service 1st Financial Corp., and issuance of common
    stock upon exercise of 107,632 stock options, net of tax benefits |                                                                                                                                         |                                                 |    |   |         |   | (164     | )        |  |             |             |        |               |               |       |          |       |   |              |         |   |   | 1,426  |   |  |   | 1,262   |        
|Comprehensive income                                                                                                                                                                        |                                                                                                                                         |                                                 |     |   |         |   |          |          |  |             |              |        |               |               |        |          |       |   |               |         |   |   |        |   |  |   |         |        
|                                                                                                                                                                                            | Net income                                                                                                                              |                                                 |     |  |         |   |          |         |  |             |              | 16,308 |               |               |        |         |       |   |               |        |   |   |        |  |  |   |         | 16,308  |       
|                                                                                                                                                                                            | Net increase in fair value of securities classified as
    available-for-sale, net of income taxes and reclassification
    adjustments |                                                 |     |  |         |   |          |         |  |             |              |       |               |               |        |         |       |   |               | 8,202   |   |   |        |  |  |   |         | 8,202   |       
|                                                                                                                                                                                            |                                                                                                                                         |                                                 |     |   |         |   |          |          |  |             |              |        |               |               |        |          |       |   |               |         |  
|                                                                                                                                                                                            |                                                                                                                                         | Total comprehensive income                      |     |   |         |   |          |          |  |             |              |        |               |               |        |          |       |   |               |         |   |   |        |   |  |   |         |         | 24,510 |  
|                                                                                                                                                                                            |                                                                                                                                         |                                                 |     |   |         |   |          |          |  |             |              |        |               |               |        |          |       |   |               |         |  
|Balance, December 31, 2002                                                                                                                                                                  |                                                                                                                                         |                                                 | 171 |   |         |   | 29,366   |          |  |             | 87,105       |        |               |               |       |          |       |   | 7,145         |         |   |   | (8,836 | ) |  |   | 114,951 |        
|Cash dividends declared ($.44 per share)                                                                                                                                                    |                                                                                                                                         |                                                 |    |   |         |   |         |          |  |             | (7,845       | )      |               |               |       |          |       |   |              |         |   |   |       |   |  |   | (7,845  | )      
|Issuance of 1,599,088 shares of common stock upon
    acquisition of Big Foot Financial Corp.                                                                                               |                                                                                                                                         |                                                 | 16  |   |         |   | 30,448   |          |  |             |             |        |               |               |       |          |       |   |              |         |   |   |       |   |  |   | 30,464  |        
|Issuance of common stock upon exercise of 108,088 stock options,
    net of tax benefits                                                                                                    |                                                                                                                                         |                                                 |    |   |         |   | 483      |          |  |             |             |        |               |               |       |          |       |   |              |         |   |   | 1,183  |   |  |   | 1,666   |        
|Capital contribution from loan payoff by related parties                                                                                                                                    |                                                                                                                                         |                                                 |    |   |         |   | 4,033    |          |  |             |             |        |               |               |       |          |       |   |              |         |   |   |       |   |  |   | 4,033   |        
|Comprehensive income                                                                                                                                                                        |                                                                                                                                         |                                                 |     |   |         |   |          |          |  |             |              |        |               |               |        |          |       |   |               |         |   |   |        |   |  |   |         |        
|                                                                                                                                                                                            | Net income                                                                                                                              |                                                 |     |  |         |   |          |         |  |             |              | 22,781 |               |               |        |         |       |   |               |        |   |   |        |  |  |   |         | 22,781  |       
|                                                                                                                                                                                            | Net decrease in fair value of securities classified as
    available-for-sale, net of income taxes and reclassification
    adjustments |                                                 |     |  |         |   |          |         |  |             |              |       |               |               |        |         |       |   |               | (22,969 | ) |   |        |  |  |   |         | (22,969 | )     
|                                                                                                                                                                                            |                                                                                                                                         |                                                 |     |   |         |   |          |          |  |             |              |        |               |               |        |          |       |   |               |         |  
|                                                                                                                                                                                            |                                                                                                                                         | Total comprehensive loss                        |     |   |         |   |          |          |  |             |              |        |               |               |        |          |       |   |               |         |   |   |        |   |  |   |         |         | (188   | )
|                                                                                                                                                                                            |                                                                                                                                         |                                                 |     |   |         |   |          |          |  |             |              |        |               |               |        |          |       |   |               |         |  
|Balance, December 31, 2003                                                                                                                                                                  |                                                                                                                                         |                                                 | 187 |   |         |   | 64,330   |          |  |             | 102,041      |        |               |               |       |          |       |   | (15,824       | )       |   |   | (7,653 | ) |  |   | 143,081 |        
|Cash dividends declared ($.48 per share)                                                                                                                                                    |                                                                                                                                         |                                                 |    |   |         |   |         |          |  |             | (8,588       | )      |               |               |       |          |       |   |              |         |   |   |       |   |  |   | (8,588  | )      
|Issuance of common stock upon exercise of 70,521 stock options,
    net of tax benefits                                                                                                     |                                                                                                                                         |                                                 |    |   |         |   | 345      |          |  |             |             |        |               |               |       |          |       |   |              |         |   |   | 677    |   |  |   | 1,022   |        
|Issuance of 150,000 shares of restricted stock from treasury                                                                                                                                |                                                                                                                                         |                                                 |    |   |         |   | 1,106    |          |  |             |             |        |               |               | (2,807 | )        |       |   |              |         |   |   | 1,701  |   |  |   |        |        
|Unearned stock-based compensation                                                                                                                                                           |                                                                                                                                         |                                                 |    |   |         |   |         |          |  |             |             |        |               |               | 165    |          |       |   |              |         |   |   |       |   |  |   | 165     |        
|Comprehensive income                                                                                                                                                                        |                                                                                                                                         |                                                 |     |   |         |   |          |          |  |             |              |        |               |               |        |          |       |   |               |         |   |   |        |   |  |   |         |        
|                                                                                                                                                                                            | Net income                                                                                                                              |                                                 |     |  |         |   |          |         |  |             |              | 2,376  |               |               |        |         |       |   |               |        |   |   |        |  |  |   |         | 2,376   |       
|                                                                                                                                                                                            | Net decrease in fair value of securities classified as
    available-for-sale, net of income taxes and reclassification
    adjustments |                                                 |     |  |         |   |          |         |  |             |              |       |               |               |        |         |       |   |               | (633    | ) |   |        |  |  |   |         | (633    | )     
|                                                                                                                                                                                            |                                                                                                                                         |                                                 |     |   |         |   |          |          |  |             |              |        |               |               |        |          |       |   |               |         |  
|                                                                                                                                                                                            |                                                                                                                                         | Total comprehensive income                      |     |   |         |   |          |          |  |             |              |        |               |               |        |          |       |   |               |         |   |   |        |   |  |   |         |         | 1,743  |  
|                                                                                                                                                                                            |                                                                                                                                         |                                                 |     |   |         |   |          |          |  |             |              |        |               |               |        |          |       |   |               |         |  
|Balance, December 31, 2004                                                                                                                                                                  |                                                                                                                                         | $                                               | 187 |   |         | $ | 65,781   |          |  | $           | 95,829       |        |               | $             | (2,642 | )        |       | $ | (16,457       | )       |   | $ | (5,275 | ) |  | $ | 137,423 |        
|                                                                                                                                                                                            |                                                                                                                                         |                                                 |     |   |         |   |          |          |  |             |              |        |               |               |        |          |       |   |               |         |  



F-4



---



##### Table of Contents



MIDWEST BANC HOLDINGS, INC.


CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                 |                                                                                                     |                                                            |                                                     |          |        |         |         |          |        |        |        |          |         |          |  
|------------------------------------------------ | --------------------------------------------------------------------------------------------------- | ---------------------------------------------------------- | --------------------------------------------------- | -------- | ------ | ------- | ------- | -------- | ------ | ------ | ------ | -------- | ------- | -------- | -
|                                                 |                                                                                                     | Year Ended December 31,                                    |                                                    
|                                                 |                                                                                                     |                                                            |                                                    
|                                                 |                                                                                                     | 2004                                                       |                                                     |          | 2003   |         |         | 2002     |       
|                                                 |                                                                                                     |                                                            |                                                     |          |        |         |         |          |       
|                                                 |                                                                                                     | (In thousands)                                             |                                                    
|Cash flows from operating activities             |                                                                                                     |                                                            |                                                     |          |        |         |         |          |        |        |        |         
|                                                 | Net income                                                                                          |                                                            | $                                                   | 2,376    |        |         | $       | 22,781   |        |        | $      | 16,308   |        
|                                                 | Adjustments to reconcile net income to net cash provided by
    operating activities Depreciation   |                                                            |                                                     | 2,744    |        |         |         | 2,433    |        |        |        | 2,308    |        
|                                                 |                                                                                                     | Provision for loan losses                                  |                                                     |          | 4,224  |         |         |          | 10,205 |        |        |          | 18,532  |         
|                                                 |                                                                                                     | Amortization of other intangibles                          |                                                     |          | 362    |         |         |          | 495    |        |        |          | 56      |         
|                                                 |                                                                                                     | Proceeds (purchases) from sales of trading securities, net |                                                     |          | (4,898 | )       |         |          | (14    | )      |        |          | 348     |         
|                                                 |                                                                                                     | Amortization of premiums and discounts on securities, net  |                                                     |          | 2,833  |         |         |          | 10,302 |        |        |          | 5,172   |         
|                                                 |                                                                                                     | Net loss (gain) on sales of securities                     |                                                     |          | 4,480  |         |         |          | (5,340 | )      |        |          | (1,522  | )       
|                                                 |                                                                                                     | Impairment loss on equity securities                       |                                                     |          | 10,098 |         |         |          |       |        |        |          |        |         
|                                                 |                                                                                                     | Net loss (gain) on sales of trading securities             |                                                     |          | 5,009  |         |         |          | 14     |        |        |          | (348    | )       
|                                                 |                                                                                                     | Net gain on sales of mortgage loans                        |                                                     |          | (537   | )       |         |          | (1,021 | )      |        |          | (650    | )       
|                                                 |                                                                                                     | Federal Home Loan Bank stock dividend                      |                                                     |          | (1,014 | )       |         |          | (1,245 | )      |        |          | (671    | )       
|                                                 |                                                                                                     | Net change in real estate loans held for sale              |                                                     |          | (877   | )       |         |          | 4,374  |        |        |          | (860    | )       
|                                                 |                                                                                                     | Increase in cash surrender value of life insurance         |                                                     |          | (1,594 | )       |         |          | (959   | )      |        |          | (1,080  | )       
|                                                 |                                                                                                     | Deferred income taxes                                      |                                                     |          | (6,528 | )       |         |          | 682    |        |        |          | (4,087  | )       
|                                                 |                                                                                                     | Gain on sale of other real estate, net                     |                                                     |          | 39     |         |         |          | 837    |        |        |          | 8       |         
|                                                 |                                                                                                     | Stock-based compensation                                   |                                                     |          | 165    |         |         |          |       |        |        |          |        |         
|                                                 |                                                                                                     | Change in other assets                                     |                                                     |          | (246   | )       |         |          | (4,345 | )      |        |          | (16,642 | )       
|                                                 |                                                                                                     | Change in other liabilities                                |                                                     |          | 4,467  |         |         |          | (829   | )      |        |          | 8,353   |         
|                                                 |                                                                                                     |                                                            |                                                     |          |        |         |         |          |       
|                                                 |                                                                                                     |                                                            | Net cash provided by operating activities           |          |        | 21,103  |         |          |        | 38,370 |        |          |         | 25,225   |  
|                                                 |                                                                                                     |                                                            |                                                     |          |        |         |         |          |       
|Cash flows from investing activities             |                                                                                                     |                                                            |                                                     |          |        |         |         |          |        |        |        |         
|                                                 | Sales of securities available-for-sale                                                              |                                                            |                                                     | 707,488  |        |         |         | 428,300  |        |        |        | 319,952  |        
|                                                 | Maturities of securities available-for-sale                                                         |                                                            |                                                     | 38,660   |        |         |         | 355      |        |        |        | 4,190    |        
|                                                 | Principal payments on securities                                                                    |                                                            |                                                     | 70,094   |        |         |         | 338,203  |        |        |        | 209,620  |        
|                                                 | Purchases of securities available-for-sale                                                          |                                                            |                                                     | (502,136 | )      |         |         | (932,634 | )      |        |        | (611,101 | )      
|                                                 | Purchases of securities held-to-maturity                                                            |                                                            |                                                     | (66,669  | )      |         |         |         |        |        |        | (24,588  | )      
|                                                 | Maturities of securities held-to-maturity                                                           |                                                            |                                                     | 3,205    |        |         |         | 4,795    |        |        |        | 26,290   |        
|                                                 | Sale of futures contracts                                                                           |                                                            |                                                     | (13,887  | )      |         |         | (7,967   | )      |        |        |         |        
|                                                 | Purchase of mortgage loans                                                                          |                                                            |                                                     | (42,690  | )      |         |         |         |        |        |        |         |        
|                                                 | Net (increase) decrease in loans                                                                    |                                                            |                                                     | (109,527 | )      |         |         | 48,545   |        |        |        | (139,722 | )      
|                                                 | Proceeds from sale of mortgage loans                                                                |                                                            |                                                     |         |        |         |         | 142,546  |        |        |        |         |        
|                                                 | Cash received (paid), net of cash and cash equivalents in
    acquisition and stock issuance        |                                                            |                                                     |         |        |         |         | 17,783   |        |        |        | (1,008   | )      
|                                                 | Proceeds from sale of other real estate                                                             |                                                            |                                                     | 1,094    |        |         |         | 2,635    |        |        |        | 347      |        
|                                                 | Property and equipment expenditures                                                                 |                                                            |                                                     | (3,250   | )      |         |         | (2,091   | )      |        |        | (1,830   | )      
|                                                 | Investment in life insurance                                                                        |                                                            |                                                     | (23,000  | )      |         |         |         |        |        |        |         |        
|                                                 |                                                                                                     |                                                            |                                                     |          |        |         |         |          |       
|                                                 |                                                                                                     |                                                            | Net cash provided by (used in) investing activities |          |        | 59,382  |         |          |        | 40,470 |        |          |         | (217,850 | )
|                                                 |                                                                                                     |                                                            |                                                     |          |        |         |         |          |       
|Cash flows from financing activities             |                                                                                                     |                                                            |                                                     |          |        |         |         |          |        |        |        |         
|                                                 | Net increase in deposits                                                                            |                                                            |                                                     | 96,010   |        |         |         | 58,034   |        |        |        | 179,128  |        
|                                                 | Issuance of junior subordinated debt owed to unconsolidated
    trusts, net of debt issuance costs  |                                                            |                                                     |         |        |         |         | 18,430   |        |        |        | 14,525   |        
|                                                 | Borrowings                                                                                          |                                                            |                                                     |         |        |         |         | 5,500    |        |        |        | 9,300    |        
|                                                 | Payments on borrowings                                                                              |                                                            |                                                     | (117,000 | )      |         |         | (5,500   | )      |        |        | (38,800  | )      
|                                                 | Dividends paid                                                                                      |                                                            |                                                     | (8,583   | )      |         |         | (7,317   | )      |        |        | (6,450   | )      
|                                                 | Change in short-term securities sold under agreements to
    repurchase and federal funds purchased |                                                            |                                                     | (4,298   | )      |         |         | (3,183   | )      |        |        | (116,789 | )      
|                                                 | Proceeds from long-term securities sold under agreement to
    repurchase                           |                                                            |                                                     |         |        |         |         |         |        |        |        | 151,521  |        
|                                                 | Repurchase of common stock                                                                          |                                                            |                                                     |         |        |         |         |         |        |        |        | (576     | )      
|                                                 | Proceeds from exercise of stock options                                                             |                                                            |                                                     | 660      |        |         |         | 1,666    |        |        |        | 641      |        
|                                                 |                                                                                                     |                                                            |                                                     |          |        |         |         |          |       
|                                                 |                                                                                                     |                                                            | Net cash provided by (used in) financing activities |          |        | (33,211 | )       |          |        | 67,630 |        |          |         | 192,500  |  
|                                                 |                                                                                                     |                                                            |                                                     |          |        |         |         |          |       
|Increase (decrease) in cash and cash equivalents |                                                                                                     |                                                            | 47,274                                              |          |        |         | 146,470 |          |        |        | (125   | )       
|Cash and cash equivalents at beginning of year   |                                                                                                     |                                                            | 196,157                                             |          |        |         | 49,687  |          |        |        | 49,812 |         
|                                                 |                                                                                                     |                                                            |                                                     |          |        |         |         |          |       
|Cash and cash equivalents at end of year         |                                                                                                     | $                                                          | 243,431                                             |          |        | $       | 196,157 |          |        | $      | 49,687 |         
|                                                 |                                                                                                     |                                                            |                                                     |          |        |         |         |          |       

F-5



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##### Table of Contents



MIDWEST BANC HOLDINGS, INC.


CONSOLIDATED STATEMENTS OF CASH
FLOWS  (Continued)


|                                                                        |                                                                 |                          |                                          |                               |                             |                                    |   |        |        |         |         |        |        |     |       |       |   | 
|----------------------------------------------------------------------- | --------------------------------------------------------------- | ------------------------ | ---------------------------------------- | ----------------------------- | --------------------------- | ---------------------------------- | - | ------ | ------ | ------- | ------- | ------ | ------ | --- | ----- | ----- | - | 
|                                                                        |                                                                 | Year Ended December 31,  |                                         
|                                                                        |                                                                 |                          |                                         
|                                                                        |                                                                 | 2004                     |                                          |                               | 2003                        |                                    |   | 2002   |       
|                                                                        |                                                                 |                          |                                          |                               |                             |                                    |   |        |       
|                                                                        |                                                                 | (In thousands)           |                                         
|Supplemental disclosures                                                |                                                                 |                          |                                          |                               |                             |                                    |   |        |        |         |         |       
|                                                                        | Cash paid during the year for                                   |                          |                                          |                               |                             |                                    |   |        |        |         |         |        |       
|                                                                        |                                                                 | Interest                 |                                          | $                             | 47,732                      |                                    |   | $      | 49,953 |         |         | $      | 53,511 |    
|                                                                        |                                                                 | Income taxes             |                                          |                               | 3,731                       |                                    |   |        | 6,334  |         |         |        | 11,175 |    
|Supplemental schedule of noncash investing and financing
    activities |                                                                 |                          |                                          |                               |                             |                                    |   |        |        |         |         |       
|                                                                        | Amount due to broker for purchases of securities                |                          |                                          |                              |                             |                                    |   |       |        |         |         | 20,582 |       
|                                                                        | Amount due from broker for sales of securities                  |                          |                                          |                              |                             |                                    |   | 40,477 |        |         |         |       |       
|                                                                        | Transfer from securities available-for-sale to held-to-maturity |                          |                                          |                              |                             |                                    |   |       |        |         |         | 99,841 |       
|                                                                        | Acquisitions                                                    |                          |                                          |                               |                             |                                    |   |        |        |         |         |        |       
|                                                                        |                                                                 | Noncash assets acquired: |                                          |                               |                             |                                    |   |        |        |         |         |        |        |    
|                                                                        |                                                                 |                          | Investment securities available for sale |                               |                             |                                   |   |        |        | 17,128  |         |        |        |    |      
|                                                                        |                                                                 |                          | Loans, net                               |                               |                             |                                   |   |        |        | 157,477 |         |        |        |    |      
|                                                                        |                                                                 |                          | Premises and equipment, net              |                               |                             |                                   |   |        |        | 8,719   |         |        |        | 139 |      
|                                                                        |                                                                 |                          | Goodwill, net                            |                               |                             |                                   |   |        |        |        |         |        |        | 761 |      
|                                                                        |                                                                 |                          | Other intangibles, net                   |                               |                             |                                   |   |        |        | 3,041   |         |        |        | 300 |      
|                                                                        |                                                                 |                          | Other assets                             |                               |                             |                                   |   |        |        | 5,930   |         |        |        |    |      
|                                                                        |                                                                 |                          |                                          |                               |                             |                                    |   |        |       
|                                                                        |                                                                 |                          |                                          | Total noncash assets acquired |                             | $                                  |  |        |        | $       | 192,295 |        |        | $   | 1,200 |      
|                                                                        |                                                                 |                          |                                          |                               |                             |                                    |   |        |       
|                                                                        |                                                                 | Liabilities assumed:     |                                          |                               |                             |                                    |   |        |        |         |         |        |        |    
|                                                                        |                                                                 |                          | Deposits                                 |                               | $                           |                                   |   |        | $      | 137,729 |         |        | $      |    |      
|                                                                        |                                                                 |                          | Advances from the Federal Home Loan Bank |                               |                             |                                   |   |        |        | 36,727  |         |        |        |    |      
|                                                                        |                                                                 |                          | Accrued expenses and other liabilities   |                               |                             |                                   |   |        |        | 5,887   |         |        |        |    |      
|                                                                        |                                                                 |                          |                                          |                               |                             |                                    |   |        |       
|                                                                        |                                                                 |                          |                                          | Total liabilities assumed     |                             |                                    |  |        |        |         | 180,343 |        |        |     |      |      
|                                                                        |                                                                 |                          |                                          |                               |                             |                                    |   |        |       
|                                                                        |                                                                 |                          |                                          |                               | Net noncash assets acquired |                                    | $ |       |        |         | $       | 11,952 |        |     | $     | 1,200 |  
|                                                                        |                                                                 |                          |                                          |                               |                             |                                    |   |        |       
|                                                                        |                                                                 |                          |                                          |                               |                             | Cash and cash equivalents acquired |   | $      |       |         |         | $      | 19,698 |     |       | $     |  | 
|                                                                        |                                                                 |                          |                                          |                               |                             |                                    |   |        |       



F-6



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##### Table of Contents



MIDWEST BANC HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




|         |                     
|-------- | --------------------
|Note 1  | Nature of Operations





|         |                                           
|-------- | ------------------------------------------
|Note 2  | Summary of Significant Accounting Policies

Basis of Presentation:


Use of Estimates:


Cash:


Securities:


F-7



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##### Table of Contents



MIDWEST BANC HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Derivatives:


Fair Value of Financial Instruments and Derivatives:


Loans:




Allowance for Loan Losses:




F-8



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##### Table of Contents



MIDWEST BANC HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








Premises and Equipment:


Other Real Estate:


Cash Surrender Value of Life Insurance:


Goodwill:


Income Taxes:


Contingencies:


Transfers of financial assets:


F-9



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##### Table of Contents



MIDWEST BANC HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Stock Compensation: Accounting for Stock-Based Compensation.


|                                                                                      |  |                       |       |  |      |   |        |      |  |   |        | 
|------------------------------------------------------------------------------------- |  | --------------------- | ----- |  | ---- | - | ------ | ---- |  | - | ------ | 
|                                                                                      |  | 2004                  |       |  | 2003 |   |        | 2002 | 
|                                                                                      |  |                       |       |  |      |   |        |      | 
|                                                                                      |  | (In thousands, except |      
|                                                                                      |  | per share data)       |      
|Net income as reported                                                                |  | $                     | 2,376 |  |      | $ | 22,781 |      |  | $ | 16,308 | 
|Deduct: Stock-based compensation expense determined under fair
    value-based method |  |                       | 494   |  |      |   | 457    |      |  |   | 321    | 
|                                                                                      |  |                       |       |  |      |   |        |      | 
|Pro forma net income                                                                  |  | $                     | 1,882 |  |      | $ | 22,324 |      |  | $ | 15,987 | 
|                                                                                      |  |                       |       |  |      |   |        |      | 
|Basic earnings per share as reported                                                  |  | $                     | 0.13  |  |      | $ | 1.28   |      |  | $ | 1.01   | 
|Pro forma basic earnings per share                                                    |  |                       | 0.11  |  |      |   | 1.25   |      |  |   | 0.99   | 
|Diluted earnings per share as reported                                                |  |                       | 0.13  |  |      |   | 1.25   |      |  |   | 0.99   | 
|Pro forma diluted earnings per share                                                  |  |                       | 0.10  |  |      |   | 1.23   |      |  |   | 0.97   | 



|                                |  |      |         |   |      |   |         |      |  |   |         |  
|------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                |  | 2004 |         |   | 2003 |   |         | 2002 | 
|                                |  |      |         |   |      |   |         |      | 
|Fair value                      |  | $    | 7.82    |   |      | $ | 6.31    |      |  | $ | 4.83    |  
|Risk-free interest rate         |  |      | 4.56    | % |      |   | 3.40    | %    |  |   | 4.84    | %
|Expected option life            |  |      | 7 years |   |      |   | 5 years |      |  |   | 5 years |  
|Expected stock price volatility |  |      | 21.01   | % |      |   | 53.00   | %    |  |   | 36.68   | %
|Dividend yield                  |  |      | 2.18    |   |      |   | 1.98    |      |  |   | 2.27    |  









F-10



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##### Table of Contents



MIDWEST BANC HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Comprehensive Income:


Earnings Per Common Share:


Dividend Restriction:


Statement of Cash Flows:


Fair Value of Financial Instruments:


Guarantees:




Consolidation of Variable Interest Entities:


F-11



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##### Table of Contents



MIDWEST BANC HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










Reclassifications:


New accounting pronouncements:






F-12



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##### Table of Contents



MIDWEST BANC HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








F-13



---



##### Table of Contents



MIDWEST BANC HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|         |           
|-------- | ----------
|Note 3  | Securities



|                                                                                       |                                                  |                                     |         |         |            |   |       |            |     |   |            |      |         |   |         |         |         | 
|-------------------------------------------------------------------------------------- | ------------------------------------------------ | ----------------------------------- | ------- | ------- | ---------- | - | ----- | ---------- | --- | - | ---------- | ---- | ------- | - | ------- | ------- | ------- | 
|                                                                                       |                                                  | December 31, 2004                   |        
|                                                                                       |                                                  |                                     |        
|                                                                                       |                                                  |                                     |         | Gross   |            |   | Gross |            |     |  
|                                                                                       |                                                  | Amortized                           |         |         | Unrealized |   |       | Unrealized |     |   |           
|                                                                                       |                                                  | Cost                                |         |         | Gains      |   |       | Losses     |     |   | Fair Value |     
|                                                                                       |                                                  |                                     |         |         |            |   |       |            |     |   |            |     
|                                                                                       |                                                  | (In thousands)                      |        
|Securities available-for-sale
    Obligations of U.S. government-sponsored entities(1) |                                                  | $                                   | 397,510 |         |            | $ |      |            |     | $ | (26,676    | )    |         | $ | 370,834 |        
|                                                                                       | Obligations of states and political subdivisions |                                     |         | 1,909   |            |   |       | 58         |     |   |            |     |         |   |         | 1,967   |        
|                                                                                       | Mortgage-backed securities(1)(2)                 |                                     |         | 51,016  |            |   |       | 74         |     |   |            | (840 | )       |   |         | 50,250  |        
|                                                                                       | Equity securities(3)                             |                                     |         | 114,331 |            |   |       | 238        |     |   |            | (62  | )       |   |         | 114,507 |        
|                                                                                       | Corporate and other debt securities              |                                     |         | 11,074  |            |   |       |           |     |   |            | (421 | )       |   |         | 10,653  |        
|                                                                                       |                                                  |                                     |         |         |            |   |       |            |     |   |            |     
|                                                                                       |                                                  | Total securities available-for-sale |         | $       | 575,840    |   |       | $          | 370 |   |            | $    | (27,999 | ) |         | $       | 548,211 | 
|                                                                                       |                                                  |                                     |         |         |            |   |       |            |     |   |            |     
|Securities held-to-maturity
    Obligations of states and political subdivisions       |                                                  | $                                   | 9,574   |         |            | $ | 259   |            |     | $ |           |      |         | $ | 9,833   |        
|                                                                                       | Mortgage-backed securities(1)(2)                 |                                     |         | 80,159  |            |   |       | 406        |     |   |            | (598 | )       |   |         | 79,967  |        
|                                                                                       |                                                  |                                     |         |         |            |   |       |            |     |   |            |     
|                                                                                       |                                                  | Total securities held-to-maturity   |         | $       | 89,733     |   |       | $          | 665 |   |            | $    | (598    | ) |         | $       | 89,800  | 
|                                                                                       |                                                  |                                     |         |         |            |   |       |            |     |   |            |     



---

|    |                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------
|(1) | Includes obligations of the Federal Home Loan Corporation
(FHLMC) and Federal National Mortgage Association (FNMA).
|    |                                                                                                                    
|(2) | Includes obligations of the Government National Mortgage
Associations.                                             
|    |                                                                                                                    
|(3) | Includes issues from government-sponsored entities (FNMA and
FHLMC).                                               



|                              |                                                      |                                     |   |         |            |  |       |            |       |  |            |         |         |   |   |         |         | 
|----------------------------- | ---------------------------------------------------- | ----------------------------------- | - | ------- | ---------- |  | ----- | ---------- | ----- |  | ---------- | ------- | ------- | - | - | ------- | ------- | 
|                              |                                                      | December 31, 2003                   |  
|                              |                                                      |                                     |  
|                              |                                                      |                                     |   | Gross   |            |  | Gross |            |       | 
|                              |                                                      | Amortized                           |   |         | Unrealized |  |       | Unrealized |       |  |           
|                              |                                                      | Cost                                |   |         | Gains      |  |       | Losses     |       |  | Fair Value |        
|                              |                                                      |                                     |   |         |            |  |       |            |       |  |            |        
|                              |                                                      | (In thousands)                      |  
|Securities available-for-sale |                                                      |                                     |   |         |            |  |       |            |       |  |            |         |         |   |   |        
|                              | Obligations of U.S. government-sponsored entities(1) |                                     | $ | 360,280 |            |  | $     |           |       |  | $          | (23,676 | )       |   | $ | 336,604 |        
|                              | Obligations of states and political subdivisions     |                                     |   | 35,124  |            |  |       | 2,078      |       |  |            |        |         |   |   | 37,202  |        
|                              | Mortgage-backed securities(1)(2)                     |                                     |   | 172,420 |            |  |       | 2,312      |       |  |            | (1,222  | )       |   |   | 173,510 |        
|                              | Equity securities(3)                                 |                                     |   | 159,391 |            |  |       | 353        |       |  |            | (4,984  | )       |   |   | 154,760 |        
|                              | Corporate and other debt securities                  |                                     |   | 95,625  |            |  |       | 100        |       |  |            | (1,661  | )       |   |   | 94,064  |        
|                              |                                                      |                                     |   |         |            |  |       |            |       |  |            |        
|                              |                                                      | Total securities available-for-sale |   | $       | 822,840    |  |       | $          | 4,843 |  |            | $       | (31,543 | ) |   | $       | 796,140 | 
|                              |                                                      |                                     |   |         |            |  |       |            |       |  |            |        
|Securities held-to-maturity   |                                                      |                                     |   |         |            |  |       |            |       |  |            |         |         |   |   |        
|                              | Obligations of states and political subdivisions     |                                     | $ | 12,840  |            |  | $     | 628        |       |  | $          |        |         |   | $ | 13,468  |        
|                              | Mortgage-backed securities(1)(2)                     |                                     |   | 43,234  |            |  |       | 537        |       |  |            |        |         |   |   | 43,771  |        
|                              |                                                      |                                     |   |         |            |  |       |            |       |  |            |        
|                              |                                                      | Total securities held-to-maturity   |   | $       | 56,074     |  |       | $          | 1,165 |  |            | $       |        |   |   | $       | 57,239  | 
|                              |                                                      |                                     |   |         |            |  |       |            |       |  |            |        



---

|    |                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------
|(1) | Includes obligations of the Federal Home Loan Corporation
(FHLMC) and Federal National Mortgage Association (FNMA).
|    |                                                                                                                    
|(2) | Includes obligations of the Government National Mortgage
Associations.                                             
|    |                                                                                                                    
|(3) | Includes issues from government-sponsored entities (FNMA and
FHLMC).                                               

F-14



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##### Table of Contents



MIDWEST BANC HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




December 31, 2004Less Than 12 Months
    
    
    12 Months or More
    
    
    TotalWeighted-AverageNumber ofMonths inFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Loss Position
    
    
    Value
    
    
    Losses(In thousands)Securities available-for-sale:Obligations of U.S.
goverment-sponsored entities (1)
    
    $
    29,306
    
    
    $
    (528
    )
    
    $
    341,528
    
    
    $
    (26,148
    )
    
    
    16.7
    
    
    $
    370,834
    
    
    $
    (26,676
    )Mortgage-backed securities:U.S.
government agencies (2)
    
    
    345
    
    
    
    (1
    )
    
    
    748
    
    
    
    (8
    )
    
    
    16.7
    
    
    
    1,093
    
    
    
    (9
    )U.S. government-sponsored entities (2)
    
    
    245
    
    
    
    (5
    )
    
    
    38,886
    
    
    
    (827
    )
    
    
    17.0
    
    
    
    39,131
    
    
    
    (832
    )Equity securities (3)
    
    
    3,975
    
    
    
    (6
    )
    
    
    7,445
    
    
    
    (56
    )
    
    
    15.7
    
    
    
    11,420
    
    
    
    (62
    )Corporate and other debt
Securities
    
    
    
    
    
    
    
    
    
    
    10,653
    
    
    
    (421
    )
    
    
    16.2
    
    
    
    10,653
    
    
    
    (421
    )Total available-for-sale
    
    $
    33,871
    
    
    $
    (540
    )
    
    $
    399,260
    
    
    $
    (27,460
    )
    
    
    16.7
    
    
    $
    433,131
    
    
    $
    (28,000
    )Securities held-to-maturity:Mortgage-backed securities:U.S. government-sponsored entities (1)
    
    $
    40,874
    
    
    $
    (597
    )
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    $
    40.874
    
    
    $
    (597
    )Total temporarily impaired
securities
    
    $
    74,745
    
    
    $
    (1,137
    )
    
    $
    399,260
    
    
    $
    (27,460
    )
    
    
    16.7
    
    
    $
    474,005
    
    
    $
    (28,597
    )




---

|(1) |  | Includes obligations of the Federal Home Loan Corporation (FHLMC) and
Federal National Mortgage Association (FNMA).
|--- |  | -------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Includes obligations of the Government National Mortgage Association.                                              
|   
|(3) |  | Includes issues from government-sponsored entities (FNMA and FHLMC),                                               









| |  | The unrealized loss for U.S. government-sponsored entities and
mortgage-backed securities relate primarily to debt securities
issued by FNMA and FHLMC; each security has a stated maturity
date. FNMA is rated Aa3, AA- and A+ by Moodys, S&P and Fitch,
respectively. FHLMC is rated Aa3 and AA- by Moodys and Fitch,
respectively. The obligations of U.S. government-sponsored
entities are notes with a weighted average maturity of
approximately 8 years and a weighted average rate of 4.12%;
these notes are all fixed rate obligations. The obligations of
the mortgage-backed securities are notes with a weighted
average maturity of approximately 28 years and a weighted
average rate of 5.50%.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The unrealized losses reported for corporate and other debt
securities relate to securities which were rated single A
minus or better by a nationally recognized rating agency.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 





F-15



---



##### Table of Contents



MIDWEST BANC HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                              |                                        |                                     |         |         |            |  |         |         |         | 
|----------------------------- | -------------------------------------- | ----------------------------------- | ------- | ------- | ---------- |  | ------- | ------- | ------- | 
|                              |                                        | Amortized                           |         |         |           
|                              |                                        | Cost                                |         |         | Fair Value | 
|                              |                                        |                                     |         |         |            | 
|                              |                                        | (In thousands)                      |        
|Securities available-for-sale |                                        |                                     |         |         |            |  |         |        
|                              | Due in one year or less                |                                     | $       | 912     |            |  | $       | 929     |        
|                              | Due after one year through five years  |                                     |         | 30,831  |            |  |         | 30,345  |        
|                              | Due after five years through ten years |                                     |         | 374,616 |            |  |         | 348,282 |        
|                              | Due after ten years                    |                                     |         | 4,134   |            |  |         | 3,898   |        
|                              |                                        |                                     |         |         |            | 
|                              |                                        |                                     | 410,493 |         |            |  | 383,454 |        
|                              | Mortgage-backed securities             |                                     |         | 51,016  |            |  |         | 50,250  |        
|                              |                                        |                                     |         |         |            | 
|                              |                                        | Total debt securities               |         |         | 461,509    |  |         |         | 433,704 | 
|                              | Equity securities                      |                                     |         | 114,331 |            |  |         | 114,507 |        
|                              |                                        |                                     |         |         |            | 
|                              |                                        | Total securities available-for-sale |         | $       | 575,840    |  |         | $       | 548,211 | 
|                              |                                        |                                     |         |         |            | 
|Securities held-to-maturity   |                                        |                                     |         |         |            |  |         |        
|                              | Due in one year or less                |                                     | $       | 4,386   |            |  | $       | 4,452   |        
|                              | Due after one year through five years  |                                     |         | 4,938   |            |  |         | 5,112   |        
|                              | Due after five years through ten years |                                     |         | 250     |            |  |         | 269     |        
|                              |                                        |                                     |         |         |            | 
|                              |                                        |                                     | 9,574   |         |            |  | 9,833   |        
|                              | Mortgage-backed securities             |                                     |         | 80,159  |            |  |         | 79,967  |        
|                              |                                        |                                     |         |         |            | 
|                              |                                        | Total securities held-to-maturity   |         | $       | 89,733     |  |         | $       | 89,800  | 
|                              |                                        |                                     |         |         |            | 



|                                              |  |                         |         |   |      |   |         |      |  |   |         |  
|--------------------------------------------- |  | ----------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                              |  | Year Ended December 31, |        
|                                              |  |                         |        
|                                              |  | 2004                    |         |   | 2003 |   |         | 2002 | 
|                                              |  |                         |         |   |      |   |         |      | 
|                                              |  | (In thousands)          |        
|Proceeds from sales                           |  | $                       | 707,488 |   |      | $ | 428,300 |      |  | $ | 319,952 |  
|Gross realized gains                          |  | $                       | 5,048   |   |      | $ | 7,082   |      |  | $ | 2,069   |  
|Gross realized losses                         |  |                         | (3,428  | ) |      |   | (1,189  | )    |  |   | (547    | )
|Hedge ineffectiveness                         |  |                         | (6,100  | ) |      |   | (553    | )    |  |   |        |  
|                                              |  |                         |         |   |      |   |         |      | 
|Net gains (losses) on securities transactions |  | $                       | (4,480  | ) |      | $ | 5,340   |      |  | $ | 1,522   |  
|                                              |  |                         |         |   |      |   |         |      | 





|         |                                    
|-------- | -----------------------------------
|Note 4  | Fair Value of Financial Instruments





F-16



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##### Table of Contents



MIDWEST BANC HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                      |                                                                                |                      |   |           |            |   |   |           |            |   |            |           |            |   |   |           |            |  
|--------------------- | ------------------------------------------------------------------------------ | -------------------- | - | --------- | ---------- | - | - | --------- | ---------- | - | ---------- | --------- | ---------- | - | - | --------- | ---------- | -
|                      |                                                                                | December 31,         |  
|                      |                                                                                |                      |  
|                      |                                                                                | 2004                 |   |           | 2003       |  
|                      |                                                                                |                      |   |           |            |  
|                      |                                                                                | Carrying             |   |           | Estimated  |   |   | Carrying  |            |   | Estimated  |          
|                      |                                                                                | Amount               |   |           | Fair Value |   |   | Amount    |            |   | Fair Value |          
|                      |                                                                                |                      |   |           |            |   |   |           |            |   |            |          
|                      |                                                                                | (In thousands)       |  
|Financial assets      |                                                                                |                      |   |           |            |   |   |           |            |   |            |           |            |   |   |          
|                      | Cash and cash equivalents                                                      |                      | $ | 243,431   |            |   | $ | 243,431   |            |   | $          | 196,157   |            |   | $ | 196,157   |           
|                      | Securities available-for-sale                                                  |                      |   | 548,211   |            |   |   | 548,211   |            |   |            | 796,140   |            |   |   | 796,140   |           
|                      | Securities held-to-maturity                                                    |                      |   | 89,733    |            |   |   | 89,800    |            |   |            | 56,074    |            |   |   | 57,239    |           
|                      | Loans, net of allowance for loan losses                                        |                      |   | 1,212,439 |            |   |   | 1,213,541 |            |   |            | 1,065,582 |            |   |   | 1,070,032 |           
|                      | Accrued interest receivable                                                    |                      |   | 10,074    |            |   |   | 10,074    |            |   |            | 12,053    |            |   |   | 12,053    |           
|                      | Due from broker                                                                |                      |   |          |            |   |   |          |            |   |            | 40,477    |            |   |   | 40,477    |           
|Financial liabilities |                                                                                |                      |   |           |            |   |   |           |            |   |            |           |            |   |   |          
|                      | Deposits                                                                       |                      |   |           |            |   |   |           |            |   |            |           |            |   |   |           |           
|                      |                                                                                | Non-interest-bearing |   |           | (176,995   | ) |   |           | (176,995   | ) |            |           | (160,668   | ) |   |           | (160,668   | )
|                      |                                                                                | Interest-bearing     |   |           | (1,505,426 | ) |   |           | (1,475,653 | ) |            |           | (1,425,743 | ) |   |           | (1,403,049 | )
|                      | Securities sold under agreements to repurchase and federal funds
    purchased |                      |   | (198,401  | )          |   |   | (196,939  | )          |   |            | (202,699  | )          |   |   | (205,444  | )         
|                      | FHLB advances                                                                  |                      |   | (133,628  | )          |   |   | (148,266  | )          |   |            | (253,461  | )          |   |   | (275,630  | )         
|                      | Notes payable                                                                  |                      |   |          |            |   |   |          |            |   |            | (2,000    | )          |   |   | (2,000    | )         
|                      | Junior subordinated debt owed to unconsolidated trusts                         |                      |   | (55,672   | )          |   |   | (55,070   | )          |   |            | (54,000   | )          |   |   | (54,075   | )         
|                      | Accrued interest payable                                                       |                      |   | (3,480    | )          |   |   | (3,480    | )          |   |            | (3,463    | )          |   |   | (3,463    | )         
|                      | Interest rate swaps                                                            |                      |   | (3,872    | )          |   |   | (3,872    | )          |   |            | (1,886    | )          |   |   | (1,886    | )         







F-17



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##### Table of Contents



MIDWEST BANC HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|         |      
|-------- | -----
|Note 5  | Loans



|                       |                    |                        |         |           |       |  |      |        |          |   |         |           |  |  |      |       |  
|---------------------- | ------------------ | ---------------------- | ------- | --------- | ----- |  | ---- | ------ | -------- | - | ------- | --------- |  |  | ---- | ----- | -
|                       |                    | December 31,           |        
|                       |                    |                        |        
|                       |                    | 2004                   |         |           | 2003  | 
|                       |                    |                        |         |           |       | 
|                       |                    |                        |         | Loan      |       |  |      |        | Loan     |  
|                       |                    |                        |         | Category  |       |  |      |        | Category |  
|                       |                    |                        |         | to Gross  |       |  |      |        | to Gross |  
|                       |                    | Amount                 |         |           | Loans |  |      | Amount |          |   | Loans   |          
|                       |                    |                        |         |           |       |  |      |        |          |   |         |          
|                       |                    | (Dollars in thousands) |        
|Commercial             |                    | $                      | 211,278 |           |       |  | 17.2 | %      |          | $ | 203,920 |           |  |  | 18.8 | %    
|Commercial real estate |                    |                        | 781,547 |           |       |  | 63.5 |        |          |   | 711,891 |           |  |  | 65.8 |      
|Agricultural           |                    |                        | 62,949  |           |       |  | 5.1  |        |          |   | 58,144  |           |  |  | 5.4  |      
|Consumer real estate   |                    |                        | 164,455 |           |       |  | 13.4 |        |          |   | 96,107  |           |  |  | 8.9  |      
|Consumer installment   |                    |                        | 10,665  |           |       |  | 0.9  |        |          |   | 12,124  |           |  |  | 1.1  |      
|                       |                    |                        |         |           |       |  |      |        |          |   |         |          
|                       | Total loans, gross |                        |         | 1,230,894 |       |  |      | 100.0  | %        |   |         | 1,082,186 |  |  |      | 100.0 | %
|Net deferred fees      |                    |                        | (494    | )         |       |  |      |        |          |   | (890    | )         |  |  |      |      
|                       |                    |                        |         |           |       |  |      |        |          |   |         |          
|                       | Total loans        |                        | $       | 1,230,400 |       |  |      |        |          |   | $       | 1,081,296 |  |  |      |       |  
|                       |                    |                        |         |           |       |  |      |        |          |   |         |          





|         |                          
|-------- | -------------------------
|Note 6  | Allowance for Loan Losses



|                                               |                        |                         |        |        |      |   |         |        |  |   |        |        | 
|---------------------------------------------- | ---------------------- | ----------------------- | ------ | ------ | ---- | - | ------- | ------ |  | - | ------ | ------ | 
|                                               |                        | Year Ended December 31, |       
|                                               |                        |                         |       
|                                               |                        | 2004                    |        |        | 2003 |   |         | 2002   | 
|                                               |                        |                         |        |        |      |   |         |        | 
|                                               |                        | (In thousands)          |       
|Balance at beginning of year                   |                        | $                       | 15,714 |        |      | $ | 20,754  |        |  | $ | 10,135 |       
|Balance from acquisition                       |                        |                         |       |        |      |   | 300     |        |  |   |       |       
|Adjustment for loan sale to related parties(1) |                        |                         |       |        |      |   | (6,685  | )      |  |   |       |       
|Provision for loan losses                      |                        |                         | 4,224  |        |      |   | 10,205  |        |  |   | 18,532 |       
|Loans charged off                              |                        |                         | (2,522 | )      |      |   | (10,005 | )      |  |   | (8,206 | )     
|Recoveries on loans previously charged off     |                        |                         | 545    |        |      |   | 1,145   |        |  |   | 293    |       
|                                               |                        |                         |        |        |      |   |         |        | 
|                                               | Balance at end of year |                         | $      | 17,961 |      |   | $       | 15,714 |  |   | $      | 20,754 | 
|                                               |                        |                         |        |        |      |   |         |        | 






|    |                                                                                                                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Adjustment made following the March 26, 2003 receipt of
    $13.3 million of proceeds relating to the sale of certain
    loans to a related party, of which $12.5 million was
    applied to outstanding principal, $750,000 to the letter of
    credit, and $67,000 applied to accrued interest income and late
    charges. See Note 28.

F-18



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##### Table of Contents



MIDWEST BANC HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                       |                      |                |        |        |      |   |        |        |  |   |        |        | 
|---------------------------------------------------------------------- | -------------------- | -------------- | ------ | ------ | ---- | - | ------ | ------ |  | - | ------ | ------ | 
|                                                                       |                      | December 31,   |       
|                                                                       |                      |                |       
|                                                                       |                      | 2004           |        |        | 2003 |   |        | 2002   | 
|                                                                       |                      |                |        |        |      |   |        |        | 
|                                                                       |                      | (In thousands) |       
|Impaired loans for which no allowance for loan losses is
    allocated |                      | $              | 16,164 |        |      | $ | 8,905  |        |  | $ | 146    |       
|Impaired loans with an allocation of the allowance for loan
    losses |                      |                | 20,392 |        |      |   | 21,774 |        |  |   | 29,998 |       
|                                                                       |                      |                |        |        |      |   |        |        | 
|                                                                       | Total impaired loans |                | $      | 36,556 |      |   | $      | 30,679 |  |   | $      | 30,144 | 
|                                                                       |                      |                |        |        |      |   |        |        | 
|Allowance for loan losses allocated to impaired loans                  |                      | $              | 6,656  |        |      | $ | 5,507  |        |  | $ | 14,286 |       
|                                                                       |                      |                |        |        |      |   |        |        | 

|                                                             |  |                         |        |  |      |   |        |      |  |   |        | 
|------------------------------------------------------------ |  | ----------------------- | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|                                                             |  | Year Ended December 31, |       
|                                                             |  |                         |       
|                                                             |  | 2004                    |        |  | 2003 |   |        | 2002 | 
|                                                             |  |                         |        |  |      |   |        |      | 
|                                                             |  | (In thousands)          |       
|Average impaired loans                                       |  | $                       | 39,901 |  |      | $ | 26,728 |      |  | $ | 13,677 | 
|Interest income recognized on impaired loans on a cash basis |  |                         | 2,898  |  |      |   | 2,141  |      |  |   | 207    | 





|                                             |  |                |       |  |      |   |        |      |  |   |        | 
|-------------------------------------------- |  | -------------- | ----- |  | ---- | - | ------ | ---- |  | - | ------ | 
|                                             |  | December 31,   |      
|                                             |  |                |      
|                                             |  | 2004           |       |  | 2003 |   |        | 2002 | 
|                                             |  |                |       |  |      |   |        |      | 
|                                             |  | (In thousands) |      
|Loans past due over 90 days still on accrual |  | $              | 29    |  |      | $ | 18     |      |  | $ | 2,514  | 
|Nonaccrual loans                             |  |                | 9,865 |  |      |   | 15,665 |      |  |   | 29,035 | 
|                                             |  |                |       |  |      |   |        |      | 
|Total nonperforming loans                    |  | $              | 9,894 |  |      | $ | 15,683 |      |  | $ | 31,549 | 
|                                             |  |                |       |  |      |   |        |      | 





|         |                  
|-------- | -----------------
|Note 7  | Other Real Estate







F-19



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##### Table of Contents



MIDWEST BANC HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                      |  |                |        |   |      |   |        |  
|----------------------------------------------------- |  | -------------- | ------ | - | ---- | - | ------ | -
|                                                      |  | December 31,   |       
|                                                      |  |                |       
|                                                      |  | 2004           |        |   | 2003 |  
|                                                      |  |                |        |   |      |  
|                                                      |  | (In thousands) |       
|Beginning balance                                     |  | $              | 6,942  |   |      | $ | 533    |  
|Transfer of net realizable value to other real estate |  |                | 874    |   |      |   | 9,881  |  
|Funding towards project                               |  |                | 1,542  |   |      |   |       |  
|Sales proceeds, net                                   |  |                | (1,134 | ) |      |   | (3,029 | )
|Provision for other real estate                       |  |                |       |   |      |   | (443   | )
|                                                      |  |                |        |   |      |  
|Total other real estate                               |  | $              | 8,224  |   |      | $ | 6,942  |  
|                                                      |  |                |        |   |      |  



|         |                       
|-------- | ----------------------
|Note 8  | Premises and Equipment



|                          |                             |                |         |        |      |   |         |        | 
|------------------------- | --------------------------- | -------------- | ------- | ------ | ---- | - | ------- | ------ | 
|                          |                             | December 31,   |        
|                          |                             |                |        
|                          |                             | 2004           |         |        | 2003 |  
|                          |                             |                |         |        |      |  
|                          |                             | (In thousands) |        
|Land and improvements     |                             | $              | 10,314  |        |      | $ | 10,519  |       
|Building and improvements |                             |                | 28,671  |        |      |   | 27,236  |       
|Furniture and equipment   |                             |                | 18,582  |        |      |   | 17,549  |       
|                          |                             |                |         |        |      |  
|                          | Total cost                  |                |         | 57,568 |      |   |         | 55,304 | 
|Accumulated depreciation  |                             |                | (30,047 | )      |      |   | (27,928 | )     
|                          |                             |                |         |        |      |  
|                          | Premises and equipment, net |                | $       | 27,521 |      |   | $       | 27,376 | 
|                          |                             |                |         |        |      |  



|         |                         
|-------- | ------------------------
|Note 9  | Goodwill and Intangibles

Goodwill and
Other Intangible Assets.




|                                           |  |                   |       |  |                   |   |      |                |  |   |              |  |  |   |      |  
|------------------------------------------ |  | ----------------- | ----- |  | ----------------- | - | ---- | -------------- |  | - | ------------ |  |  | - | ---- | -
|                                           |  | December 31, 2004 |       |  | December 31, 2003 |  
|                                           |  |                   |       |  |                   |  
|                                           |  | Gross Carrying    |       |  | Accumulated       |   |      | Gross Carrying |  |   | Accumulated  | 
|                                           |  | Amount            |       |  | Amortization      |   |      | Amount         |  |   | Amortization | 
|                                           |  |                   |       |  |                   |   |      |                |  |   |              | 
|Amortized intangible assets:               |  |                   |       |  |                   |   |      |                |  |   |              |  |  |   |      |  
|Core deposit and other intangibles         |  | $                 | 3,130 |  |                   | $ | (913 | )              |  | $ | 3,341        |  |  | $ | (551 | )
|Estimated intangible amortization expense: |  |                   |       |  |                   |   |      |                |  |   |              |  |  |   |      |  
|For the year ending December 31, 2005      |  |                   | 429   |  |                   |   |      |                |  |   |              |  |  |   |      |  
|For the year ending December 31, 2006      |  |                   | 373   |  |                   |   |      |                |  |   |              |  |  |   |      |  
|For the year ending December 31, 2007      |  |                   | 354   |  |                   |   |      |                |  |   |              |  |  |   |      |  
|For the year ending December 31, 2008      |  |                   | 354   |  |                   |   |      |                |  |   |              |  |  |   |      |  
|For the year ending December 31, 2009      |  |                   | 420   |  |                   |   |      |                |  |   |              |  |  |   |      |  

F-20



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##### Table of Contents



MIDWEST BANC HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                  |  |                   |       |              |             |   |       |  
|--------------------------------- |  | ----------------- | ----- | ------------ | ----------- | - | ----- | -
|                                  |  | December 31, 2004 |      
|                                  |  |                   |      
|                                  |  |                   |       | Core Deposit |            
|                                  |  |                   |       | and Other    |            
|                                  |  | Goodwill          |       |              | Intangibles |  
|                                  |  |                   |       |              |             |  
|Balance at beginning of period    |  | $                 | 4,360 |              |             | $ | 2,790 |  
|Amortization expense              |  |                   |      |              |             |   | (362  | )
|Goodwill and intangibles acquired |  |                   |      |              |             |   | (211  | )
|                                  |  |                   |       |              |             |  
|Balance at end of period          |  | $                 | 4,360 |              |             | $ | 2,217 |  
|                                  |  |                   |       |              |             |  

|                                  |  |                   |       |              |             |   |       |  
|--------------------------------- |  | ----------------- | ----- | ------------ | ----------- | - | ----- | -
|                                  |  | December 31, 2003 |      
|                                  |  |                   |      
|                                  |  |                   |       | Core Deposit |            
|                                  |  |                   |       | and Other    |            
|                                  |  | Goodwill          |       |              | Intangibles |  
|                                  |  |                   |       |              |             |  
|Balance at beginning of year      |  | $                 | 4,360 |              |             | $ | 244   |  
|Amortization expense              |  |                   |      |              |             |   | (495  | )
|Goodwill and intangibles acquired |  |                   |      |              |             |   | 3,041 |  
|                                  |  |                   |       |              |             |  
|Balance at end of year            |  | $                 | 4,360 |              |             | $ | 2,790 |  
|                                  |  |                   |       |              |             |  



|          |             
|--------- | ------------
|Note 10  | Income Taxes



|         |                                  |                         |        |        |      |  |     |       |  |  |        |       | 
|-------- | -------------------------------- | ----------------------- | ------ | ------ | ---- |  | --- | ----- |  |  | ------ | ----- | 
|         |                                  | Year Ended December 31, |       
|         |                                  |                         |       
|         |                                  | 2004                    |        |        | 2003 |  |     | 2002  | 
|         |                                  |                         |        |        |      |  |     |       | 
|         |                                  | (In thousands)          |       
|Current  |                                  |                         |        |        |      |  |     |       |  |  |        |      
|         | Federal                          |                         | $      | 2,991  |      |  | $   | 8,095 |  |  | $      | 7,761 | 
|         | State                            |                         |        | (638   | )    |  |     | 110   |  |  |        | 987   | 
|Deferred |                                  |                         | (6,528 | )      |      |  | 682 |       |  |  | (4,087 | )    
|         |                                  |                         |        |        |      |  |     |       | 
|         | Total provision for income taxes |                         | $      | (4,175 | )    |  | $   | 8,887 |  |  | $      | 4,661 | 
|         |                                  |                         |        |        |      |  |     |       | 

F-21



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##### Table of Contents



MIDWEST BANC HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                |                                  |                         |        |        |      |   |        |       |  |   |        |       | 
|--------------------------------------------------------------- | -------------------------------- | ----------------------- | ------ | ------ | ---- | - | ------ | ----- |  | - | ------ | ----- | 
|                                                                |                                  | Year Ended December 31, |       
|                                                                |                                  |                         |       
|                                                                |                                  | 2004                    |        |        | 2003 |   |        | 2002  | 
|                                                                |                                  |                         |        |        |      |   |        |       | 
|                                                                |                                  | (In thousands)          |       
|Income taxes computed at the statutory rate                     |                                  | $                       | (630   | )      |      | $ | 11,084 |       |  | $ | 7,339  |      
|Decrease in state income taxes due to Illinois audit settlement |                                  |                         |       |        |      |   |       |       |  |   | (821   | )    
|Tax-exempt interest income on securities and loans              |                                  |                         | (517   | )      |      |   | (1,184 | )     |  |   | (1,021 | )    
|General business credits                                        |                                  |                         | (120   | )      |      |   |       |       |  |   |       |      
|State income taxes, net of federal tax benefit                  |                                  |                         | (1,315 | )      |      |   | 506    |       |  |   | 378    |      
|Cash surrender value increase, net of premiums                  |                                  |                         | (553   | )      |      |   | (336   | )     |  |   | (376   | )    
|Dividends received deduction                                    |                                  |                         | (1,212 | )      |      |   | (1,091 | )     |  |   | (818   | )    
|Other                                                           |                                  |                         | 172    |        |      |   | (92    | )     |  |   | (20    | )    
|                                                                |                                  |                         |        |        |      |   |        |       | 
|                                                                | Total provision for income taxes |                         | $      | (4,175 | )    |   | $      | 8,887 |  |   | $      | 4,661 | 
|                                                                |                                  |                         |        |        |      |   |        |       | 



|                               |                                                  |                                      |                        |        |        |        |   |        |        |        | 
|------------------------------ | ------------------------------------------------ | ------------------------------------ | ---------------------- | ------ | ------ | ------ | - | ------ | ------ | ------ | 
|                               |                                                  | December 31,                         |                       
|                               |                                                  |                                      |                       
|                               |                                                  | 2004                                 |                        |        | 2003   |       
|                               |                                                  |                                      |                        |        |        |       
|                               |                                                  | (In thousands)                       |                       
|Gross deferred tax assets      |                                                  |                                      |                        |        |        |        |   |       
|                               | Unrealized loss on securities available-for-sale |                                      | $                      | 10,960 |        |        | $ | 10,608 |       
|                               | Allowance for loan losses                        |                                      |                        | 7,125  |        |        |   | 6,234  |       
|                               | Amortizable assets                               |                                      |                        |       |        |        |   | 117    |       
|                               | Deferred compensation                            |                                      |                        | 1,124  |        |        |   | 463    |       
|                               | Net operating loss carryforward                  |                                      |                        | 667    |        |        |   | 1,675  |       
|                               | Income from partnerships                         |                                      |                        | 117    |        |        |   | 261    |       
|                               | Deferred tax credits                             |                                      |                        | 430    |        |        |   |       |       
|                               | Impairment loss on equity securities             |                                      |                        | 4,006  |        |        |   |       |       
|                               | Hedge ineffectiveness                            |                                      |                        | 2,639  |        |        |   |       |       
|                               |                                                  |                                      |                        |        |        |       
|                               |                                                  | Total gross deferred tax assets      |                        |        | 27,068 |        |   |        | 19,358 |       
|                               |                                                  |                                      |                        |        |        |       
|Gross deferred tax liabilities |                                                  |                                      |                        |        |        |        |   |       
|                               | Depreciation                                     |                                      |                        | (1,773 | )      |        |   | (2,151 | )     
|                               | FHLB stock dividends                             |                                      |                        | (2,121 | )      |        |   | (1,719 | )     
|                               | Amortizable liabilities                          |                                      |                        | (726   | )      |        |   |       |       
|                               | Other                                            |                                      |                        | (82    | )      |        |   | (2     | )     
|                               |                                                  |                                      |                        |        |        |       
|                               |                                                  | Total gross deferred tax liabilities |                        |        | (4,702 | )      |   |        | (3,872 | )     
|                               |                                                  |                                      |                        |        |        |       
|                               |                                                  |                                      | Net deferred tax asset |        | $      | 22,366 |   |        | $      | 15,486 | 
|                               |                                                  |                                      |                        |        |        |       



F-22



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##### Table of Contents



MIDWEST BANC HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|          |                                               
|--------- | ----------------------------------------------
|Note 11  | Securities Sold Under Agreements to Repurchase



|                                                  |  |                |         |   |      |   |         |      |  |   |         |  
|------------------------------------------------- |  | -------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                  |  | 2004           |         |   | 2003 |   |         | 2002 | 
|                                                  |  |                |         |   |      |   |         |      | 
|                                                  |  | (In thousands) |        
|Outstanding at end of year                        |  | $              | 198,401 |   |      | $ | 202,699 |      |  | $ | 185,057 |  
|Weighted average interest at year end             |  |                | 2.59    | % |      |   | 2.89    | %    |  |   | 2.95    | %
|Maximum amount outstanding as of any month end    |  | $              | 335,764 |   |      | $ | 243,909 |      |  | $ | 204,830 |  
|Average amount outstanding                        |  |                | 212,644 |   |      |   | 211,825 |      |  |   | 155,635 |  
|Approximate weighted average rate during the year |  |                | 2.59    | % |      |   | 2.81    | %    |  |   | 2.70    | %



|                   |  |                |         |  |                  |                      |      |           |  |   |            |  |  |   |         | 
|------------------ |  | -------------- | ------- |  | ---------------- | -------------------- | ---- | --------- |  | - | ---------- |  |  | - | ------- | 
|                   |  |                |         |  |                  | Collateral Mortgage- |     
|                   |  |                |         |  |                  | Backed and Equity    |     
|                   |  |                |         |  |                  | Securities           |     
|                   |  |                |         |  |                  |                      |     
|                   |  | Repurchase     |         |  | Weighted Average |                      |      | Amortized |  |   |           
|Original Term      |  | Liability      |         |  | Interest Rate    |                      |      | Cost      |  |   | Fair Value | 
|                   |  |                |         |  |                  |                      |      |           |  |   |            | 
|                   |  | (In thousands) |        
|Up to 30 days      |  | $              | 9,208   |  |                  |                      | 2.21 | %         |  | $ | 14,970     |  |  | $ | 11,906  | 
|30 to 90 days      |  |                | 893     |  |                  |                      | 2.10 |           |  |   | 1,124      |  |  |   | 1,127   | 
|180 days to 1 year |  |                | 2,509   |  |                  |                      | 2.47 |           |  |   | 2,927      |  |  |   | 2,877   | 
|2 to 3 years       |  |                | 19,500  |  |                  |                      | 2.16 |           |  |   | 28,713     |  |  |   | 26,421  | 
|Over 3 years       |  |                | 166,291 |  |                  |                      | 2.67 |           |  |   | 188,091    |  |  |   | 177,380 | 
|                   |  |                |         |  |                  |                      |      |           |  |   |            | 
|                   |  | $              | 198,401 |  |                  |                      | 2.59 | %         |  | $ | 235,825    |  |  | $ | 219,711 | 
|                   |  |                |         |  |                  |                      |      |           |  |   |            | 

F-23



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##### Table of Contents



MIDWEST BANC HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|          |                       
|--------- | ----------------------
|Note 12  | Advances from the FHLB



|                                             |      |                  |  |      |        |   |                  |         |         |  |        |      |      |   |   |         |         | 
|-------------------------------------------- | ---- | ---------------- |  | ---- | ------ | - | ---------------- | ------- | ------- |  | ------ | ---- | ---- | - | - | ------- | ------- | 
|                                             |      | December 31,     | 
|                                             |      |                  | 
|                                             |      | 2004             |  |      | 2003   |  
|                                             |      |                  |  |      |        |  
|                                             |      | Weighted Average |  |      |        |   | Weighted Average |         |         | 
|                                             |      | Rate             |  |      | Amount |   |                  | Rate    |         |  | Amount |     
|                                             |      |                  |  |      |        |   |                  |         |         |  |        |     
|                                             |      | (In thousands)   | 
|Advances from the Federal Home Loan Bank due |      |                  |  |      |        |   |                  |         |         |  |        |      |      |   |   |        
|                                             | 2004 |                  |  |     | %      |   | $                |        |         |  |        | 5.63 | %    |   | $ | 4,500   |        
|                                             | 2005 |                  |  |     |        |   |                  |        |         |  |        | 6.20 |      |   |   | 41,010  |        
|                                             | 2006 |                  |  |     |        |   |                  |        |         |  |        | 1.21 |      |   |   | 2,000   |        
|                                             | 2008 |                  |  |     |        |   |                  |        |         |  |        | 5.09 |      |   |   | 69,338  |        
|                                             | 2010 |                  |  | 4.55 |        |   |                  | 133,628 |         |  |        | 3.28 |      |   |   | 135,613 |        
|                                             | 2011 |                  |  |     |        |   |                  |        |         |  |        | 4.08 |      |   |   | 1,000   |        
|                                             |      |                  |  |      |        |   |                  |         |         |  |        |     
|                                             |      | Total            |  |      | 4.55   | % |                  | $       | 133,628 |  |        |      | 4.26 | % |   | $       | 253,461 | 
|                                             |      |                  |  |      |        |   |                  |         |         |  |        |     





|          |              
|--------- | -------------
|Note 13  | Notes Payable



|                                                                                                                                                                                                                                                                                                                               |  |                |   |      |  |   |       | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------- | - | ---- |  | - | ----- | 
|                                                                                                                                                                                                                                                                                                                               |  | December 31,   |  
|                                                                                                                                                                                                                                                                                                                               |  |                |  
|                                                                                                                                                                                                                                                                                                                               |  | 2004           |   | 2003 | 
|                                                                                                                                                                                                                                                                                                                               |  |                |   |      | 
|                                                                                                                                                                                                                                                                                                                               |  | (In thousands) |  
|Revolving line of credit ($25,000,000) maturing on April 7,
    2005, interest payments due quarterly at 90-day LIBOR plus
    150 basis points or prime rate; secured by all common stock
    of the subsidiary banks                                                                                                         |  | $              |  |      |  | $ |      | 
|Revolving line of credit ($10,000,000) maturing on May 1,
    2004, interest payments due quarterly at the 30-, 60-, 90-, or
    180-day LIBOR plus 120 basis points or prime rate less
    25 basis points (weighted average rate of 2.11% at
    December 31, 2003); secured by all common stock of the
    subsidiary banks |  | $              |  |      |  | $ | 2,000 | 





|          |                                                       
|--------- | ------------------------------------------------------
|Note 14  | Junior Subordinated Debt Owed to Unconsolidated Trusts



F-24



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##### Table of Contents



MIDWEST BANC HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|                       |  |            |                   |  |        |   |            |           |  |  |                 |   |  |                 |                   |  |  |  |                   | 
|---------------------- |  | ---------- | ----------------- |  | ------ | - | ---------- | --------- |  |  | --------------- | - |  | --------------- | ----------------- |  |  |  | ----------------- | 
|                       |  |            |                   |  |        |   |            | Mandatory |  |  | Optional        |  
|Issuer                 |  | Issue Date |                   |  | Amount |   |            | Rate      |  |  | Redemption Date |   |  | Redemption Date |                  
|                       |  |            |                   |  |        |   |            |           |  |  |                 |   |  |                 |                  
|MBHI Capital Trust II  |  |            | October 29, 2002  |  |        | $ | 15,000,000 |           |  |  | LIBOR+3.45      | % |  |                 | November 7, 2032  |  |  |  | November 7, 2007  | 
|MBHI Capital Trust III |  |            | December 19, 2003 |  |        | $ | 9,000,000  |           |  |  | LIBOR+3.00      | % |  |                 | December 30, 2033 |  |  |  | December 30, 2008 | 
|MBHI Capital Trust IV  |  |            | December 19, 2003 |  |        | $ | 10,000,000 |           |  |  | LIBOR+2.85      | % |  |                 | January 23, 2034  |  |  |  | January 23, 2008  | 







|          |                       
|--------- | ----------------------
|Note 15  | Employee Benefit Plans



F-25



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##### Table of Contents



MIDWEST BANC HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










|          |              
|--------- | -------------
|Note 16  | Time Deposits





|           |  |                |         | 
|---------- |  | -------------- | ------- | 
|           |  | (In thousands) |        
|2005       |  | $              | 650,723 | 
|2006       |  |                | 185,877 | 
|2007       |  |                | 42,710  | 
|2008       |  |                | 3,313   | 
|2009       |  |                | 2,478   | 
|Thereafter |  |                |        | 
|           |  |                |        
|           |  | $              | 885,101 | 
|           |  |                |        



|          |                           
|--------- | --------------------------
|Note 17  | Related Party Transactions



|                             |                              |                |         |        | 
|---------------------------- | ---------------------------- | -------------- | ------- | ------ | 
|                             |                              | (In thousands) |        
|Balance at December 31, 2003 |                              | $              | 26,728  |       
|New loans                    |                              |                | 13,109  |       
|Repayments                   |                              |                | (10,441 | )     
|                             |                              |                |        
|                             | Balance at December 31, 2004 |                | $       | 29,396 | 
|                             |                              |                |        

F-26



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##### Table of Contents



MIDWEST BANC HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|          |                     
|--------- | --------------------
|Note 18  | Capital Requirements







|                                         |         |        |   |             |                   |                  |            |             |   |  |       |         |  |        |  |     |       |  |   |         |  |  |  |      |  
|---------------------------------------- | ------- | ------ | - | ----------- | ----------------- | ---------------- | ---------- | ----------- | - |  | ----- | ------- |  | ------ |  | --- | ----- |  | - | ------- |  |  |  | ---- | -
|                                         |         |        |   |             |                   | Minimum Required |           
|                                         |         |        |   |             |                   |                  |           
|                                         |         |        |   | For Capital |                   |                  | To Be Well |            
|                                         |         | Actual |   |             | Adequacy Purposes |                  |            | Capitalized |  
|                                         |         |        |   |             |                   |                  |            |             |  
|                                         |         | Amount |   |             | Ratio             |                  |            | Amount      |   |  | Ratio |         |  | Amount |  |     | Ratio | 
|                                         |         |        |   |             |                   |                  |            |             |   |  |       |         |  |        |  |     |       | 
|                                         |         |        |   |             |                   | (In thousands)   |            |             |   |  |      
|As of December 31, 2004                  |         |        |   |             |                   |                  |            |             |   |  |       |         |  |        |  |     |       |  |   |         |  |  |  |     
|Total Capital (to risk-weighted assets)  |         |        |   |             |                   |                  |            |             |   |  |       |         |  |        |  |     |       |  |   |         |  |  |  |     
|                                         | Company |        | $ | 219,343     |                   |                  |            | 14.7        | % |  | $     | 119,758 |  |        |  | 8.0 | %     |  |   | n/a     |  |  |  | n/a  |  
|                                         | MBTC    |        |   | 189,276     |                   |                  |            | 14.3        |   |  |       | 105,724 |  |        |  | 8.0 |       |  | $ | 132,155 |  |  |  | 10.0 | %
|                                         | MBWI    |        |   | 23,685      |                   |                  |            | 13.7        |   |  |       | 13,822  |  |        |  | 8.0 |       |  |   | 17,278  |  |  |  | 10.0 |  
|Tier 1 Capital (to risk-weighted assets) |         |        |   |             |                   |                  |            |             |   |  |       |         |  |        |  |     |       |  |   |         |  |  |  |     
|                                         | Company |        |   | 198,597     |                   |                  |            | 13.3        |   |  |       | 59,879  |  |        |  | 4.0 |       |  |   | n/a     |  |  |  | n/a  |  
|                                         | MBTC    |        |   | 172,985     |                   |                  |            | 13.1        |   |  |       | 52,862  |  |        |  | 4.0 |       |  |   | 79,293  |  |  |  | 6.0  |  
|                                         | MBWI    |        |   | 21,936      |                   |                  |            | 12.7        |   |  |       | 6,911   |  |        |  | 4.0 |       |  |   | 10,367  |  |  |  | 6.0  |  
|Tier 1 Capital (to average assets)       |         |        |   |             |                   |                  |            |             |   |  |       |         |  |        |  |     |       |  |   |         |  |  |  |     
|                                         | Company |        |   | 198,597     |                   |                  |            | 8.5         |   |  |       | 93,225  |  |        |  | 4.0 |       |  |   | n/a     |  |  |  | n/a  |  
|                                         | MBTC    |        |   | 172,985     |                   |                  |            | 8.5         |   |  |       | 80,991  |  |        |  | 4.0 |       |  |   | 101,239 |  |  |  | 5.0  |  
|                                         | MBWI    |        |   | 21,936      |                   |                  |            | 7.4         |   |  |       | 11,816  |  |        |  | 4.0 |       |  |   | 14,770  |  |  |  | 5.0  |  

F-27



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##### Table of Contents



MIDWEST BANC HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                                         |         |        |   |             |                   |                  |            |             |   |  |       |         |  |        |  |     |       |  |   |         |  |  |  |      |  
|---------------------------------------- | ------- | ------ | - | ----------- | ----------------- | ---------------- | ---------- | ----------- | - |  | ----- | ------- |  | ------ |  | --- | ----- |  | - | ------- |  |  |  | ---- | -
|                                         |         |        |   |             |                   | Minimum Required |           
|                                         |         |        |   |             |                   |                  |           
|                                         |         |        |   | For Capital |                   |                  | To Be Well |            
|                                         |         | Actual |   |             | Adequacy Purposes |                  |            | Capitalized |  
|                                         |         |        |   |             |                   |                  |            |             |  
|                                         |         | Amount |   |             | Ratio             |                  |            | Amount      |   |  | Ratio |         |  | Amount |  |     | Ratio | 
|                                         |         |        |   |             |                   |                  |            |             |   |  |       |         |  |        |  |     |       | 
|                                         |         |        |   |             |                   | (In thousands)   |            |             |   |  |      
|As of December 31, 2003                  |         |        |   |             |                   |                  |            |             |   |  |       |         |  |        |  |     |       |  |   |         |  |  |  |     
|Total Capital (to risk-weighted assets)  |         |        |   |             |                   |                  |            |             |   |  |       |         |  |        |  |     |       |  |   |         |  |  |  |     
|                                         | Company |        | $ | 216,819     |                   |                  |            | 14.7        | % |  | $     | 117,647 |  |        |  | 8.0 | %     |  |   | n/a     |  |  |  | n/a  |  
|                                         | MBTC    |        |   | 180,973     |                   |                  |            | 14.0        |   |  |       | 103,635 |  |        |  | 8.0 |       |  | $ | 129,544 |  |  |  | 10.0 | %
|                                         | MBWI    |        |   | 23,129      |                   |                  |            | 13.2        |   |  |       | 14,065  |  |        |  | 8.0 |       |  |   | 17,581  |  |  |  | 10.0 |  
|Tier 1 Capital (to risk-weighted assets) |         |        |   |             |                   |                  |            |             |   |  |       |         |  |        |  |     |       |  |   |         |  |  |  |     
|                                         | Company |        |   | 201,105     |                   |                  |            | 13.7        |   |  |       | 58,823  |  |        |  | 4.0 |       |  |   | n/a     |  |  |  | n/a  |  
|                                         | MBTC    |        |   | 166,514     |                   |                  |            | 12.9        |   |  |       | 51,818  |  |        |  | 4.0 |       |  |   | 77,726  |  |  |  | 6.0  |  
|                                         | MBWI    |        |   | 21,874      |                   |                  |            | 12.4        |   |  |       | 7,033   |  |        |  | 4.0 |       |  |   | 10,549  |  |  |  | 6.0  |  
|Tier 1 Capital (to average assets)       |         |        |   |             |                   |                  |            |             |   |  |       |         |  |        |  |     |       |  |   |         |  |  |  |     
|                                         | Company |        |   | 201,105     |                   |                  |            | 8.9         |   |  |       | 89,967  |  |        |  | 4.0 |       |  |   | n/a     |  |  |  | n/a  |  
|                                         | MBTC    |        |   | 166,514     |                   |                  |            | 8.5         |   |  |       | 78,071  |  |        |  | 4.0 |       |  |   | 97,589  |  |  |  | 5.0  |  
|                                         | MBWI    |        |   | 21,874      |                   |                  |            | 7.7         |   |  |       | 11,391  |  |        |  | 4.0 |       |  |   | 14,239  |  |  |  | 5.0  |  

Note 19  Off-Balance-Sheet Risk and
Concentrations of Credit Risk




|                             |                        |                                            |         |         |           |   |        |           |  |   |         |       |  |       |        |        |  |   |         |         | 
|---------------------------- | ---------------------- | ------------------------------------------ | ------- | ------- | --------- | - | ------ | --------- |  | - | ------- | ----- |  | ----- | ------ | ------ |  | - | ------- | ------- | 
|                             |                        | Amount of Commitment Expiration Per Period |        
|                             |                        |                                            |        
|                             |                        | Within                                     |         |         |           |   | After  |           |  |  
|                             |                        | 1 Year                                     |         |         | 1-3 Years |   |        | 4-5 Years |  |   | 5 Years |       |  | Total |       
|                             |                        |                                            |         |         |           |   |        |           |  |   |         |       |  |       |       
|                             |                        | (In thousands)                             |        
|Lines of Credit:             |                        |                                            |         |         |           |   |        |           |  |   |         |       |  |       |        |        |  |   |         |        
|                             | Commercial real estate |                                            | $       | 115,817 |           |   | $      | 32,755    |  |   | $       | 544   |  |       | $      | 1,881  |  |   | $       | 150,997 | 
|                             | Consumer real estate   |                                            |         | 16,491  |           |   |        | 2,474     |  |   |         | 9,367 |  |       |        | 27,766 |  |   |         | 56,098  | 
|                             | Consumer               |                                            |         |        |           |   |        |          |  |   |         |      |  |       |        | 3,427  |  |   |         | 3,427   | 
|                             | Commercial             |                                            |         | 94,540  |           |   |        | 2,639     |  |   |         | 454   |  |       |        | 1,261  |  |   |         | 98,894  | 
|Letters of credit            |                        |                                            | 32,452  |         |           |   | 660    |           |  |   | 3,997   |       |  |       |       |        |  |   | 37,109  |        
|Commitments to extend credit |                        |                                            | 146,270 |         |           |   |       |           |  |   |        |       |  |       |       |        |  |   | 146,270 |        
|                             |                        |                                            |         |         |           |   |        |           |  |   |         |       |  |       |       
|Total commercial commitments |                        | $                                          | 405,570 |         |           | $ | 38,528 |           |  | $ | 14,362  |       |  | $     | 34,335 |        |  | $ | 492,795 |        
|                             |                        |                                            |         |         |           |   |        |           |  |   |         |       |  |       |       





F-28



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##### Table of Contents



MIDWEST BANC HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Note 20  Stock Compensation and Restricted
Stock Awards






|                                 |  |           |           |                  |                |   |       | 
|-------------------------------- |  | --------- | --------- | ---------------- | -------------- | - | ----- | 
|                                 |  |           |           | Weighted Average |               
|                                 |  | Number of |           |                  | Exercise Price |  
|                                 |  | Options   |           |                  | Per Share      |  
|                                 |  |           |           |                  |                |  
|Outstanding at January 1, 2002   |  |           | 1,013,292 |                  |                | $ | 9.77  | 
|Granted during 2002              |  |           | 235,500   |                  |                |   | 14.90 | 
|Exercised during 2002            |  |           | (137,717  | )                |                |   | 9.40  | 
|Forfeited during 2002            |  |           | (11,278   | )                |                |   | 10.76 | 
|                                 |  |           |           |                  |                |  
|Outstanding at December 31, 2002 |  |           | 1,099,797 |                  |                |   | 10.90 | 
|Granted during 2003              |  |           | 103,000   |                  |                |   | 18.34 | 
|Exercised during 2003            |  |           | (120,251  | )                |                |   | 10.25 | 
|Forfeited during 2003            |  |           | (6,001    | )                |                |   | 13.42 | 
|                                 |  |           |           |                  |                |  
|Outstanding at December 31, 2003 |  |           | 1,076,545 |                  |                |   | 11.67 | 
|Granted during 2004              |  |           | 117,500   |                  |                |   | 22.03 | 
|Exercised during 2004            |  |           | (70,521   | )                |                |   | 9.37  | 
|Forfeited during 2004            |  |           | (10,938   | )                |                |   | 16.78 | 
|                                 |  |           |           |                  |                |  
|Outstanding at December 31, 2004 |  |           | 1,112,586 |                  |                | $ | 12.78 | 
|                                 |  |           |           |                  |                |  



|     |  |           |         |                  |                |   |       | 
|---- |  | --------- | ------- | ---------------- | -------------- | - | ----- | 
|     |  |           |         | Weighted Average |               
|     |  | Number of |         |                  | Exercise Price |  
|     |  | Options   |         |                  | Per Share      |  
|     |  |           |         |                  |                |  
|2002 |  |           | 539,981 |                  |                | $ | 9.89  | 
|2003 |  |           | 584,670 |                  |                |   | 10.30 | 
|2004 |  |           | 805,836 |                  |                |   | 10.96 | 

F-29



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##### Table of Contents



MIDWEST BANC HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                        |  |             |           |                  |                  |  |       |        |                  |  |                |  |  |   |       | 
|----------------------- |  | ----------- | --------- | ---------------- | ---------------- |  | ----- | ------ | ---------------- |  | -------------- |  |  | - | ----- | 
|                        |  | Outstanding |           |                  |                 
|                        |  |             |           |                  | Exercisable      | 
|                        |  |             |           | Weighted Average |                  |  |       |       
|                        |  |             |           | Remaining        |                  |  |       |        | Weighted Average | 
|Range of Exercise Price |  | Number      |           |                  | Contractual Life |  |       | Number |                  |  | Exercise Price | 
|                        |  |             |           |                  |                  |  |       |        |                  |  |                | 
|$5.42-8.50              |  |             | 50,000    |                  |                  |  | 2.78  |        |                  |  | 50,000         |  |  | $ | 8.01  | 
|$8.83-10.59             |  |             | 487,774   |                  |                  |  | 5.57  |        |                  |  | 450,024        |  |  |   | 9.56  | 
|$10.75-14.90            |  |             | 362,062   |                  |                  |  | 10.35 |        |                  |  | 282,562        |  |  |   | 13.09 | 
|$18.34-22.03            |  |             | 212,750   |                  |                  |  | 9.00  |        |                  |  | 23,250         |  |  |   | 18.34 | 
|                        |  |             |           |                  |                  |  |       |        |                  |  |                | 
|Outstanding at year end |  |             | 1,112,586 |                  |                  |  | 6.18  |        |                  |  | 805,836        |  |  | $ | 10.96 | 
|                        |  |             |           |                  |                  |  |       |        |                  |  |                | 



F-30



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##### Table of Contents



MIDWEST BANC HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|          |                       
|--------- | ----------------------
|Note 21  | Derivative Instruments





|                                      |  |                |            |   |      |   |            |  
|------------------------------------- |  | -------------- | ---------- | - | ---- | - | ---------- | -
|                                      |  | 2004           |            |   | 2003 |  
|                                      |  |                |            |   |      |  
|                                      |  | (In thousands) |           
|Notional amounts                      |  | $              | 137,500    |   |      | $ | 137,500    |  
|Weighted average fixed rates received |  |                | 5.46       | % |      |   | 5.46       | %
|Weighted average variable rates paid  |  |                | 4.45       | % |      |   | 3.34       | %
|Weighted average maturity             |  |                | 5.60 years |   |      |   | 6.61 years |  
|Fair value                            |  | $              | (3,872     | ) |      | $ | (1,886     | )







F-31



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##### Table of Contents



MIDWEST BANC HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                              |  |                |        |   |      |   |       |      |  |   |       | 
|--------------------------------------------- |  | -------------- | ------ | - | ---- | - | ----- | ---- |  | - | ----- | 
|                                              |  | December 31,   |       
|                                              |  |                |       
|                                              |  | 2004           |        |   | 2003 |   |       | 2002 | 
|                                              |  |                |        |   |      |   |       |      | 
|                                              |  | (In thousands) |       
|Net gains on securities transactions          |  | $              | 1,620  |   |      | $ | 5,893 |      |  | $ | 1,522 | 
|Hedge ineffectiveness                         |  |                | (6,100 | ) |      |   | (553  | )    |  |   |      | 
|                                              |  |                |        |   |      |   |       |      | 
|Net gains (losses) on securities transactions |  | $              | (4,480 | ) |      | $ | 5,340 |      |  | $ | 1,522 | 
|                                              |  |                |        |   |      |   |       |      | 





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##### Table of Contents



MIDWEST BANC HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Note 22  Parent Company Financial
Statements




CONDENSED BALANCE SHEETS


|                                                       |                                            |                |         |         |      |   |         |         | 
|------------------------------------------------------ | ------------------------------------------ | -------------- | ------- | ------- | ---- | - | ------- | ------- | 
|                                                       |                                            | December 31,   |        
|                                                       |                                            |                |        
|                                                       |                                            | 2004           |         |         | 2003 |  
|                                                       |                                            |                |         |         |      |  
|                                                       |                                            | (In thousands) |        
|ASSETS                                                
|Cash                                                   |                                            | $              | 2,669   |         |      | $ | 11,716  |        
|Investment in subsidiaries                             |                                            |                | 186,700 |         |      |   | 186,097 |        
|Other assets                                           |                                            |                | 9,023   |         |      |   | 6,351   |        
|                                                       |                                            |                |         |         |      |  
|                                                       | Total assets                               |                | $       | 198,392 |      |   | $       | 204,164 | 
|                                                       |                                            |                |         |         |      |  
|                                                      
|LIABILITIES AND STOCKHOLDERS EQUITY                  
|Note payable                                           |                                            | $              |        |         |      | $ | 2,000   |        
|Junior subordinated debt owed to unconsolidated trusts |                                            |                | 55,672  |         |      |   | 54,000  |        
|Other liabilities                                      |                                            |                | 5,297   |         |      |   | 5,083   |        
|Stockholders equity                                   |                                            |                | 137,423 |         |      |   | 143,081 |        
|                                                       |                                            |                |         |         |      |  
|                                                       | Total liabilities and stockholders equity |                | $       | 198,392 |      |   | $       | 204,164 | 
|                                                       |                                            |                |         |         |      |  

CONDENSED STATEMENTS OF INCOME


|                                                                                         |                                 |                |        |        |      |   |        |        |   |   |        |        |  
|---------------------------------------------------------------------------------------- | ------------------------------- | -------------- | ------ | ------ | ---- | - | ------ | ------ | - | - | ------ | ------ | -
|                                                                                         |                                 | December 31,   |       
|                                                                                         |                                 |                |       
|                                                                                         |                                 | 2004           |        |        | 2003 |   |        | 2002   |  
|                                                                                         |                                 |                |        |        |      |   |        |        |  
|                                                                                         |                                 | (In thousands) |       
|Operating income                                                                         |                                 |                |        |        |      |   |        |        |   |   |        |       
|                                                                                         | Dividends from subsidiary banks |                | $      | 7,471  |      |   | $      | 7,445  |   |   | $      | 7,303  |  
|                                                                                         | Fees from subsidiaries          |                |        | 1,899  |      |   |        | 1,831  |   |   |        | 1,705  |  
|                                                                                         | Other income                    |                |        | 37     |      |   |        | 1,104  |   |   |        | 350    |  
|                                                                                         | Interest expense                |                |        | (3,567 | )    |   |        | (2,844 | ) |   |        | (1,827 | )
|                                                                                         | Other expense                   |                |        | (8,633 | )    |   |        | (5,566 | ) |   |        | (4,862 | )
|                                                                                         |                                 |                |        |        |      |   |        |        |  
|Income (loss) before income taxes and equity in undistributed
    income of subsidiaries |                                 |                | (2,793 | )      |      |   | 1,970  |        |   |   | 2,669  |       
|Income tax benefit                                                                       |                                 |                | 3,932  |        |      |   | 2,110  |        |   |   | 2,054  |       
|Equity in undistributed income of subsidiaries                                           |                                 |                | 1,237  |        |      |   | 18,701 |        |   |   | 11,585 |       
|                                                                                         |                                 |                |        |        |      |   |        |        |  
|Net income                                                                               |                                 | $              | 2,376  |        |      | $ | 22,781 |        |   | $ | 16,308 |       
|                                                                                         |                                 |                |        |        |      |   |        |        |  

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MIDWEST BANC HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


CONDENSED STATEMENTS OF CASH FLOWS


|                                                 |                                                                                      |                                                     |                                           |        |        |       |        |         |         |       |       |        |         |     | 
|------------------------------------------------ | ------------------------------------------------------------------------------------ | --------------------------------------------------- | ----------------------------------------- | ------ | ------ | ----- | ------ | ------- | ------- | ----- | ----- | ------ | ------- | --- | 
|                                                 |                                                                                      | December 31,                                        |                                          
|                                                 |                                                                                      |                                                     |                                          
|                                                 |                                                                                      | 2004                                                |                                           |        | 2003   |       |        | 2002    |        
|                                                 |                                                                                      |                                                     |                                           |        |        |       |        |         |        
|                                                 |                                                                                      | (In thousands)                                      |                                          
|Cash flows from operating activities             |                                                                                      |                                                     |                                           |        |        |       |        |         |         |       |       |       
|                                                 | Net income                                                                           |                                                     | $                                         | 2,376  |        |       | $      | 22,781  |         |       | $     | 16,308 |        
|                                                 | Adjustments to reconcile net income to net cash provided by
    operating activities |                                                     |                                           |        |        |       |        |         |         |       |       |        |        
|                                                 |                                                                                      | Equity in undistributed income of subsidiaries      |                                           |        | (1,237 | )     |        |         | (18,701 | )     |       |        | (11,585 | )  
|                                                 |                                                                                      | Depreciation                                        |                                           |        | 73     |       |        |         | 66      |       |       |        | 71      |    
|                                                 |                                                                                      | Stock-based compensation                            |                                           |        | 165    |       |        |         |        |       |       |        |        |    
|                                                 |                                                                                      | Decrease (increase) in other assets                 |                                           |        | (2,175 | )     |        |         | 7,059   |       |       |        | (4,458  | )  
|                                                 |                                                                                      | Increase (decrease) in other liabilities            |                                           |        | 1,881  |       |        |         | (3,178  | )     |       |        | 341     |    
|                                                 |                                                                                      |                                                     |                                           |        |        |       |        |         |        
|                                                 |                                                                                      |                                                     | Net cash provided by operating activities |        |        | 1,083 |        |         |         | 8,027 |       |        |         | 677 | 
|                                                 |                                                                                      |                                                     |                                           |        |        |       |        |         |        
|Cash flows from investing activities             |                                                                                      |                                                     |                                           |        |        |       |        |         |         |       |       |       
|                                                 | Cash paid, net of cash and cash equivalents in acquisition and
    stock issuance    |                                                     |                                           |       |        |       |        | (1,377  | )       |       |       |       |        
|                                                 | Investment in subsidiaries                                                           |                                                     |                                           |       |        |       |        | (10,000 | )       |       |       | (4,700 | )      
|                                                 | Property and equipment expenditures                                                  |                                                     |                                           | (207   | )      |       |        | (68     | )       |       |       | (50    | )      
|                                                 |                                                                                      |                                                     |                                           |        |        |       |        |         |        
|                                                 |                                                                                      | Net cash used in investing activities               |                                           |        | (207   | )     |        |         | (11,445 | )     |       |        | (4,750  | )  
|                                                 |                                                                                      |                                                     |                                           |        |        |       |        |         |        
|Cash flows from financing activities             |                                                                                      |                                                     |                                           |        |        |       |        |         |         |       |       |       
|                                                 | Issuance of junior subordinated debt, net of debt issuance costs                     |                                                     |                                           |       |        |       |        | 18,430  |         |       |       | 14,525 |        
|                                                 | Notes payable                                                                        |                                                     |                                           |       |        |       |        | 5,500   |         |       |       |       |        
|                                                 | Payments on notes payable                                                            |                                                     |                                           | (2,000 | )      |       |        | (5,500  | )       |       |       | (4,500 | )      
|                                                 | Dividends paid                                                                       |                                                     |                                           | (8,583 | )      |       |        | (7,317  | )       |       |       | (6,450 | )      
|                                                 | Repurchase of common stock                                                           |                                                     |                                           |       |        |       |        |        |         |       |       | (576   | )      
|                                                 | Proceeds from exercise of stock options                                              |                                                     |                                           | 660    |        |       |        | 1,666   |         |       |       | (641   | )      
|                                                 |                                                                                      |                                                     |                                           |        |        |       |        |         |        
|                                                 |                                                                                      | Net cash provided by (used in) financing activities |                                           |        | (9,923 | )     |        |         | 12,779  |       |       |        | 3,640   |    
|                                                 |                                                                                      |                                                     |                                           |        |        |       |        |         |        
|Increase (decrease) in cash and cash equivalents |                                                                                      |                                                     | (9,047                                    | )      |        |       | 9,361  |         |         |       | (433  | )     
|Cash and cash equivalents at beginning of year   |                                                                                      |                                                     | 11,716                                    |        |        |       | 2,355  |         |         |       | 2,788 |       
|                                                 |                                                                                      |                                                     |                                           |        |        |       |        |         |        
|Cash and cash equivalents at end of year         |                                                                                      | $                                                   | 2,669                                     |        |        | $     | 11,716 |         |         | $     | 2,355 |       
|                                                 |                                                                                      |                                                     |                                           |        |        |       |        |         |        

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MIDWEST BANC HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Note 23  Earnings Per Share


|                                  |                                            |                                       |      |        |      |   |      |        |  |   |      |        | 
|--------------------------------- | ------------------------------------------ | ------------------------------------- | ---- | ------ | ---- | - | ---- | ------ |  | - | ---- | ------ | 
|                                  |                                            | 2004                                  |      |        | 2003 |   |      | 2002   | 
|                                  |                                            |                                       |      |        |      |   |      |        | 
|                                  |                                            | (In thousands, except per share data) |     
|Basic                             |                                            |                                       |      |        |      |   |      |        |  |   |      |       
|                                  | Net income                                 |                                       | $    | 2,376  |      |   | $    | 22,781 |  |   | $    | 16,308 | 
|                                  |                                            |                                       |      |        |      |   |      |        | 
|                                  | Weighted average common shares outstanding |                                       |      | 17,888 |      |   |      | 17,798 |  |   |      | 16,122 | 
|                                  |                                            |                                       |      |        |      |   |      |        | 
|                                  | Basic earnings per common share            |                                       | $    | 0.13   |      |   | $    | 1.28   |  |   | $    | 1.01   | 
|                                  |                                            |                                       |      |        |      |   |      |        | 
|Diluted                           |                                            |                                       |      |        |      |   |      |        |  |   |      |       
|                                  | Net income                                 |                                       | $    | 2,376  |      |   | $    | 22,781 |  |   | $    | 16,308 | 
|                                  |                                            |                                       |      |        |      |   |      |        | 
|                                  | Weighted average common shares outstanding |                                       |      | 17,888 |      |   |      | 17,798 |  |   |      | 16,122 | 
|                                  | Dilutive effect of stock options           |                                       |      | 403    |      |   |      | 420    |  |   |      | 379    | 
|                                  |                                            |                                       |      |        |      |   |      |        | 
|                                  | Dilutive average common shares outstanding |                                       |      | 18,291 |      |   |      | 18,218 |  |   |      | 16,501 | 
|                                  |                                            |                                       |      |        |      |   |      |        | 
|Diluted earnings per common share |                                            | $                                     | 0.13 |        |      | $ | 1.25 |        |  | $ | 0.99 |       
|                                  |                                            |                                       |      |        |      |   |      |        | 

Note 24  Other Comprehensive Income




|                                                                                                        |                                   |                          |         |        |      |   |         |         |   |   |        |        | 
|------------------------------------------------------------------------------------------------------- | --------------------------------- | ------------------------ | ------- | ------ | ---- | - | ------- | ------- | - | - | ------ | ------ | 
|                                                                                                        |                                   | Years Ended December 31, |        
|                                                                                                        |                                   |                          |        
|                                                                                                        |                                   | 2004                     |         |        | 2003 |   |         | 2002    |  
|                                                                                                        |                                   |                          |         |        |      |   |         |         |  
|                                                                                                        |                                   | (In thousands)           |        
|Unrealized holding gains (losses) on securities
    available-for-sale                                  |                                   | $                        | (15,504 | )      |      | $ | (32,087 | )       |   | $ | 14,051 |       
|Reclassification adjustment for (gains) losses recognized
    in income                                 |                                   |                          | 14,578  |        |      |   | (5,340  | )       |   |   | (1,522 | )     
|Unrealized holding gains on securities transferred from
    available-for-sale to held-to-maturity      |                                   |                          |        |        |      |   |        |         |   |   | 1,396  |       
|Accretion of unrealized gains on securities transferred from
    available-for-sale to held-to-maturity |                                   |                          | (123    | )      |      |   | (595    | )       |   |   | (331   | )     
|                                                                                                        |                                   |                          |         |        |      |   |         |         |  
|                                                                                                        | Net unrealized gains (losses)     |                          |         | (1,049 | )    |   |         | (38,022 | ) |   |        | 13,594 | 
|Tax effect                                                                                              |                                   |                          | 416     |        |      |   | 15,053  |         |   |   | 5,392  |       
|                                                                                                        |                                   |                          |         |        |      |   |         |         |  
|                                                                                                        | Other comprehensive income (loss) |                          | $       | (633   | )    |   | $       | (22,969 | ) |   | $      | 8,202  | 
|                                                                                                        |                                   |                          |         |        |      |   |         |         |  

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##### Table of Contents



MIDWEST BANC HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Note 25  Quarterly Results of Operations
(Unaudited)


|                                  |         |                                       |        |      |         |   |        |              |  |   |             |      |  |   |         |       |  
|--------------------------------- | ------- | ------------------------------------- | ------ | ---- | ------- | - | ------ | ------------ |  | - | ----------- | ---- |  | - | ------- | ----- | -
|                                  |         | Three Months Ended                    |       
|                                  |         |                                       |       
|2004                              |         | March 31                              |        |      | June 30 |   |        | September 30 |  |   | December 31 |     
|                                  |         |                                       |        |      |         |   |        |              |  |   |             |     
|                                  |         | (In thousands, except per share data) |       
|Interest income                   |         | $                                     | 26,093 |      |         | $ | 25,004 |              |  | $ | 27,077      |      |  | $ | 27,233  |      
|Interest expense                  |         |                                       | 11,926 |      |         |   | 11,914 |              |  |   | 12,836      |      |  |   | 11,073  |      
|                                  |         |                                       |        |      |         |   |        |              |  |   |             |     
|Net interest income               |         |                                       | 14,167 |      |         |   | 13,090 |              |  |   | 14,241      |      |  |   | 16,160  |      
|Provision for loan losses         |         |                                       | 756    |      |         |   | 756    |              |  |   | 556         |      |  |   | 2,156   |      
|Other income                      |         |                                       | 3,943  |      |         |   | 3,128  |              |  |   | (1,788      | )    |  |   | (7,783  | )    
|Other expense                     |         |                                       | 11,041 |      |         |   | 11,435 |              |  |   | 13,436      |      |  |   | 16,821  |      
|                                  |         |                                       |        |      |         |   |        |              |  |   |             |     
|Income/(loss) before income taxes |         |                                       | 6,313  |      |         |   | 4,027  |              |  |   | (1,539      | )    |  |   | (10,600 | )    
|Provision for income taxes        |         |                                       | 1,488  |      |         |   | 843    |              |  |   | (1,508      | )    |  |   | (4,998  | )    
|                                  |         |                                       |        |      |         |   |        |              |  |   |             |     
|Net income (loss)                 |         | $                                     | 4,825  |      |         | $ | 3,184  |              |  | $ | (31         | )    |  | $ | (5,602  | )    
|                                  |         |                                       |        |      |         |   |        |              |  |   |             |     
|Earnings per common share(a)      |         |                                       |        |      |         |   |        |              |  |   |             |      |  |   |         |      
|                                  | Basic   |                                       | $      | 0.27 |         |   | $      | 0.18         |  |   | $           | 0.00 |  |   | $       | (0.31 | )
|                                  | Diluted |                                       |        | 0.26 |         |   |        | 0.17         |  |   |             | 0.00 |  |   |         | (0.31 | )

|                             |         |                                       |        |      |         |   |        |              |  |   |             |      |  |   |        |      | 
|---------------------------- | ------- | ------------------------------------- | ------ | ---- | ------- | - | ------ | ------------ |  | - | ----------- | ---- |  | - | ------ | ---- | 
|                             |         | Three Months Ended                    |       
|                             |         |                                       |       
|2003                         |         | March 31                              |        |      | June 30 |   |        | September 30 |  |   | December 31 |     
|                             |         |                                       |        |      |         |   |        |              |  |   |             |     
|                             |         | (In thousands, except per share data) |       
|Interest income              |         | $                                     | 29,982 |      |         | $ | 27,576 |              |  | $ | 27,137      |      |  | $ | 27,384 |     
|Interest expense             |         |                                       | 13,016 |      |         |   | 12,749 |              |  |   | 12,257      |      |  |   | 11,775 |     
|                             |         |                                       |        |      |         |   |        |              |  |   |             |     
|Net interest income          |         |                                       | 16,966 |      |         |   | 14,827 |              |  |   | 14,880      |      |  |   | 15,609 |     
|Provision for loan losses    |         |                                       | 990    |      |         |   | 755    |              |  |   | 7,743       |      |  |   | 717    |     
|Other income                 |         |                                       | 4,062  |      |         |   | 7,939  |              |  |   | 5,790       |      |  |   | 5,295  |     
|Other expense                |         |                                       | 10,783 |      |         |   | 10,672 |              |  |   | 10,665      |      |  |   | 11,375 |     
|                             |         |                                       |        |      |         |   |        |              |  |   |             |     
|Income before income Taxes   |         |                                       | 9,255  |      |         |   | 11,339 |              |  |   | 2,262       |      |  |   | 8,812  |     
|Provision for income Taxes   |         |                                       | 2,861  |      |         |   | 3,548  |              |  |   | (21         | )    |  |   | 2,499  |     
|                             |         |                                       |        |      |         |   |        |              |  |   |             |     
|Net income                   |         | $                                     | 6,394  |      |         | $ | 7,791  |              |  | $ | 2,283       |      |  | $ | 6,313  |     
|                             |         |                                       |        |      |         |   |        |              |  |   |             |     
|Earnings per common share(a) |         |                                       |        |      |         |   |        |              |  |   |             |      |  |   |        |     
|                             | Basic   |                                       | $      | 0.36 |         |   | $      | 0.44         |  |   | $           | 0.13 |  |   | $      | 0.35 | 
|                             | Diluted |                                       |        | 0.35 |         |   |        | 0.43         |  |   |             | 0.12 |  |   |        | 0.34 | 






|    |                                                                                                                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Earnings per share for the quarters and fiscal years have been
    calculated separately. Accordingly, quarterly amounts may not
    add to the annual amounts because of differences in the average
    common shares outstanding during each period.

Note 26  Business Combination




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##### Table of Contents



MIDWEST BANC HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






Note 27  Stock Dividend




Note 28  Capital Contribution and Regulatory
Matters










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##### Table of Contents



MIDWEST BANC HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




F-38



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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


ON THE FINANCIAL STATEMENTS


















| |                            
| | ---------------------------
| | McGladrey &
    Pullen, LLP





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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
















| |                                 
| | --------------------------------
| | Crowe Chizek and Company
    LLC







F-40