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SECURITIES AND EXCHANGE
    COMMISSION
 Washington, D.C.
    20549
  Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal
    year ended December 31,
    2009ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For 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:
  Depositary Shares each representing
    1/100th

    of a Share of Series A
 Noncumulative Redeemable Convertible Preferred Stock,
 $25.00 liquidation preference, NASDAQ Capital Market
 (Title of Class)
  Securities registered pursuant to Section 12(g) of the
    Act:
  Common Stock, $0.01 par value, NASDAQ Capital Market
 (Title of Class)
  o þ
  o þ
  þ o
  Regulation S-T o o
  Regulation S-K Form 10-K Form 10-K. þ
  12b-2
  Large accelerated filer o

Accelerated filer o

Non-accelerated filerþ
    (Do not check if a smaller reporting company)

Smaller reporting company o   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE




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##### 





MIDWEST
    BANC HOLDINGS, INC.
  FORM 10-K
  INDEX
   
 PageNo.PART IItem 1.


Business


1Item 1A.


Risk Factors


36Item 1B.


Unresolved Staff Comments


56Item 2.


Properties


57Item 3.


Legal Proceedings


58Item 4.


Reserved


58PART IIItem 5.


Market for the Registrants Common Equity
    and Related Stockholder Matters


58Item 6.


Selected Consolidated Financial Data


61Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


64Item 7A.


Quantitative and Qualitative Disclosures about
    Market Risk


106Item 8.


Consolidated Financial Statements and
    Supplementary Data


108Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


108Item 9A.


Controls and Procedures


108Item 9B.


Other Information


109PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


109Item 11.


Executive Compensation


109Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


109Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


109Item 14.


Principal Accounting Fees and Services


109PART IVItem 15.


Exhibits and Financial Statement Schedules


110Signature(s) Page


114Contents of Consolidated Financial Statements


F-1EX-3.3EX-4.1.3EX-4.1.4EX-10.77EX-10.78EX-12.1EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1EX-99.1EX-99.2




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PART I  Item 1.
    Business  The
    Company
    small-to-medium-sized
  Recent
    Developments
  Outlook
    for 2010
  Regulatory Capital:
       1




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Written
    Agreement with Regulators
  Forbearance Agreement:
  Going Concern
  Capital Plan: Capital Plan Exchange Transaction with the
    U.S. Treasury
  Written Agreement with
    Regulators
 2




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Going Concern:
      Liquidity  Bank:
  Liquidity  Company:
 3




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Goodwill Impairment; Increase in Valuation
    Allowance:
  Repurchase Agreements:
  Written
    Agreement with Regulators
       4




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Outlook for 2010
  Regulatory
    Capital
         5




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Outlook for
    2010
    Capital
    Plan
      
    Exchanging 82% of the Companys outstanding depositary
    shares, each representing 1/100th fractional interest in a
    share of the Companys Series A noncumulative
    redeemable convertible perpetual preferred stock, for shares of
    the Companys common stock (the Exchange Offer);
    Exchange by the U.S. Treasury of the Companys
    outstanding Series T preferred stock for a new series of
    fixed rate cumulative mandatorily convertible preferred stock,
    Series G;
    Cost reduction initiatives, including a reduction in force of
    over 100 employees, completed on September 30, 2009,
    salary reductions, suspension of certain benefits, elimination
    of discretionary projects and initiatives and an increased focus
    on expense control;
    Retaining independent consultants to refine cumulative credit
    loss projections;
    Engaging investment banking support to assist with the Capital
    Plan;  Exchange Transaction with the
    U.S. Treasury.
   6




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Capital Raising Activities.
  Restructuring of Debt with Primary Lender.
  Other
    Recent Developments
         7




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sub-prime
     8




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2008
    Developments
  other-than-temporary
      Strategy
  Outlook for 2010
  Building a New Foundation 100-Day
     9




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# of BankingCentersCompany Subsidiaries

Headquarters

Market Area

or OfficesBank:Midwest Bank and Trust Company

Elmwood Park, IL

Algonquin, Bensenville, Bloomingdale, Buffalo Grove, Chicago,
    Des Plaines, Downers Grove, Elgin, Elmwood Park, Franklin Park,
    Glenview, Hinsdale, Inverness, Long Grove, McHenry, Melrose
    Park, Mount Prospect, Naperville, Norridge, North Barrington,
    Roselle, and Union


26Non-bank subsidiaries of the Bank:MBTC Investment Company

Las Vegas, NV

*


2Midwest Funding, L.L.C.

Melrose Park, IL

**


1Midwest Financial and InvestmentServices, Inc.

Elmwood Park, IL

****


23Non-bank subsidiaries of the Company:MBHI Capital Trust III

Melrose Park, IL

***


MBHI Capital Trust IV

Melrose Park, IL

***


MBHI Capital Trust V

Melrose Park, IL

***


Royal Capital Trust I

Melrose Park, IL

***


Northwest Capital Trust I

Melrose Park, IL

***


     *
    
    Provides additional investment portfolio management to the Bank.**
    
    Provides real estate asset management services to the Bank.***
    
    The trust is a statutory business trust formed as a financing
    subsidiary of the Company.****
    
    Provides securities brokerage services.  History
  The
    Bank
   10




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
    On October 1, 2007, the Company completed its acquisition
    of Northwest Suburban Bancorp, Inc. (Northwest
    Suburban). The Company issued 3.7 million common
    shares, paid $81.2 million in cash, and incurred $414,000
    in costs which were capitalized for a total purchase price of
    $136.7 million. Northwest Suburbans primary operating
    subsidiary, Mount Prospect National Bank, merged into the Bank
    on October 1, 2007. Northwest Suburban had total assets of
    $546.2 million.
    During December 2008, the Bank closed two unprofitable branches
    located in Addison and Lake Zurich, Illinois.
    During 2009, the Bank relocated its Bucktown and Michigan Avenue
    Chicago branches and opened a second branch in the downtown
    Chicago business district. Also, in June 2009, the Bank closed
    two unprofitable branches located in Island Lake and Lakemoor,
    Illinois.  Non-bank
    Subsidiaries
          InitialMandatory

OptionalRedemption

RedemptionIssuer

Issue Date

Amount

Rate

Date

Date(1)(In thousands)MBHI Capital Trust III

December 19, 2003

$
9,000


LIBOR+3.00%

December 30, 2033

December 30, 2008MBHI Capital Trust IV

December 19, 2003


10,000


LIBOR+2.85%

January 23, 2034

January 23, 2009MBHI Capital Trust V

June 7, 2005


20,000


LIBOR+1.77%

June 15, 2035

June 15, 2010Royal Capital Trust I

April 30, 2004


10,000


6.62% until July 23, 2009;
    LIBOR+2.75% thereafter

July 23, 2034

July 23, 2009Northwest Suburban Capital Trust I

May 18, 2004


10,000


LIBOR+2.70%

July 23, 2034

July 23, 2009     (1)
    
    Redeemable at option of the Company as of the initial optional
    redemption date provided and quarterly thereafter. 11




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Markets
  10-20 mile low-to-moderate
  Competition
        and/or
  Products
    and Services
  Deposit
    Products
    Checking and Interest-bearing Checking
    Accounts.
  Savings and Money Market Accounts.
 12




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Time Deposits.
  Lending
    Services
  not-for-profit
  Commercial Loans.
  Construction Loans.
  Commercial Real Estate Loans.
  Consumer Real Estate Loans.
    Consumer Loans.
    ATMs
    Trust Activities
   13




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Insurance
    and Securities Brokerage
    Employees
    Available
    Information
  www.midwestbanc.com. Forms 10-K, 10-Q, 8-K,
  1-800-SEC-0330. http://www.sec.gov.
  www.midwestbanc.com
  
    Excessive or Luxury Expenditures Policy
    Code of Business Conduct and Ethics
    Director Independence Standards
    Asset/Liability Committee Charter
    Audit Committee Charter
    Compensation Committee Charter
    Corporate Governance and Nominating Committee Charter
    Board Enterprise Risk Management Committee Charter  SUPERVISION
    AND REGULATION
   14




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Bank
    Holding Company Regulation
               15




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16




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and/or and/or
  sub-prime
     17




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Form 10-K.
        Participation
    in Capital Purchase Program
   18




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Persons Subject to the Rules. Regulation S-K).
  Compensation Committee Duties  Semi-annual
    Reviews.
  
    the features in the SEO compensation plans so they do not
    encourage SEOs to take unnecessary and excessive risks that
    could threaten the value of the Company;
    any features in employee compensation plans that pose risks to
    the Company to ensure that it is not unnecessarily exposed to
    risks, including any features in these SEO compensation plans or
    employee compensation plans that would encourage behavior
    focused on short-term results rather than long-term value
    creation; and
    the terms of each employee compensation plan in order to
    eliminate the features in a plan that could encourage the
    manipulation of reported earnings of the Company to enhance the
    compensation of employees.  Annual Narrative.
  
    SEO compensation plans that could encourage SEOs to take
    unnecessary and excessive risks that could threaten the value of
    the Company, including how these SEO compensation plans do not
    encourage behavior focused on short-term results rather than
    long-term value creation;
    employee compensation plans to ensure that the Company is not
    unnecessarily exposed to risks, including how these employee
    compensation plans do not encourage behavior focused on
    short-term results rather than long-term value creation; and
    employee compensation plans that could encourage the
    manipulation of reported earnings of the Company to enhance the
    compensation of employees.  Annual Certification.
  
    with senior risk officers the SEO compensation plans and has
    made all reasonable efforts to ensure that these plans do not
    encourage SEOs to take unnecessary and excessive risks that
    threaten the value of the Company;
    with senior risk officers the employee compensation plans and
    has made all reasonable efforts to limit unnecessary risks these
    plans pose to the Company; and
    the employee compensation plans to eliminate any features of
    these plans that would encourage the manipulation of reported
    earnings of the Company to enhance the compensation of any
    employee. 19




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Reporting of Narrative and Certification.
  Stockholder Non-Binding Say on
    Pay.
  Compliance Certifications. Form 10-K
  Limitation on the Companys Compensation Tax
    Deduction.
  Clawback.
  Severance Prohibited.
  Limits on Bonuses, Retention Awards and Incentive
    Compensation.
  Long-Term Restricted Stock.
          Perquisites. Regulation S-K)
 20




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Tax
    Gross-Ups. gross-ups
  Compensation Consultant.
  Limits on Luxury Expenditures.
    Compensation
    Guidelines
       21




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Bank
    Regulation
    and/or
      Financial
    Institution Regulation
  Transactions with Affiliates.
  Dividend Limitations.
   22




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Capital Requirements.
    Standards for Safety and Soundness.
       23




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Prompt Corrective Action.
      
    prohibiting the payment of principal and interest on
    subordinated debt;
    prohibiting the holding company from making distributions
    without prior regulatory approval;
    placing limits on asset growth and restrictions on activities;
    placing additional restrictions on transactions with affiliates;
    restricting the interest rate the institution may pay on
    deposits;
    prohibiting the institution from accepting deposits from
    correspondent banks; and
    in the most severe cases, appointing a conservator or receiver
    for the institution.       24




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FDIC Insurance Premiums on Deposit
    Accounts.
          Initial
    Base Assessment Rates (in basis points)
  Risk

Risk

Risk

RiskCategory

Category

Category

CategoryI

II

III

IV12-16

22

32

45    25




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Total
    Base Assessment Rates
  Risk

Risk

Risk

RiskCategory

Category

Category

CategoryI

II

III

IVInitial Base Assessment Rate

12-16

22

32

45Unsecured Debt Adjustment

-5-0

-5-0

-5-0

-5-0Secured Liability Adjustment

0-8

0-11

0-16

0-22.5Brokered Deposit Adjustment



0-10

0-10

0-10Total Base Assessment Rate

7-24.0

17-43.0

27-58.0

40-77.5              26




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Federal Reserve System.
  Community Reinvestment.
  Brokered Deposits.
  Enforcement Actions.
  Bank Secrecy Act and USA Patriot Act.
 27




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Interstate Banking and Branching
    Legislation.
  de novo
  Insurance Powers.
      Securities Brokerage.
  Consumer Compliance.
 28




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
    require lenders to disclose credit terms in meaningful and
    consistent ways;
    prohibit discrimination against an applicant in any consumer or
    business credit transaction;
    prohibit discrimination in housing-related lending activities;
    require certain lenders to collect and report applicant and
    borrower data regarding loans for home purchases or improvement
    projects;
    require lenders to provide borrowers with information and a
    written good faith estimate regarding the nature and cost of
    real estate settlements;
    prohibit certain lending practices and limit escrow account
    amounts with respect to real estate transactions; and
    prescribe possible penalties for violations of the requirements
    of consumer protection statutes and regulations.  Federal Fair Lending Laws.
  Home Mortgage Disclosure Act.
    Real Estate Settlement Procedures Act.
 29




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Truth in Lending Act.
              Fair and Accurate Credit Transactions Act.
   30




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Federal Home Loan Bank System. 1 20
      Monetary
    Policy and Economic Conditions
     31




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EXECUTIVE
    OFFICERS OF THE REGISTRANT
                 32




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32-year
            E-Loan,
   33




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SAFE
    HARBOR STATEMENT UNDER THE PRIVATE SECURITIES
    LITIGATION REFORM ACT OF 1995
  Form 10-K,
        
    The Company and Banks ability to timely comply with the
    terms of the PCA and the Written Agreement with their regulators
    pursuant to which the Company and Bank agreed to take certain
    corrective actions to improve their capital positions and
    financial condition;
    Possible administrative or enforcement actions of banking
    regulators in connection with any material failure of the
    Company or the Bank to comply with banking laws, rules or
    regulations, or terms of the PCA and the Written Agreement;
    The potential call by the Banks repurchase agreement
    counterparty to terminate the repurchase agreements since the
    Bank has not maintained its well-capitalized status and the
    substantial costs the Bank would incur to unwind these
    repurchase agreements prior to their maturities;
    Uncertainties regarding the Companys ability to raise a
    sufficient amount of new equity capital in a timely manner in
    order to increase its regulatory capital ratios as required by
    the PCA, facilitate a possible restructuring or equity
    conversion of its senior and subordinated debt, permit a
    conversion of the U.S. Treasurys preferred equity
    investment into common stock and otherwise successfully
    implement and achieve the goals of the Capital Plan, and whether
    the Company will need to materially modify its Capital Plan in
    the future;
    The expiration of the Forbearance Agreement with our primary
    lender on March 31, 2010, which will permit the lender to
    exercise all its rights in full as a result of certain existing
    events of default, including taking possession of all of the
    Banks capital stock held by the Company and pledged to the
    lender as collateral;
    The Companys ability to address its own liquidity problem;
    Managements ability to effectively manage interest rate
    risk and the impact of interest rates in general on the
    volatility of the Companys net interest income; 34




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
    the effect of the Emergency Economic Stabilization Act of 2008,
    the American Recovery and Reinvestment Act of 2009, the
    implementation by the U.S. Department of the Treasury (the
    U.S. Treasury) and federal banking regulators
    of a number of programs to address capital and liquidity issues
    in the banking system and additional programs that will apply to
    us in the future, all of which may have significant effects on
    us and the financial services industry;
    The effect on the Companys profitability if interest rates
    fluctuate as well as the effect of the Banks
    customers changing use of deposit products;
    The possibility that the Companys wholesale funding
    sources may prove insufficient to replace deposits at maturity
    and support potential growth;
    Inaccessibility of funding sources on the same terms on which
    the Company has historically relied, due to its current capital
    ratings;
    The decline in commercial and residential real estate sales
    volume and the likely potential for continuing illiquidity in
    the real estate market, including within the Chicago
    metropolitan area;
    The risks associated with the high concentration of commercial
    real estate loans in the Companys portfolio;
    The uncertainties in estimating the fair value of developed real
    estate and undeveloped land in light of declining demand for
    such assets and continuing illiquidity in the real estate market;
    Uncertainties with respect to the future utilization of the
    Companys deferred tax assets;
    Negative developments and disruptions in the credit and lending
    markets, including the impact of the ongoing credit crisis on
    the Companys business and on the businesses of its
    customers as well as other banks and lending institutions with
    which the Company has commercial relationships;
    A continuation of the recent unprecedented volatility in the
    capital markets;
    The risks associated with implementing the Companys
    business strategy, including its ability to preserve and access
    sufficient capital to execute on its strategy;
    Rising unemployment and its impact on the Companys
    customers savings rates and their ability to service debt
    obligations;
    Fluctuations in the value of the Companys investment
    securities;
    The ability to attract and retain senior management experienced
    in banking and financial services;
    The risks associated with management changes and employee
    turnover;
    Credit risks and risks from concentrations (by geographic area
    and by industry) within the Banks loan portfolio and
    individual large loans;
    The risk that the allowance for loan losses may prove
    insufficient to absorb actual losses in the loan portfolio;
    Possible volatility in loan charge-offs and recoveries between
    periods;
    The imprecision of assumptions underlying the establishment of
    the allowance for loan losses and change in estimated values of
    collateral or cash flow projections and various financial assets
    and liabilities;
    The Companys ability to adapt successfully to
    technological changes to compete effectively in the marketplace;
    The effects of competition from other commercial banks, thrifts,
    mortgage banking firms, consumer finance companies, credit
    unions, securities brokerage firms, insurance companies, money
    market and other mutual funds, and other financial institutions
    operating in the Companys market or elsewhere or providing
    similar services;
    Volatility of rate sensitive deposits;
    Operational risks, including data processing system failures or
    fraud; 35




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
    Liquidity risks;
    The possibility that the Bank would experience deposit erosion
    caused by the expiration of the FDICs Temporary Liquidity
    Guarantee Program;
    The ability to successfully acquire low cost deposits or funding;
    Changes in the economic environment, competition, or other
    factors that may influence loan demand, deposit flows, and the
    quality of the loan portfolio and loan and deposit pricing;
    The impact from liabilities arising from legal or administrative
    proceedings on the financial condition of the Company;
    The inability of the Bank to pay dividends to the Company;
    The Companys inability to pay cash dividends on its common
    and preferred stock and interest on its junior subordinated
    debentures;
    Governmental monetary and fiscal policies, as well as
    legislative and regulatory changes, that may result in the
    imposition of costs and constraints on the Company through
    higher FDIC insurance premiums, significant fluctuations in
    market interest rates, increases in capital requirements, and
    operational limitations;
    Changes in general economic or capital market conditions,
    interest rates, debt credit ratings, deposit flows, loan demand,
    including loan syndication opportunities;
    Changes in legislation or regulatory and accounting
    requirements, principles, policies, or guidelines affecting the
    business conducted by the Company, including the results of
    regulatory examinations;
    The impact of possible future goodwill and other material
    impairment charges;
    The effects of increased deposit insurance premiums;
    The delisting of the Companys common stock from Nasdaq;
    Acts of war or terrorism; and
    Other economic, competitive, governmental, regulatory, and
    technological factors affecting the Companys operations,
    products, services, and prices.      Item 1A.
    Risk
    Factors    The Bank
    was undercapitalized under regulatory guidelines at
    December 31, 2009, and continued losses and deterioration
    in credit quality are likely to cause the Banks capital
    levels to further decline in the near term.
   36




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Due to
    the Banks significantly undercapitalized status, the
    Federal Reserve Bank has issued a Prompt Corrective Action
    Directive (PCA) pursuant to which the Bank must
    either become adequately capitalized or be sold within
    45 days of the PCA. Any failure to comply with the terms of
    the PCA will have a material adverse effect on the business of
    the Company.
  Written Agreement with
    Regulators
  Outlook for 2010
    The
    Company does not have the ability to pay amounts that will
    become immediately due and payable upon the expiration of the
    Forbearance Agreement with the Companys primary lender on
    March 31, 2010.
   37




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If the
    Company fails to raise additional capital in a timely manner,
    the Company may be forced to seek bankruptcy protection and/or
    the Bank could be placed under FDIC receivership.
    As a
    result of the above-described events and circumstances, the
    Company has determined that there is substantial doubt as to the
    Companys ability to continue as a going concern.
     38




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The
    Company has incurred cumulative losses since January 1,
    2008 and expect to incur losses in the future.
      The
    Companys results of operations, financial condition and
    business may be materially, adversely affected if it fails to
    successfully implement the Capital Plan.
    and/or
  Changes
    in economic conditions, in particular a continued economic
    slowdown in Chicago, Illinois, has hurt and could continue to
    hurt the Companys business materially.
    
    loan delinquencies may continue to increase or remain at
    elevated levels;
    problem assets and foreclosures may continue to increase or
    remain at elevated levels;
    unemployment may continue to increase;
    demand for the Companys products and services may decline; 39




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
    low cost or noninterest bearing deposits may decrease; and
    collateral for loans made by the Company, especially residential
    and commercial real estate, may decline or continue to decline
    in value, in turn reducing customers borrowing power, and
    reducing the value of assets and collateral associated with the
    Companys existing loans.  A large
    percentage of the Companys loans are collateralized by
    real estate, including construction loans, and adverse changes
    in the real estate market may result in continued or increased
    losses and continue adversely affect the Companys
    profitability.
        loan-to-value
  Nonperforming
    assets take significant time to resolve and adversely affect the
    Companys results of operations and financial
    condition.
     40




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The
    Companys allowance for loan losses may not be sufficient
    to cover actual loan losses, which could adversely affect its
    results of operations or its financial condition.
    
    current economic conditions and their estimated effects on
    specific borrowers;
    an evaluation of the existing relationships among loans,
    potential loan losses and the present level of the allowance;
    managements internal review of the loan portfolio; and
    results of examinations of its loan portfolio by regulatory
    agencies.        While the
    Company attempts to manage the risk from changes in market
    interest rates, interest rate risk management techniques are not
    exact. In addition, the Company may not be able to economically
    hedge its interest rate risk. A rapid or substantial increase or
    decrease in interest rates could adversely affect its net
    interest income and results of operations.
     41




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The
    Company and the Bank may not be able to access sufficient and
    cost-effective sources of liquidity necessary to fund operations
    and meet payment obligations under their existing funding
    commitments, including the repayment of brokered
    deposits.
       42




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##### Table of Contents



The
    Companys cost of funds for banking operations may increase
    as a result of general economic conditions, interest rates and
    competitive pressures.
   43




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The
    Company is in breach of certain financial covenants under its
    Loan Agreements and its lender has the right to take certain
    courses of action that would, if exercised, have a material
    adverse effect on the Companys operations and ability to
    continue as a going concern.
         44




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There is
    a risk that the counterparty to certain of the Banks
    existing repurchase agreements may have the right to terminate
    the repurchase agreements, which could materially and adversely
    affect the Companys financial position and earnings in the
    period of termination.
    The
    Companys common stock could be delisted from
    Nasdaq.
    calendar-day
        Markets
    have experienced, and may continue to experience, periods of
    high volatility accompanied by reduced liquidity.
   45




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##### Table of Contents



Concern
    of the Companys customers over deposit insurance may cause
    a decrease in deposits.
    The
    Banks deposit insurance premium could be substantially
    higher in the future, which could have a material adverse effect
    on the Companys future earnings.
           46




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Defaults
    by another financial institution could adversely affect
    financial markets generally.
        The
    widespread effect of falling housing prices on financial markets
    has adversely affected and could continue to adversely affect
    the Companys profitability, liquidity, and financial
    condition.
    The value
    of securities in the Companys investment securities
    portfolio may be negatively affected by continued disruptions in
    securities markets.
   47




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If the
    Company is required to write down goodwill or other intangible
    assets or if it is required to
    mark-to-market
    certain of its assets or further reduce its deferred tax assets
    by a valuation allowance, its financial condition and results of
    operations would be negatively affected.
      
    significant adverse change in business climate;
    significant unanticipated loss of clients/assets under
    management;
    unanticipated loss of key personnel;
    sustained periods of poor investment performance;
    significant loss of deposits or loans;
    significant reductions in profitability; or
    significant changes in loan credit quality.       48




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##### Table of Contents



If the
    Companys investment in the common stock of the Federal
    Home Loan Bank of Chicago is other than temporarily impaired,
    its financial condition and results of operations could be
    materially impaired.
      942-325-35).
 49




---



##### Table of Contents



other-than-temporarily
  As a bank
    holding company that conducts substantially all of the
    Companys operations through its subsidiaries, its ability
    to pay dividends, repurchase its shares, or to repay its
    indebtedness depends upon liquid assets held by the bank holding
    company, as well as the results of operations of the
    Companys subsidiaries. The Company and its subsidiaries
    are subject to other restrictions.
          
    the terms of junior subordinated debentures of the Company,
    pursuant to which it can not declare or pay any dividends or
    distributions on, or redeem, purchase, acquire or make a
    liquidation payment with respect to, any of its common stock or
    preferred stock if, at that time, there is a default under the
    junior subordinated debentures or a related guarantee or it has
    delayed interest payments on the securities issued under the
    junior indenture; and
    the Companys outstanding Series A and Series G
    Preferred Stock, which have preference over the Companys
    common stock with respect to the payment of dividends as well as
    distributions of assets upon liquidation, and no dividends on
    the common stock may be declared and paid unless and until
    dividends have been paid on its preferred stock. Furthermore,
    the Company cannot repurchase its common stock until all
    dividends have been paid on the Series G Preferred Stock.  The
    Company must seek additional capital in the future, but capital
    may not be available when it is needed.
   50




---



##### Table of Contents



Outlook for 2010 Capital
    Plan
    The
    Companys effective tax rates may be adversely affected by
    changes in federal and state tax laws.
      An
    interruption in or breach in security of the Companys
    information systems may result in a loss of customer
    business.
       51




---



##### Table of Contents



The
    Company continually encounters technological change.
    The
    Company is subject to various reporting requirements that
    increase compliance costs, and failure to comply timely could
    adversely affect its reputation and the value of its
    securities.
  Form 10-K
  The
    Companys ability to attract and retain management and key
    personnel may affect future growth and earnings and may be
    adversely affected by compensation and employment restrictions
    to which it may be subject.
       52




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##### Table of Contents



The
    Companys business may be adversely affected by the highly
    regulated environment in which it operates.
    There can
    be no assurance that the recently enacted Emergency Economic
    Stabilization Act of 2008, the American Recovery and
    Reinvestment Act of 2009 and other recently enacted government
    programs will help stabilize the U.S. financial
    system.
           53




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##### Table of Contents



The
    limitations on incentive compensation contained in the ARRA may
    adversely affect the Companys ability to retain its
    highest performing employees.
    The
    Company is subject to claims and litigation pertaining to
    fiduciary responsibility.
  and/or
  Future
    sales of the Companys common stock or other securities
    will dilute the ownership interests of its existing stockholders
    and could depress the market price of the Companys common
    stock.
     54




---



##### Table of Contents



Shares of
    the Companys preferred stock may be issued in the future
    which could materially adversely affect the rights of the
    holders of the Companys common stock.
    Offerings
    of debt, which could be senior to the Companys common
    stock upon liquidation, or preferred equity securities, which
    may be senior to its common stock for purposes of dividend
    distributions or upon liquidation, may adversely affect the
    market price of the Companys common stock.
    The
    outstanding shares of the Companys Series G preferred
    stock may be converted by the U.S. Treasury at any time or will
    be converted if certain conditions are met, which will dilute
    the Companys existing stockholders in the case of
    conversion. In addition, the Companys ability to pay
    dividends on those shares is restricted.
    The
    Company is exposed to risk of environmental liabilities with
    respect to properties to which it takes title.
  clean-up
 55




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##### Table of Contents



Severe
    weather, natural disasters, acts of war or terrorism and other
    external events could significantly impact the Companys
    business.
  and/or
  Non-Compliance
    with USA PATRIOT Act, Bank Secrecy Act, or Other Laws and
    Regulations Could Result in Fines or Sanctions, and Curtail
    Expansion Opportunities
    Provisions
    in the Companys amended and restated certificate of
    incorporation and its amended and restated bylaws may delay or
    prevent an acquisition of the Company by a third
    party.
      Item 1B.
    Unresolved
    Staff Comments   56




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##### Table of Contents



Item 2.
    Properties    Date


Net Book Value at


Leased orLocation

Acquired


December 31, 2009


Owned(In thousands)Principal Office of the Company and Midwest Bank and Trust
    Company Banking Office501 West North Avenue
    Melrose Park, Illinois 60160


1987


$
973



OwnedOther Midwest Bank and Trust Company Banking Offices1606 North Harlem Avenue
    Elmwood Park, Illinois 60607


1959



3,080



Owned2045 East Algonquin Road
    Algonquin, Illinois 60102


1994



558



Owned1000 Tower Lane #125
    Bensenville, Illinois 60106


2006



3



Leased236 West Lake Street
    Bloomingdale, Illinois 60108


2006



430



Leased1001 Johnson Drive
    Buffalo Grove, Illinois 60089


2006



11



Leased61 East Van Buren
    Chicago, Illinois 60605


1986



993



Leased4012 North Pulaski Road
    Chicago, Illinois 60641


1993



717



Owned500 W. Monroe
    Chicago, Illinois 60606


2009



2,082



Leased7227 West Addison Street
    Chicago, Illinois 60634


1996



967



Owned2130 West North Avenue
    Chicago, Illinois 60647


2003



833



Leased1545 Ellinwood Ave
    Des Plaines, Illinois 60016


2007



5,342



Owned927 Curtiss Street
    Downers Grove, Illinois 60515


1996



87



Leased645 Tollgate Road
    Elgin, Illinois 60123


2006







Leased9668 Franklin Avenue
    Franklin Park, Illinois 60131


2006



94



Leased1441 Waukegan Road
    Glenview, Illinois 60025


2003



386



Leased500 West Chestnut Street
    Hinsdale, Illinois 60521


1991



1,250



Owned1604 West Colonial Parkway
    Inverness, Illinois 60067


2006







Leased1190 Old McHenry Road
    Long Grove, Illinois 60047


2003







Leased5555 Bull Valley Road
    McHenry, Illinois 60050


1998



979



Owned50 N. Main Street
    Mount Prospect, Illinois 60056


2007



4,659



Owned1730 Park Street
    Naperville, Illinois 60563


2006



501



Owned8301 West Lawrence
    Norridge, Illinois 60656


2003



263




*444 N. Rand Road
    North Barrington, Illinois 60010


2007



4,454



Owned505 North Roselle Road
    Roselle, Illinois 60172


1999



1,838



Owned17622 Depot Street
    Union, Illinois 60180


1987



55



Owned     *
    
    Land is leased and building is owned. 57




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##### Table of Contents



Item 3.
    Legal
    Proceedings    Item 4.
    Reserved PART II  Item 5.
    Market
    for the Registrants Common Equity and Related Stockholder
    Matters and Issuer Purchases of Equity Securities    Dividends DeclaredHigh

Low

Per Common Share2008First Quarter

$
13.93


$
9.63


$
0.13Second Quarter


13.21



4.87



0.13Third Quarter


7.50



2.90



Fourth Quarter


4.50



1.30



2009First Quarter

$
2.00


$
0.69


$
Second Quarter


1.93



0.67



Third Quarter


0.97



0.52



Fourth Quarter


0.75



0.30



   Issuer
    Purchases of Equity Securities
    Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters
 58




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##### Table of Contents



Supervision and Regulation, Financial Institution
    Regulation  Dividend Limitations. Managements Discussion and Analysis of Financial
    Condition and Results of Operations
     Liquidity.
 59




---



##### Table of Contents



Performance
    Graph
    
 60




---



##### Table of Contents



Item 6.
    Selected
    Consolidated Financial Data  360-10-05),
  Year Ended December 31,2009


2008


2007


2006


2005(Dollars in thousands, except per share data)Statement of Income Data:Total interest income

$
150,508


$
187,661


$
193,869


$
159,262


$
112,244Total interest expense


77,637



100,695



111,237



83,980



50,797Net interest income


72,871



86,966



82,632



75,282



61,447Provision for credit losses(1)


170,203



72,642



4,891



12,025



2,797Noninterest income (loss)


17,130



(50,596
)


15,477



14,551



(6,245
)Noninterest expenses


106,915



177,074



71,395



58,640



60,319(Loss) income before income taxes and discontinued operations


(187,117
)


(213,346
)


21,823



19,168



(7,914
)Provision (benefit) for income taxes


55,596



(55,073
)


3,246



1,422



(6,325
)(Loss) income from continuing operations


(242,713
)


(158,273
)


18,577



17,746



(1,589
)Income from discontinued operations


















7,533Net (loss) income


(242,713
)


(158,273
)


18,577



17,746



5,944Preferred stock dividends and premium accretion


6,057



3,728



204







Income allocated to participating securities(2)










325



217



46Net (loss) income available to common stockholders

$
(248,770
)

$
(162,001
)

$
18,048


$
17,529


$
5,898Per Common Share Data:(Loss) earnings per share (basic) from continuing operations

$
(8.89
)

$
(5.82
)

$
0.71


$
0.75


$
(0.08
)Earnings per share (basic) from discontinued operations


















0.38(Loss) earnings per share (basic)


(8.89
)


(5.82
)


0.71



0.75



0.30(Loss) earnings per share (diluted) from continuing operations


(8.89
)


(5.82
)


0.71



0.74



(0.08
)Earnings per share (diluted) from discontinued operations


















0.38(Loss) earnings per share (diluted)


(8.89
)


(5.82
)


0.71



0.74



0.30Cash dividends declared






0.26



0.52



0.51



0.48Book value at end of period


(2.39
)


6.56



11.94



11.65



9.91Tangible book value at end of period (non-GAAP measure)(3)


(5.14
)


3.21



5.56



7.97



9.78   61




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##### Table of Contents



Year Ended December 31,2009


2008


2007


2006


2005(Dollars in thousands, except per share data)Selected Financial Ratios:Return on average assets from continuing operations(4)


(6.69
)%


(4.32
)%


0.58
%


0.67
%


(0.07
)%Return on average equity from continuing operations(5)


(100.76
)


(46.65
)


6.13



7.04



(0.95
)Dividend payout ratio






N/M



73.04



67.95



162.38Average equity to average assets


6.64



9.27



9.53



9.57



7.29Tier 1 risk-based capital


0.22



8.30



9.21



11.92



16.97Total risk-based capital


0.43



10.07



10.17



12.97



18.07Net interest margin (taxable equivalent)(6)(7)(8)


2.16



2.75



3.02



3.32



3.31Loan to deposit ratio(8)


90.28



104.02



100.66



99.44



88.62Net overhead expense to average assets(8)(9)


2.59



3.98



1.76



1.67



2.14Efficiency ratio(8)(10)


113.23



144.15



68.29



60.55



75.44Loan Quality Ratios(8):Allowance for loan losses to total loans at the end of year


5.55



1.77



1.08



1.19



1.32Provision for loan losses to total loans


7.23



2.86



0.20



0.62



0.19Net loans charged off to average total loans


3.32



2.18



0.20



0.59



0.09Nonaccrual loans to total loans at the end of year(11)


11.80



2.43



1.99



2.20



0.59Nonperforming assets to total assets(12)


9.09



2.36



1.39



1.55



0.83Allowance for loan losses to nonaccrual loans


0.47
x


0.73
x


0.54
x


0.54
x


2.25
xRatio of Earnings to Fixed Charges and Preferred Stock
    Dividends (13):Including deposit interest


(1.31
)


(1.05
)


1.19



1.22



0.83Excluding deposit interest


(3.03
)


(2.76
)


3.79



3.82



2.42Balance Sheet Data:Total assets

$
3,435,545


$
3,570,212


$
3,692,782


$
2,942,046


$
2,307,608Total earning assets(8)


3,343,911



3,195,408



3,266,461



2,617,894



2,126,227Average assets


3,625,855



3,661,209



3,181,990



2,635,138



2,305,086Loans(8)


2,320,319



2,509,759



2,474,327



1,946,816



1,349,996Allowance for loan losses(8)


128,800



44,432



26,748



23,229



17,760Deposits(8)


2,570,111



2,412,791



2,458,148



1,957,810



1,523,384Borrowings(8)


777,078



817,041



821,063



652,774



538,480Stockholders equity


56,476



305,834



375,164



287,242



216,126Tangible stockholders equity (non-GAAP measure)(3)(8)


(20,777
)


212,289



197,713



196,481



213,447       (1)
    
    The provision for credit losses includes the provision for loan
    losses and the provision for unfunded commitments losses as
    follows:  2009


2008


2007


2006


2005Provision for loan losses

$
167,700


$
71,765


$
4,891


$
12,050


$
2,589Provision for unfunded commitments losses


2,503



877







(25
)


208Provision for credit losses

$
170,203


$
72,642


$
4,891


$
12,025


$
2,797  62




---



##### Table of Contents



(2)
    
    Prior periods with earnings were restated as required by the
    authoritative guidance for determining whether instruments
    granted in share-based payment transactions are participating
    securities (ASC 260), which was effective on January 1,
    2009 and required retrospective application, to allocate
    earnings available to common stockholders to restricted shares
    of common stock that are considered participating securities.(3)
    
    Stockholders equity less goodwill, core deposit intangible
    and other intangible assets. Management believes that tangible
    stockholders equity (non-GAAP measure) is a useful measure
    since it excludes the balances of intangible assets which are
    subjective components of valuation. The following table
    reconciles reported stockholders equity to tangible
    stockholders equity for the periods presented:  2009


2008


2007


2006


2005Stockholders equity

$
56,476


$
305,834


$
375,164


$
287,242


$
216,126Core deposit intangible and other intangibles, net


(12,391
)


(14,683
)


(17,044
)


(11,273
)


(1,788
)Goodwill


(64,862
)


(78,862
)


(160,407
)


(79,488
)


(891
)Tangible stockholders equity

$
(20,777
)

$
212,289


$
197,713


$
196,481


$
213,447   (4)
    
    Net income divided by average assets.(5)
    
    Net income divided by average equity.(6)
    
    Net interest income, on a fully taxable-equivalent basis,
    divided by average earning assets.(7)
    
    The following table reconciles reported net interest income on a
    fully taxable-equivalent basis for the periods presented:  2009


2008


2007


2006


2005Net interest income

$
72,871


$
86,966


$
82,632


$
75,282


$
61,447Taxable-equivalent adjustment to net interest income






2,621



3,612



4,286



2,628Net interest income, fully taxable-equivalent basis

$
72,871


$
89,587


$
86,244


$
79,568


$
64,075   No taxable-equivalent adjustment is included for 2009 as a
    result of the Companys current tax position.(8)
    
    Reflects continuing operations due to the sale of bank
    subsidiary on September 30, 2005.(9)
    
    Noninterest expense less noninterest income, excluding security
    gains/losses and impairments, divided by average assets.(10)
    
    Noninterest expense excluding amortization of intangible assets
    and foreclosed properties expense divided by noninterest income,
    excluding security gains/losses and impairments, plus net
    interest income on a fully taxable-equivalent basis.(11)
    
    Includes total nonaccrual, impaired and all other loans
    90 days or more past due.(12)
    
    Includes total nonaccrual and all other loans 90 days or
    more past due, trouble-debt restructured loans and foreclosed
    properties.(13)
    
    For purposes of calculating the ratio of earnings to combined
    fixed charges and preferred stock dividends, earnings are the
    sum of (a) income (loss) before income taxes and
    discontinued operations and (b) fixed charges; and fixed
    charges are the sum of: (x) interest cost, including
    interest on deposits, (y) that portion of rent expense
    estimated to be representative of the interest factor and
    (z) amortization of issuance costs on trust preferred
    securities. The preferred stock dividend amounts represent
    pre-tax earnings required to cover dividends on Series A
    preferred stock and Series T preferred stock. 63




---



##### Table of Contents



Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Overview
        Critical
    Accounting Policies and Estimates
    Allowance for Loan Losses:
  310-10-35).
 64




---



##### Table of Contents



Income Taxes:
      Evaluation of Securities for
    Impairment: held-to-maturity available-for-sale available-for-sale held-to-maturity available-for-sale
 65




---



##### Table of Contents



other-than-temporary Other-than-temporary other-than-temporary
  Evaluation of Goodwill Impairment:
       66




---



##### Table of Contents



Accounting
    Pronouncements
  tm
    and/or
  815-40-15). fixed-for-fixed
 67




---



##### Table of Contents



2010-6).
  other-than-temporary other-than-temporary Other-than-temporary
  2010-09, 2010-09), 2010-09
   68




---



##### Table of Contents



Consolidated
    Results of Operations
  Outlook for
    2010
  2009
    Compared to 2008
     69




---



##### Table of Contents



Net Interest Income.
  Trends in Fully Taxable-Equivalent Interest Income and
    Average Interest-Earning Assets.
    Trends in Interest Expense and Average Interest-Bearing
    Liabilities.
   70




---



##### Table of Contents



Provision for Credit Losses. Analysis of Allowance for Loan
    Losses
  Noninterest Income.
    Noninterest Expense.
     71




---



##### Table of Contents



Federal and State Income Tax.
    Year Ended December 31,2009


2008(Dollars in thousands)Income taxes computed at the statutory rate

$
(65,491
)


35.0
%

$
(74,671
)


35.0
%Tax-exempt interest income on securities and loans


(455
)


0.2



(802
)


0.4General business credits


(566
)


0.3



(661
)


0.3State income taxes, net of federal tax benefit due to state
    operating loss


(6,699
)


3.6



(4,419
)


2.1Life insurance cash surrender value increase, net of premiums


(466
)


0.2



(1,195
)


0.6Liquidation of bank-owned life insurance


6,924



(3.7
)






Dividends received deduction










(642
)


0.3Goodwill impairment


4,900



(2.6
)


27,733



(13.0
)Valuation allowance


116,286



(62.1
)






Nondeductible costs and other, net


1,163



(0.6
)


(416
)


0.1Total (benefit) provision for income taxes

$
55,596



(29.7
)%

$
(55,073
)


25.8
%   2008
    Compared to 2007
      Net Interest Income.
 72




---



##### Table of Contents



Trends in Fully Taxable-Equivalent Interest Income and
    Average Interest-Earning Assets.
    Trends in Interest Expense and Average Interest-Bearing
    Liabilities.
         73




---



##### Table of Contents



Provision for Credit Losses.
  Noninterest Income.
    Noninterest Expense.
         74




---



##### Table of Contents



Federal and State Income Tax.
  Year Ended December 31,2008


2007(Dollars in thousands)Income taxes computed at the statutory rate

$
(74,671
)


35.0
%

$
7,638



35.0
%Tax-exempt interest income on securities and loans


(802
)


0.4



(771
)


(3.5
)General business credits


(661
)


0.3



(643
)


(2.9
)State income taxes, net of federal tax benefit due to state
    operating loss


(4,419
)


2.1



(1,027
)


(4.7
)Life insurance cash surrender value increase, net of premiums


(1,195
)


0.6



(1,072
)


(4.9
)Dividends received deduction


(642
)


0.3



(1,214
)


(5.6
)Goodwill impairment


27,733



(13.0
)






Annuity proceeds










267



1.2Nondeductible costs and other, net


(416
)


0.1



68



0.3Total provision (benefit) for income taxes

$
(55,073
)


25.8
%

$
3,246



14.9
%  75




---



##### Table of Contents



Interest-Earning
    Assets and Interest-Bearing Liabilities
    Year Ended December 31,2009


2008


2007Average





Average


Average





Average


Average





AverageBalance


Interest


Rate


Balance


Interest


Rate


Balance


Interest


Rate(Dollars in thousands)Interest-Earning Assets:Federal funds sold and other short-term investments

$
185,487


$
472



0.25
%

$
17,320


$
327



1.89
%

$
17,124


$
839



4.90
%Securities:Taxable(1)


624,215



15,190



2.43



667,324



34,282



5.14



669,154



36,901



5.51Exempt from federal income taxes(1)


25,780



986



3.82



60,704



3,563



5.87



58,844



3,491



5.93Total securities


649,995



16,176



2.49



728,028



37,845



5.20



727,998



40,392



5.55FRB and FHLB stock


29,397



680



2.31



29,975



741



2.47



24,697



839



3.40Loans held for sale


























1,450



89



6.14Loans:Commercial loans(1)(2)(3)


520,911



26,721



5.13



513,321



31,475



6.13



452,438



34,105



7.54Commercial real estate loans(1)(2)(3)(4)


1,632,689



91,187



5.59



1,639,442



102,112



6.23



1,336,421



100,954



7.55Agricultural loans(1)(2)(3)


7,913



511



6.46



6,287



403



6.41



3,406



268



7.87Consumer real estate loans(2)(3)(4)


339,767



14,379



4.23



314,917



16,754



5.32



285,999



19,207



6.72Consumer installment loans(2)(3)


5,783



382



6.61



9,103



625



6.87



10,432



788



7.55Total loans


2,507,063



133,180



5.31



2,483,070



151,369



6.10



2,088,696



155,322



7.44Total interest-earning assets

$
3,371,942


$
150,508



4.46
%

$
3,258,393


$
190,282



5.84
%

$
2,859,965


$
197,481



6.91
%Noninterest-Earning Assets:Cash

$
45,724










$
57,303










$
57,185Premises and equipment, net


39,663











39,018











27,093Allowance for loan losses


(65,366
)










(28,093
)










(24,977
)Other assets


233,892











334,588











262,724Total noninterest-earning assets


253,913











402,816











322,025Total assets

$
3,625,855










$
3,661,209










$
3,181,990Interest-Bearing Liabilities:Deposits:Interest-bearing demand deposits

$
176,930


$
862



0.49
%

$
200,869


$
1,977



0.98
%

$
182,276


$
3,366



1.85
%Money-market demand accounts and savings accounts


349,278



2,864



0.82



384,496



4,994



1.30



386,722



9,949



2.57Time deposits less than $100,000


798,254



22,132



2.77



619,828



25,106



4.05



598,012



29,603



4.95Time deposits of $100,000 or more


892,178



21,350



2.39



891,354



33,948



3.81



689,335



33,774



4.90Total interest-bearing deposits


2,216,640



47,208



2.13



2,096,547



66,025



3.15



1,856,345



76,692



4.13Borrowings:Federal funds purchased and repurchase agreements


312,052



13,011



4.17



390,399



15,326



3.93



304,269



13,131



4.32FHLB advance


346,329



12,195



3.52



335,039



11,824



3.53



317,232



14,769



4.66Junior subordinated debt


60,818



2,290



3.77



60,758



3,696



6.08



66,114



5,275



7.98Revolving note payable


8,600



448



5.21



10,550



474



4.49



3,007



186



6.19Term note payable


55,000



1,900



3.45



58,689



2,643



4.50



18,205



1,184



6.50Subordinated debt


15,000



585



3.90



11,311



707



6.25











Total borrowings


797,799



30,429



3.81



866,746



34,670



4.00



708,827



34,545



4.87Total interest-bearing liabilities

$
3,014,439


$
77,637



2.58
%

$
2,963,293


$
100,695



3.40
%

$
2,565,172


$
111,237



4.34
%Noninterest-Bearing Liabilities:Demand deposits

$
337,246










$
326,104










$
274,819Other liabilities


33,290











32,551











38,804Total noninterest-bearing liabilities


370,536











358,655











313,623Stockholders equity


240,880











339,261











303,195Total liabilities and stockholders equity

$
3,625,855










$
3,661,209










$
3,181,990Net interest income (tax equivalent)(1)(5)





$
72,871



1.88
%





$
89,587



2.44
%





$
86,244



2.57
%Net interest margin (tax equivalent)(1)










2.16
%










2.75
%










3.02
%Net interest income(5)(6)





$
72,871










$
86,966










$
82,632Net interest margin(6)










2.16
%










2.67
%










2.89
%Average interest-earning assets to interest-bearing liabilities


111.86
%










109.96
%










111.49
%     (1)
    
    Adjusted for 35% tax rate and adjusted for the
    dividends-received deduction, except for 2009 as a result of the
    Companys current tax position. 76




---



##### Table of Contents



(2)
    
    Nonaccrual loans are included in the average balances; however,
    these loans are not earning any interest.(3)
    
    Includes loan fees (in thousands) of $2,134, $2,866, and $2,747
    for 2009, 2008, and 2007, respectively.(4)
    
    Includes construction loans.(5)
    
    The following table reconciles reported net interest income on a
    tax equivalent basis for the periods presented (in thousands):  2009


2008


2007Net interest income

$
72,871


$
86,966


$
82,632Taxable-equivalent adjustment to net interest income






2,621



3,612Net interest income, fully taxable-equivalent basis

$
72,871


$
89,587


$
86,244   (6)
    
    Not adjusted for 35% tax rate or for the dividends-received
    deduction.  Changes
    in Interest Income and Expense
      Year Ended December 31,2009 Compared to 2008


2008 Compared to 2007Change Due to


Change Due toNet


Volume


Rate


Net


Volume


Rate(In thousands)Interest-Earning Assets:Federal funds sold and other short-term investments

$
145


$
653


$
(508
)

$
(512
)

$
9


$
(521
)Securities taxable


(19,092
)


(2,087
)


(17,005
)


(2,619
)


(101
)


(2,518
)Securities exempt from federal income taxes


(2,577
)


(1,605
)


(972
)


72



109



(37
)FRB and FHLB stock


(61
)


(14
)


(47
)


(98
)


158



(256
)Loans held for sale














(89
)


(89
)


Commercial loans


(4,754
)


459



(5,213
)


(2,630
)


4,231



(6,861
)Commercial real estate loans


(10,925
)


(419
)


(10,506
)


1,158



20,626



(19,468
)Agricultural loans


108



105



3



135



192



(57
)Consumer real estate loans


(2,375
)


1,247



(3,622
)


(2,453
)


1,810



(4,263
)Consumer installment loans


(243
)


(220
)


(23
)


(163
)


(95
)


(68
)Total interest-earning assets

$
(39,774
)

$
(1,881
)

$
(37,893
)

$
(7,199
)

$
26,850


$
(34,049
) 77




---



##### Table of Contents



Year Ended December 31,2009 Compared to 2008


2008 Compared to 2007Change Due to


Change Due toNet


Volume


Rate


Net


Volume


Rate(In thousands)Interest-Bearing Liabilities:Interest-bearing demand deposits

$
(1,115
)

$
(213
)

$
(902
)

$
(1,389
)

$
315


$
(1,704
)Money market demand accounts and savings accounts


(2,130
)


(424
)


(1,706
)


(4,955
)


(57
)


(4,898
)Time deposits of less than $100,000


(2,974
)


6,139



(9,113
)


(4,497
)


1,047



(5,544
)Time deposits of $100,000 or more


(12,598
)


31



(12,629
)


174



8,646



(8,472
)Federal funds purchased and repurchase agreements


(2,315
)


(3,222
)


907



2,195



3,462



(1,267
)FHLB advances


371



398



(27
)


(2,945
)


791



(3,736
)Junior subordinated debentures


(1,406
)


4



(1,410
)


(1,579
)


(402
)


(1,177
)Revolving note payable


(26
)


(95
)


69



288



351



(63
)Term note payable


(743
)


(158
)


(585
)


1,459



1,922



(463
)Subordinated note payable


(122
)


190



(312
)


707



707



Total interest-bearing liabilities

$
(23,058
)

$
2,650


$
(25,708
)

$
(10,542
)

$
16,782


$
(27,324
)Net interest

$
(16,716
)

$
(4,531
)

$
(12,185
)

$
3,343


$
10,068


$
(6,725
)   Financial
    Condition
  Balance Sheet.
  Asset Quality. 30-89 days
 78




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##### Table of Contents



Loans
    December 31,2009(1)


2008(1)


2007(1)


2006(2)


2005(2)(In thousands)Commercial

$
972,090


$
1,090,078


$
1,079,631


$
376,944


$
201,284Construction


293,215



366,178



464,583



424,181



358,785Commercial real estate


725,814



729,729



627,928



761,742



496,819Home equity


219,183



194,673



142,158



147,366



115,429Other consumer


5,454



6,332



10,689



9,373



4,273Residential mortgage


105,147



123,161



149,703



227,762



174,184Total loans, gross


2,320,903



2,510,151



2,474,692



1,947,368



1,350,774Net deferred fees


(584
)


(392
)


(365
)


(552
)


(778
)Total loans


2,320,319



2,509,759



2,474,327



1,946,816



1,349,996Allowance for loan losses


(128,800
)


(44,432
)


(26,748
)


(23,229
)


(17,760
)Net loans

$
2,191,519


$
2,465,327


$
2,447,579


$
1,923,587


$
1,332,236Loans held for sale:Consumer real estate

$



$



$



$
2,672


$
1,912     (1)
    
    Source of repayment classification.(2)
    
    Collateral-based classification.  and/or loan-by-loan
   79




---



##### Table of Contents



Loan
    Maturities
    One Year


1-5 Years


Over 5 YearsOr Less


Fixed


Variable


Fixed


Variable


Total(In thousands)Commercial

$
433,429


$
424,941


$
43,250


$
55,777


$
14,693


$
972,090Construction


247,664



4,355



40,449







747



293,215Commercial real estate


300,343



347,741



69,438



8,292







725,814Home equity


16,912



13,360



104,059



199



84,653



219,183Other consumer


3,600



1,673



181











5,454Residential mortgage


8,341



19,111



2,679



35,508



39,508



105,147Total loans, gross


1,010,289



811,181



260,056



99,776



139,601



2,320,903Net deferred fees






















(584
)Total loans

$
1,010,289


$
811,181


$
260,056


$
99,776


$
139,601


$
2,320,319   Nonaccrual
    Loans and Nonperforming Assets
    310-10-35),
  case-by-case
   80




---



##### Table of Contents



December 31,2009


2008


2007


2006


2005(Dollars in thousands)Impaired and other loans 90 days past due and accruing

$



$



$



$
34


$
4Nonaccrual loans

$
273,823


$
61,104


$
49,173


$
42,826


$
7,905Troubled-debt restructured loans accruing


11,635



11,006











Total nonperforming loans


285,458



72,110



49,173



42,826



7,905Foreclosed properties


26,917



12,018



2,220



2,640



11,154Total nonperforming assets

$
312,375


$
84,128


$
51,393


$
45,466


$
19,059Nonaccrual loans to loans


11.80
%


2.43
%


1.99
%


2.20
%


0.59
%Nonperforming assets to loans and foreclosed properties


13.31



3.34



2.08



2.33



1.40Nonperforming assets to assets


9.09



2.36



1.39



1.55



0.83       December 31,2009


2008(Dollars in thousands)Nonaccrual loans:Commercial and industrial

$
20,719


$
3,559Commercial real estate  non-owner occupied


110,504



10,310Commercial real estate  owner occupied


19,573



14,244Construction


73,124



20,726Vacant land


37,021



6,550Total commercial and commercial real estate


260,941



55,389Other consumer


12,588



5,315Home equity


294



400Total consumer


12,883



5,715Total nonaccrual loans

$
273,823


$
61,104    81




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##### Table of Contents




    a $15.9 million loan relationship related to a mobile home
    park in Michigan. As of December 31, 2009, the Company has
    $10.5 million in a specific loan loss reserve based upon
    estimated collateral values. The Companys total credit
    exposure to this customer is $15.9 million;
    an $11.6 million loan relationship (net of
    $4.7 million charge-offs in December 2009) secured by
    vacant land. As of December 31, 2009, the Company has
    $4.0 million in a specific loan loss reserve based upon
    estimated collateral values. The Companys total credit
    exposure to this customer is $11.8 million;
    a $9.2 million loan relationship (net of $2.3 million
    charge-offs in October 2009) that consists of several loans
    for various commercial properties in Cook County, Illinois.
    Third party real estate management and marketing firms have been
    engaged by the borrower. The management company is focusing on
    stabilizing buildings, renewing leases and seeking new tenants.
    Collateral consists of five office buildings, a single family
    home, and a residential condominium. The properties securing the
    loans have experienced increased vacancies and resulting
    decreases in operating income to provide sufficient cash flow to
    meet contractual loan payments. The guarantor has limited
    liquidity. The Company has $0.6 million in a specific loan
    loss reserve for this loan as of December 31, 2009. The
    Companys total credit exposure to this customer is
    $10.5 million;
    a $9.0 million loan relationship secured by vacant lots,
    rented and vacant single family homes, apartment buildings, and
    an incomplete condominium project. As of December 31, 2009,
    the Company has $2.1 million in a specific loan loss
    reserve based upon estimated collateral values. The
    Companys total credit exposure to this customer is
    $9.3 million;
    an $8.8 million loan relationship secured by first real
    estate mortgages on various commercial real estate properties in
    Chicago and Indiana. As of December 31, 2009, the Company
    has $0.4 million in a specific loan loss reserve based upon
    estimated collateral values. The Companys total credit
    exposure to this customer is $8.8 million;
    an $8.5 million loan relationship related to several
    construction projects in and near Lake County, Illinois. As of
    December 31, 2009, the Company has $3.3 million in a
    specific loan loss reserve based upon estimated collateral
    values. The Companys total credit exposure to this
    customer is $11.8 million;
    an $8.3 million loan relationship secured by a completed
    condominium project in a western suburb of Chicago, IL with 22
    residential condominiums and four commercial spaces. As of
    December 31, 2009, the Company has $2.6 million in a
    specific loan loss reserve based upon estimated collateral
    values. The Companys total credit exposure to this
    customer is $8.5 million;
    an $8.0 million loan relationship secured by 38 residential
    condominiums in three projects, three commercial condominiums in
    a single building and two residential condominiums. As of
    December 31, 2009, the Company has $0.3 million in a
    specific loan loss reserve based upon estimated collateral
    values. The Companys total credit exposure to this
    customer is $8.4 million;
    a $7.9 million loan relationship (net of $3.2 million
    charge-offs in the fourth quarter of 2009) with collateral
    located in a western suburb of Chicago, consisting of improved
    lots on 25 acres which will consist of 52 single family
    homes. The property value has declined and only six lots have
    been sold. The guarantors have limited liquidity and net worth
    and continue efforts to raise equity to fund the real estate
    investment. The Company has $3.0 million in a specific loan
    loss reserve for this loan relationship as of December 31,
    2009, based upon estimated collateral values. The Companys
    total credit exposure to this customer is $8.2 million;
    a $7.6 million loan relationship comprised of land
    acquisition and development for commercial lots. The Company has
    $3.6 million in a specific loan loss reserve for this loan
    relationship as of December 31, 2009, based upon estimated
    collateral values. The Companys total credit exposure to
    this customer is $8.5 million; 82




---



##### Table of Contents




    a $5.1 million loan relationship ($2.5 million
    commercial real estate, $1.8 million vacant land, and
    $0.8 million commercial & industrial) related to
    multi-unit
    apartment buildings. The borrowers are currently attempting to
    sell the properties. The Company has $1.6 million in a
    specific loan loss reserve for this loan relationship as of
    December 31, 2009, based upon estimated collateral values.
    The Companys total credit exposure to this customer is
    $5.6 million;
    a $4.9 million loan relationship to a residential
    homebuilder originated in 2003 for a commercial property in a
    western suburb of Chicago which has been stalled due to on-going
    litigation with the local municipality. The Company has
    $1.5 million in a specific loan loss reserve for this loan
    relationship as of December 31, 2009, based upon estimated
    collateral values. The Companys total credit exposure to
    this customer is $5.7 million;
    a $4.6 million loan relationship to a realtor in west
    suburban Chicago. Collateral consists of two office buildings.
    No specific loan loss reserve was needed based upon estimated
    collateral values. The Companys total credit exposure to
    this customer is $4.6 million;
    a $4.5 million loan relationship (net of $1.0 million
    charge-off in November 2009), with collateral located in Indiana
    consisting of a three building retail development. The Company
    has $0.3 million in a specific loan loss reserve for this
    loan relationship as of December 31, 2009, based upon
    estimated collateral values. The Companys total credit
    exposure to this customer is $4.5 million;
    a $4.1 million loan relationship (net of $1.0 million
    charge-off in December 2009), secured by a vacant auto
    dealership and single family home. No specific loan loss reserve
    was needed based upon estimated collateral values. The
    Companys total credit exposure to this customer is
    $4.6 million;
    a $4.0 million loan relationship ($2.8 million
    construction and $1.2 million non-owner occupied real
    estate) secured with an 18 unit residential project and a
    six unit residential project. The Company has $1.8 million
    in a specific loan loss reserve for this loan relationship as of
    December 31, 2009, based upon estimated collateral values.
    The Companys total credit exposure to this customer is
    $4.1 million;
    a $4.0 million loan relationship, of which
    $2.5 million has been charged off, secured with a project
    located in Cook County experiencing slow sales. The properties
    securing the loan relationship have not sold with the borrower
    now leasing properties at a level that is not sufficient to meet
    contractual loan payments. There are multiple guarantors who
    have limited liquidity. The Company has $1.4 million in a
    specific loan loss reserve for this loan relationship as of
    December 31, 2009, based upon estimated collateral values.
    The Companys total credit exposure to this customer is
    $4.0 million;
    a $3.7 million loan relationship (net of $2.4 million
    charge-offs in the fourth quarter of 2009) secured by
    retail strip center and various land parcels. Borrower is
    currently trying to sell or refinance all of the collateral. The
    Company has $0.7 million in a specific loan loss reserve
    for this loan relationship as of December 31, 2009, based
    upon estimated collateral values. The Companys total
    credit exposure to this customer is $3.7 million;
    a $3.5 million loan relationship (net of $1.6 million
    charge-offs in December 2009) secured by four models, five
    speculative homes, one townhome, and 41 vacant lots. The Company
    has $1.0 million in a specific loan loss reserve for this
    loan relationship as of December 31, 2009, based upon
    estimated collateral values. The Companys total credit
    exposure to this customer is $4.8 million;
    a $3.4 million loan relationship on an acquisition and
    development loan in a southwestern suburb of Chicago, IL. The
    Company has $2.2 million in a specific loan loss reserve
    for this loan relationship as of December 31, 2009, based
    upon estimated collateral values. The Companys total
    credit exposure to this customer is $3.4 million;
    a $3.4 million loan relationship secured by a six unit
    residential condominium building with ground level retail and
    lower level parking located in Chicago, IL. The Company has
    $2.1 million in a specific loan loss reserve for this loan
    relationship as of December 31, 2009, based upon estimated
    collateral values. The Companys total credit exposure to
    this customer is $3.5 million; 83




---



##### Table of Contents




    a $3.4 million loan relationship secured by a high end
    single family speculative homes in a western suburb of Chicago,
    IL. The Company has $0.3 million in a specific loan loss
    reserve for this loan as of December 31, 2009, based upon
    estimated collateral values. The Companys total credit
    exposure to this customer is $3.4 million;
    a $3.3 million loan relationship secured by residential
    condominiums. The Company has $0.3 million in a specific
    loan loss reserve for this loan relationship as of
    December 31, 2009, based upon estimated collateral values.
    The Companys total credit exposure to this customer is
    $3.3 million;
    a $3.0 million loan relationship secured by real estate
    collateral to a borrower which also had a business loan of
    $1.3 million that was fully charged-off in November 2009.
    The Company has $1.2 million in a specific loan loss
    reserve for this loan relationship as of December 31, 2009,
    based upon estimated collateral values. The Companys total
    credit exposure to this customer is $3.0 million;
    a $3.0 million loan relationship (net of $1.2 million
    charge-offs in December 2009) secured by two single family
    residences, a four flat, and a vacant lot. Foreclosures have
    been filed on all four properties. No specific loan loss reserve
    was needed based upon estimated collateral values. The
    Companys total credit exposure to this customer is
    $3.0 million;
    a $3.0 million loan relationship ($2.3 owner occupied
    commercial real estate and $674,000 commercial and industrial).
    The guarantor has passed away. Foreclosure proceedings are
    continuing against underlying collateral of commercial property
    located in Chicago, IL. No specific loan loss reserve was needed
    based upon estimated collateral value. The Companys total
    credit exposure to this customer is $3.0 million;
    a $3.0 million loan relationship secured by real property
    in a western suburb of Chicago, IL that is currently vacant. The
    Company has $1.1 million in a loss specific reserve for
    this loan relationship as of December 31, 2009, based upon
    estimated collateral values. The Companys total credit
    exposure to this customer is $3.0 million;
    a $2.5 million loan relationship secured by three vacant
    lots , a commercial property, and an office/warehouse property
    in western suburbs of Chicago, IL. No specific loan loss reserve
    was needed based upon estimated collateral values. The
    Companys total credit exposure to this customer is
    $2.5 million; and
    a $2.2 million loan relationship (net of $3.1 million
    charge-offs in December 2009) secured with property where the
    development has stalled and the guarantor is considering
    alternative strategies to sell or liquidate the assets. The
    guarantor is currently providing contractual payments; however,
    in the future their liquidity position will no longer enable
    them to continue to meet loan repayment terms. The Company has
    $0.6 million in a specific loan loss reserve for this loan
    relationship as of December 31, 2009, based upon estimated
    collateral values. The Companys total credit exposure to
    this customer is $2.2 million.     84




---



##### Table of Contents



Analysis
    of Allowance for Loan Losses
        310-10-35).
    20-35%
   85




---



##### Table of Contents



Year Ended December 31,2009


2008


2007


2006


2005(Dollars in thousands)Average total loans

$
2,507,063


$
2,483,070


$
2,088,696


$
1,658,920


$
1,210,873Total loans at end of year

$
2,320,319


$
2,509,759


$
2,474,327


$
1,946,816


$
1,349,996Total nonaccrual loans

$
273,823


$
61,104


$
49,173


$
42,826


$
7,905Allowance for loan losses at beginning of year

$
44,432


$
26,748


$
23,229


$
17,760


$
16,217Addition resulting from acquisition










2,767



3,244



Charge-offs:Commercial loans


28,484



11,475



5,092



5,912



1,668Consumer real estate loans(1)


5,950



3,846



458



360



15Commercial real estate loans(1)


51,084



40,389



336



4,401



772Agricultural loans


















Consumer installment loans


84



139



89



136



64Total charge-offs


85,602



55,849



5,975



10,809



2,519Recoveries:Commercial loans


1,238



1,149



885



616



1,448Consumer real estate loans(1)


138



91



9



4



5Commercial real estate loans(1)


881



508



927



339



6Agricultural loans


















Consumer installment loans


13



20



15



25



14Total recoveries


2,270



1,768



1,836



984



1,473Net charge-offs


83,332



54,081



4,139



9,825



1,046Provision for loan losses


167,700



71,765



4,891



12,050



2,589Allowance for loan losses at end of the year

$
128,800


$
44,432


$
26,748


$
23,229


$
17,760Net charge-offs to average total loans


3.32
%


2.18
%


0.20
%


0.59
%


0.09
%Allowance for loan losses to total loans at end of year


5.55



1.77



1.08



1.19



1.32Allowance for loan losses to nonaccrual loans


0.47
x


0.73
x


0.54
x


0.54
x


2.25x     (1)
    
    Includes construction loans. 86




---



##### Table of Contents



December 31,2009


2008


2007


2006


2005Loan





Loan





Loan





Loan





LoanCategory





Category





Category





Category





CategoryTo





To





To





To





ToGross





Gross





Gross





Gross





GrossAmount


Loans


Amount


Loans


Amount


Loans


Amount


Loans


Amount


Loans(Dollars in thousands)Commercial

$
13,944



19.42
%

$
8,829



20.80
%

$
6,369



21.52
%

$
6,156



19.87
%

$
7,727



14.54
%Commercial real estate


89,728



66.12



24,518



65.79



19,336



65.15



16,166



65.35



7,807



69.24Agricultural


42



0.26



171



0.29



2



0.20



3



0.13



3



0.15Consumer real estate


12,398



13.97



6,258



12.67



603



12.64



352



14.10



864



15.76Consumer installment


266



0.23



302



0.25



81



0.49



90



0.55



46



0.31Unallocated


12,422







4,354







357







462







1,313



Total allowance for loan losses

$
128,800



100.00
%

$
44,432



100.00
%

$
26,748



100.00
%

$
23,229



100.00
%

$
17,760



100.00
%       Special Mention:
  and/or
 87




---



##### Table of Contents



Substandard:
    Doubtful:
      Securities
   88




---



##### Table of Contents



available-for-sale held-to-maturity
  December 31, 2009Held-to-Maturity


Available-for-Sale


Total% ofAmortized


Fair


Amortized


Fair


Amortized


Fair


AmortizedCost


Value


Cost


Value


Cost


Value


Cost(Dollars in thousands)Obligations of the U.S. Treasury

$



$



$
310,954


$
310,947


$
310,954


$
310,947



52.7
%Mortgage-backed securities:U.S. government agencies  residential(1)










259,878



256,275



259,878



256,275



44.1U.S. government-sponsored entities(2)










1,271



1,259



1,271



1,259



0.2Equity securities of U.S. government-sponsored entities(3)










2,749



2,272



2,749



2,272



0.5Corporate and other debt securities










14,920



10,721



14,920



10,721



2.5Total

$



$



$
589,772


$
581,474


$
589,772


$
581,474



100.0
%     (1)
    
    Includes obligations of the Government National Mortgage
    Association (GNMA).(2)
    
    Includes obligations of the Federal Home Loan Mortgage
    Corporation (FHLMC).(3)
    
    Includes issues from Federal National Mortgage Association
    (FNMA) and FHLMC.  December 31, 2008Held-to-Maturity


Available-for-Sale


Total% ofAmortized


Fair


Amortized


Fair


Amortized


Fair


AmortizedCost


Value


Cost


Value


Cost


Value


Cost(Dollars in thousands)Obligations of U.S. Treasury and U.S. government-sponsored
    entities(1)

$



$



$
263,483


$
265,435


$
263,483


$
265,435



40.3
%Obligations of states and political subdivisions


1,251



1,263



57,309



56,664



58,560



57,927



9.0Mortgage-backed securities(1)(2)


29,016



29,124



281,592



283,679



310,608



312,803



47.4Equity securities(3)










2,749



930



2,749



930



0.4Corporate and other debt securities










19,176



15,241



19,176



15,241



2.9Total

$
30,267


$
30,387


$
624,309


$
621,949


$
654,576


$
652,336



100.0
%     (1)
    
    Includes obligations of the FHLMC and FNMA.(2)
    
    Includes obligations of the GNMA.(3)
    
    Includes issues from the FNMA and FHLMC.  89




---



##### Table of Contents



December 31, 2007Held-to-Maturity


Available-for-Sale


Total% ofAmortized


Fair


Amortized


Fair


Amortized


Fair


AmortizedCost


Value


Cost


Value


Cost


Value


Cost(Dollars in thousands)Obligations of U.S. Treasury and U.S. government-sponsored
    entities(1)

$



$



$
181,983


$
183,613


$
181,983


$
183,613



23.6
%Obligations of states and political subdivisions


1,254



1,268



60,985



61,400



62,239



62,668



8.1Mortgage-backed securities(1)(2)


36,347



35,644



383,633



379,040



419,980



414,684



54.4Equity securities(3)










85,139



65,979



85,139



65,979



11.0Corporate and other debt securities










22,095



20,849



22,095



20,849



2.9Total

$
37,601


$
36,912


$
733,835


$
710,881


$
771,436


$
747,793



100.0
%     (1)
    
    Includes obligations of the FHLMC and FNMA.(2)
    
    Includes obligations of the GNMA.(3)
    
    Includes issues from the FNMA and FHLMC.      available-for-sale available-for-sale
  held-to-maturity. held-to-maturity.
  other-than-temporary
 90




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##### Table of Contents



available-for-sale
  
    U.S. Treasury and obligations of
    U.S. government-sponsored entities increased by
    $45.5 million to $310.9 million, or 52.7% of the
    portfolio in terms of amortized cost, at December 31, 2009
    compared to $265.4 million at the end of 2008. At
    December 31, 2009, the Companys holdings in this
    category consisted of only U.S. Treasury bills with
    maturities of less than four months.
    U.S. government agency and government-sponsored entity
    mortgage-backed securities decreased 9.2%, or
    $26.1 million, from $283.7 million at
    December 31, 2008 to $257.5 million at
    December 31, 2009.
    Equity securities increased $1.3 million to
    $2.3 million at December 31, 2009 from
    December 31, 2008 as a result of the increase in fair
    market value.
    Corporate and other debt securities decreased by
    $4.5 million to $10.7 million at December 31,
    2009 from $15.2 million at December 31, 2008 mainly as
    a result of a sale transaction.  sub-prime
  available-for-sale available-for-sale other-than-temporary
    Investment
    Maturities and Yields
  available-for-sale
  Contractual or Estimated MaturityAfter One But


After Five ButWithin One


Within


Within


AfterYear


Five Years


Ten Years


Ten Years


TotalAmount


Yield


Amount


Yield


Amount


Yield


Amount


Yield


Amount


Yield(Dollars in thousands)Available- for-Sale-Securities:Obligations of U.S. Treasury

$
310,947



0.07
%

$





%

$





%

$





%

$
310,947



0.07
%Mortgage-backed securities:U.S. government agencies  residential(1)


4,206



0.76



168,476



2.68



83,593



3.80











256,275



3.02U.S. government-sponsored entities(2)


1,259



3.01



























1,259



3.01Equity securities of U.S. government-sponsored entities(3)(4)


























2,272







2,272



Corporate and other debt securities


















3,700



4.39



7,021



0.69



10,721



1.66Total

$
316,412



0.09
%

$
168,476



2.68
%

$
87,293



3.83
%

$
9,293



0.52
%

$
581,474



1.40
%     (1)
    
    Includes obligations of the GNMA.(2)
    
    Includes obligations of the FHLMC. 91




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##### Table of Contents



(3)
    
    Includes issues from FNMA and FHLMC.(4)
    
    Equity securities, although they do not have a maturity date,
    are included in the after ten years column.  Cash
    Surrender Value of Life Insurance
    Goodwill
                 92




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##### Table of Contents



60-89 days
  60-89 days
   93




---



##### Table of Contents



60-89 days
  Deposits
    December 31,2009


2008(Dollars in thousands)Noninterest-bearing demand

$
349,796


$
334,495Interest-bearing demand


178,172



176,224Money market


168,228



208,484Savings


172,969



129,101Certificates of deposit less than $100,000


833,187



689,896Certificates of deposit of $100,000 or more


413,256



435,687Brokered certificates of deposit


454,503



438,904Total interest-bearing deposits


2,220,315



2,078,296Total deposits

$
2,570,111


$
2,412,791Total core deposits(1)

$
869,165


$
848,304  94




---



##### Table of Contents



(1)
    
    Includes noninterest-bearing and interest-bearing demand, money
    market, and savings.      
    Noninterest-bearing deposits were $349.8 million at
    December 31, 2009, $15.3 million, or 4.6%, more than
    the $334.5 million level at December 31, 2008.
    Interest-bearing deposits increased 6.8%, or $142.0 million
    to $2.2 billion at December 31, 2009 compared to
    December 31, 2008.
    Core deposits increased $20.9 million, or 2.5%, to
    $869.2 million at December 31, 2009 from
    $848.3 million at December 31, 2008.
    Certificates of deposit under $100,000 increased
    $143.3 million, or 20.8%, from December 31, 2008 to
    $833.2 million at December 31, 2009, as a result of
    successful promotions which allowed the Company to build
    liquidity.
    Certificates of deposit of $100,000 or more decreased by
    $22.4 million, or 5.1%, from December 31, 2008 to
    $413.3 million at December 31, 2009.
    Certificates of deposits through the CDARS and Internet networks
    were $137.8 million at December 31, 2009 compared to
    $41.6 million at December 31, 2008. These networks
    allow the Company to access other deposit funding sources.
    Brokered certificates of deposit increased $15.6 million,
    or 3.6%, to $454.5 million at December 31, 2009
    compared to year end 2008. The brokered certificates of deposit
    are comprised of underlying certificates of deposits in
    denominations of less than $100,000.
    As a result of the Banks undercapitalized status for
    regulatory capital purposes, the Bank is no longer able to
    accept or renew brokered deposits or, whether wholesale or
    retail, secure deposits at rates that are 75 basis points
    higher than the prevailing effective rates on insured deposits
    of comparable amounts or maturities in the Banks normal
    market area or the national rates periodically release by the
    FDIC.     95




---



##### Table of Contents



Year Ended December 31,2009


2008


2007Average


Percent of





Average


Percent of





Average


Percent ofBalance


Deposits


Rate


Balance


Deposits


Rate


Balance


Deposits


Rate(Dollars in thousands)Noninterest-bearing demand deposits

$
337,246



13.21
%


0.00
%

$
326,104



13.46
%


0.00
%

$
274,819



12.90
%


0.00
%Interest-bearing demand deposits


176,930



6.93



0.49



200,869



8.29



0.98



182,276



8.55



1.85Savings and money market accounts


349,278



13.68



0.82



384,496



15.87



1.30



386,722



18.15



2.57Time Deposits:Certificates of deposit, less than $100,000


798,254



31.26



2.77



619,829



25.58



4.05



598,012



28.06



4.95Certificates of deposit, $100,000 or more(1)


892,178



34.92



2.39



891,354



36.80



3.81



689,335



32.34



4.90Total time deposits


1,690,432



66.18



2.57



1,511,183



62.38



3.91



1,287,347



60.40



4.92Total deposits

$
2,553,886



100.00
%


1.85
%

$
2,422,652



100.00
%


2.73
%

$
2,131,164



100.00
%


3.60
%     (1)
    
    Includes brokered deposits.  not-for-profit
  December 31,2009


2008


2007(In thousands)Three months or less

$
187,794


$
402,122


$
308,259Over three months through six months


130,508



172,417



241,765Over six months through twelve months


447,293



229,867



230,985Over twelve months


102,164



70,185



75,598Total

$
867,759


$
874,591


$
856,607    96




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##### Table of Contents



Borrowings
    December 31,2009


2008


2007(In thousands)Federal funds purchased

$



$



$
81,000Revolving note payable


8,600



8,600



2,500Securities sold under agreements to repurchase


297,650



297,650



283,400Advances from the Federal Home Loan Bank


340,000



380,000



323,439Junior subordinated debentures


60,828



60,791



60,724Subordinated debt


15,000



15,000



Term note payable


55,000



55,000



70,000Total

$
777,078


$
817,041


$
821,063     Year Ended December 31,2009

2008

2007(Dollars in thousands)Federal funds purchased:Balance at end of year

$



$



$
81,000Weighted average interest rate at end of year



%



%


4.15
%Maximum amount outstanding(1)

$
55,000


$
184,500


$
109,000Average amount outstanding


12,441



77,000



35,630Weighted average interest rate during year(2)


0.39
%


2.62
%


5.13
%     (1)
    
    Based on amounts outstanding at each month end during each year.(2)
    
    During 2008, the federal funds target rate decreased by
    225 basis points.    Year Ended December 31,2009

2008

2007(Dollars in thousands)Securities sold under repurchase agreements:Balance at end of year

$
297,650


$
297,650


$
283,400Weighted average interest rate at end of year


4.29
%


4.29
%


4.21
%Maximum amount outstanding(1)

$
323,033


$
394,764


$
317,118Average amount outstanding


299,611



311,346



268,639Weighted average interest rate during year


4.33
%


4.26
%


4.21
%  97




---



##### Table of Contents



(1)
    
    Based on amount outstanding at each month end during each year.      Year Ended December 31,2009

2008

2007(Dollars in thousands)FHLB advances:Balance at end of year

$
340,000


$
380,000


$
323,439Weighted average interest rate at end of year


3.53
%


3.38
%


4.49
%Maximum amount outstanding(1)

$
380,000


$
380,000


$
323,439Average amount outstanding


346,329



335,039



317,232Weighted average interest rate during year


3.52
%


3.53
%


4.66
%     (1)
    
    Based on amount outstanding at each month end during each year.      December 31,






Initial2009


2008




Mandatory

OptionalIssuer

Issue Date

Amount


Amount


Rate

Redemption Date

Redemption Date(1)(In thousands)MBHI Capital Trust III

December 19, 2003

$
9,279


$
9,279


LIBOR+3.00%

December 30, 2033

December 30, 2008MBHI Capital Trust IV

December 19, 2003


10,310



10,310


LIBOR+2.85%

January 23, 2034

January 23, 2009MBHI Capital Trust V

June 7, 2005


20,619



20,619


LIBOR+1.77%

June 15, 2035

June 15, 2010Royal Capital Trust I

April 30, 2004


10,310



10,310


6.62% until July

July 23, 2034

July 23, 200923, 2009; thenLIBOR+2.75%Northwest Suburban Capital Trust I

May 18, 2004


10,310



10,310


LIBOR+2.70%

July 23, 2034

July 23, 2009Unamortized purchase accounting adjustment








(37
)Total



$
60,828


$
60,791     (1)
    
    Redeemable at option of the Company as of the initial optional
    redemption date provided and quarterly thereafter. 98




---



##### Table of Contents



Revolving
    and Term Loan Facilities; Events of Default
                 99




---



##### Table of Contents



Capital
    Resources
  
         100




---



##### Table of Contents



 Outlook for
    2010
  
    Risk-Based Capital Ratios December 31,2009

2008

2007Amount

Ratio

Amount

Ratio

Amount

Ratio(Dollars in thousands)Tier 1 capital to risk-weighted assets

$
5,037



0.22
%

$
238,873



8.30
%

$
258,862



9.21
%Tier 1 capital minimum requirement


92,664



4.00



115,123



4.00



112,457



4.00Total capital to risk-weighted assets


10,074



0.43



289,967



10.07



285,843



10.17Total capital minimum requirements


185,329



8.00



230,247



8.00



224,914



8.00Total risk-weighted assets


2,316,607







2,878,087







2,811,423          101




---



##### Table of Contents



Liquidity
            available-for-sale
 102




---



##### Table of Contents



Holding Company Liquidity. and/or
       103




---



##### Table of Contents



 Outlook for
    2010
  Contractual
    Obligations, Commitments, and Off-Balance Sheet
    Arrangements
    December 31, 2009Payments Due By PeriodWithin








After1 Year


2-3 Years


4-5 Years


5 Years


Other(1)


Total(In thousands)Deposits without a stated maturity

$
869,165


$



$



$



$



$
869,165Consumer and brokered certificates of deposits


1,478,026



217,641



5,279











1,700,946Revolving note payable


8,600



















8,600Securities sold under agreements to repurchase














297,650







297,650FHLB advances














340,000







340,000Junior subordinated debentures














60,828







60,828Subordinated debt














15,000







15,000Term note payable


55,000



















55,000Operating leases


1,519



2,647



2,683



13,850







20,699Uncertain tax position liability


















784



784Total contractual cash obligations

$
2,412,310


$
220,288


$
7,962


$
727,328


$
784


$
3,368,672     (1)
    
    Duration of liability is not determinable.    Amount of Commitment Expiration Per PeriodWithin








After1 Year


1-3 Years


4-5 Years


5 Years


Total(In thousands)Lines of credit:Commercial real estate

$
64,539


$
3,444


$
4,268


$
4,137


$
76,388Consumer real estate


26,061



24,886



29,165



26,486



106,598Consumer














1,778



1,778Commercial


150,735



2,575



2,311



4,738



160,359Letters of credit


36,686



3,847



2,483







43,016Commitments to extend credit


7,158















7,158Total commitments

$
285,179


$
34,752


$
38,227


$
37,139


$
395,297  104




---



##### Table of Contents



Asset/Liability
    Management
  other-than-trading
       105




---



##### Table of Contents



Effects
    of Inflation
    Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk    Change in Net Interest Income Over One Year HorizonCompanyGuidelineDecember 31, 2009

December 31, 2008

MaximumDollar

%

Dollar

%

%Change

Change

Change

Change

Change(Dollars in thousands)+200 bp

$
11,109



18.12
%

$
6,274



8.23
%


(10.0
)%+100 bp


5,084



8.29



2,850



3.74



−100 bp


N/A



N/A



N/A



N/A



−200 bp


N/A



N/A



N/A



N/A



(10.0
)       sub-prime sub-
   106




---



##### Table of Contents



0-3


4-12





OverMonths


Months


1-5 Years


5 Years


Total(Dollars in thousands)INTEREST-EARNING ASSETS:Federal funds sold and other short-term investments

$
414,466


$



$



$



$
414,466Securities
    available-for-sale,
    at fair value


197,672



165,818



89,782



128,202



581,474Federal Reserve Bank and Federal Home Loan Bank stock


27,652















27,652Loans


1,024,700



267,194



744,475



283,950



2,320,319Total interest-earning assets

$
1,664,490


$
433,012


$
834,257


$
412,152


$
3,343,911INTEREST-BEARING LIABILITIES:Interest-bearing demand deposits

$
16,035


$
48,106


$



$
114,031


$
178,172Money market deposits


15,141



45,422







107,665



168,228Savings deposits


15,567



46,702







110,700



172,969Time deposits


428,793



1,052,101



220,052







1,700,946Total interest-bearing deposits


475,536



1,192,331



220,052



332,396



2,220,315Revolving note payable


8,600















8,600Securities sold under agreements to repurchase














297,650



297,650Advances from the Federal Home Loan Bank














340,000



340,000Junior subordinated debentures


60,828















60,828Subordinated debt


15,000















15,000Term note payable


55,000















55,000Total borrowings


139,428











637,650



777,078Total interest-bearing liabilities

$
614,964


$
1,192,331


$
220,052


$
970,046


$
2,997,393Interest sensitivity gap

$
1,049,526


$
(759,319
)

$
614,205


$
(557,894
)

$
346,518Cumulative interest sensitivity gap

$
1,049,526


$
290,207


$
904,412


$
346,518Interest sensitivity gap to total assets


30.5
%


(22.1
)%


17.9
%


(16.2
)%Cumulative interest sensitivity gap to total assets


30.5
%


8.4
%


26.3
%


10.1
%      107




---



##### Table of Contents



Item 8.
    Consolidated
    Financial Statements and Supplementary Data  page F-1.
  Item 9.
    Changes
    in and Disagreements With Independent Accountants On Accounting
    and Financial Disclosure    Item 9A.
    Controls
    and Procedures  Evaluation
    of Disclosure Controls and Procedures
  Rule 13a-15(e)).
  Managements
    Report on Internal Control Over Financial
    Reporting
  Rule 13a-15(f)
   108




---



##### Table of Contents



Item 9B.
    Other
    Information    PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance            Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence    Item 14.
    Principal
    Accounting Fees and Services   109




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##### Table of Contents



PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules  Index to Financial Statements
  Form 10-K page F-1.
  Financial Statement Schedules
  Form 10-K
  Exhibits
    3
.1

Amended and Restated Certificate of Incorporation, as amended
    (incorporated by reference to Registrants Form 10-Q for
    the quarter ended September 30, 2007, File No. 001-13735).3
.1.1

Certificate of Designation for the Series A Preferred Stock
    (incorporated by reference to Registrants Report on Form
    8-K filed December 7, 2007, File No. 001-13735).3
.1.2

Deposit Agreement, dated December 5, 2007, among the Registrant,
    Illinois Stock Transfer Company and the holders from time to
    time of the Depositary Receipts issued pursuant to the Deposit
    Agreement (incorporated by reference to Registrants Report
    on Form 8-K filed December 7, 2007, File No. 001-13735).3
.2

Amended and Restated By-laws (incorporated by reference to
    Registrants Report on Form 8-K filed July 29, 2009, File
    No. 001-13735).3
.3

Certificate of Designation for the Series G Preferred Stock.4
.1

Specimen Common Stock Certificate (incorporated by reference to
    Registrants Registration Statement on Form S-1,
    Registration No. 333-42827).4
.1.1

Form of Certificate for the Series A Preferred Stock
    (incorporated by reference to Registrants Report on Form
    8-K filed December 7, 2007, File No. 001-13735).4
.1.2

Form of Depositary Receipt for the Depositary Shares
    (incorporated by reference to Registrants Report on Form
    8-K filed December 7, 2007, File No. 001-13735).4
.1.3

Form of Certificate for the Series G Preferred Stock.4
.1.4

Warrant for Purchase of Shares of Common Stock, Dated March 8,
    2010.4
.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
.1

Midwest Banc Holdings, Inc. Stock and Incentive Plan
    (incorporated by reference to Registrants Form 10-K for
    the year ended December 31, 2006, File No. 001-13735).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 and 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) 110




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##### Table of Contents



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 2001 Supplemental Executive Retirement Agreement
    (incorporated by reference to Registrants Form 10-Q for
    the quarter ended September 30, 2001, File No. 001-13735).*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
.17

Form of Restricted Stock Award Agreement for Officers,
    Restricted Stock Grant Notice for Officers, Incentive and
    Nonqualified Stock Options Award Agreements, and Stock Option
    Grant Notice for Officers (incorporated by reference to
    Registrants Report on Form 8-K filed August 29, 2005, File
    No. 001-13735).*10
.18

Form of 2005 Supplemental Executive Retirement Agreement
    (incorporated by reference to Registrants Report on Form
    8-K filed October 28, 2005, File No. 001-13735).*10
.19

Form of Restricted Stock Award Agreement for Non-employee
    Directors and Restricted Stock Grant Notice for Non-employee
    Directors (incorporated by reference to Registrants Report
    on Form 8-K filed October 28, 2005, File No. 001-13735).10
.21

Lease dated as of April 29, 1976, between Joseph C. and Grace
    Ann Sanfilippo 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 4, 2007, between the Company and
    M&I Marshall & Ilsley Bank (incorporated by reference
    to Registrants Report on Form 8-K filed April 6, 2007,
    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 quarter ended
    September 30, 2004, File No. 001-13735).10
.29

Midwest Banc Holdings, Inc. Directors Deferred Compensation Plan
    (incorporated by reference to Registrants Report on Form
    8-K filed December 19, 2008, File No. 001-13735).*10
.30

Amendment to Employment Agreement as of September 28, 2004
    between the Company and the Chief Executive Officer
    (incorporated by reference to Registrants Report on Form
    8-K filed March 24, 2006, File No. 001-13735).10
.32

Lease dated April 1, 1993, by and between Royal American Bank
    and LaSalle National Trust, N.A., as amended, assumed by the
    Company as of July 1, 2006 (incorporated by reference to
    Registrants Form 10-Q for the quarter ended September 30,
    2006, File No. 001-13735).10
.33

Lease dated April 19, 1993 by and between Royal American Bank
    and Hamilton Forsythe 1000 Tower Lane LLC, successor-in-interest
    to Bensenville Office Venture, as amended, assumed by the
    Company as of July 1, 2006 (incorporated by reference to
    Registrants Form 10-Q for the quarter ended September 30,
    2006, File No. 001-13735).10
.34

Sublease dated January 31, 2006 by and between Royal American
    Bank and JPMorgan Chase Bank, National Association, assumed by
    the Company as of July 1, 2006 (incorporated by reference to
    Registrants Form 10-Q for the quarter ended September 30,
    2006, File No. 001-13735).10
.35

Lease dated January 20, 2006 by and between Royal American Bank
    and MEG Associates Limited Partnership, assumed by the Company
    as of July 1, 2006 (incorporated by reference to
    Registrants Form 10-Q for the quarter ended September 30,
    2006, File No. 001-13735).10
.36

Lease dated October 28, 1996 by and between Royal American Bank
    and Tiffany Pointe, Inc./Marquette Bank, as amended, assumed by
    the Company as of July 1, 2006 (incorporated by reference to
    Registrants Form 10-Q for the quarter ended September 30,
    2006, File No. 001-13735).10
.37

Lease dated September 24, 1999, by and between Royal American
    Bank and Moats Office Properties, Inc., as amended, assumed by
    the Company as of July 1, 2006 (incorporated by reference to
    Registrants Form 10-Q for the quarter ended September 30,
    2006, File No. 001-13735). 111




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10
.38

Lease dated July 14, 2006 by and between Midwest Bank and Trust
    Company and William C. Moran (incorporated by reference to
    Registrants Form 10-Q for the quarter ended September 30,
    2006, File No. 001-13735).*10
.41

Form of 2006 Supplemental Executive Retirement Agreement
    (incorporated by reference to Registrants Form 10-Q for
    the quarter ended September 30, 2006, File No. 001-13735).*10
.42

First Amendment to the Form of 2005 Supplemental Executive
    Retirement Agreement (incorporated by reference to
    Registrants Form 10-Q for the quarter ended September 30,
    2006, File
    No. 001-13735).10
.43

Lease dated November 9, 2005 by and between Midwest Bank and
    Trust Company and Crossings Commercial, LLC (incorporated by
    reference to Registrants Form 10-Q for the quarter ended
    September 30, 2006, File No. 001-13735).10
.44

Lease dated August 17, 2005 by and between Royal American Bank
    and L.F.A.J.J. Partners, LLC, assumed by the Company as of July
    1, 2006 (incorporated by reference to Registrants Form
    10-Q for the quarter ended March 31, 2007, File No. 001-13735).10
.45

Loan Agreement dated as of September 28, 2007 and amendment of
    loan agreement dated April 4, 2007, between the Company and
    M&I Marshall & Ilsley Bank (incorporated by reference
    to Registrants Report on Form 8-K filed October 1, 2007,
    File No. 001-13735).*10
.46

Form of 2007 Transitional Employment Agreement (incorporated by
    reference to Registrants Report on Form 8-K filed October
    1, 2007, File No. 001-13735).*10
.47

Form of 2007 Supplemental Executive Retirement Agreement
    (incorporated by reference to Registrants Report on Form
    8-K filed October 1, 2007, File No. 001-13735).*10
.48

First Amendment to the Midwest Banc Holdings, Inc. Stock and
    Incentive Plan (incorporated by reference to Registrants
    Report on Form 8-K filed October 1, 2007, File No. 001-13735).10
.49

Lease dated December 27, 2007 by and between Midwest Bank and
    Trust Company and George Garner and Barbara Garner (incorporated
    by reference to Registrants Form 10-K for the year ended
    December 31, 2007, File No. 001-13735).*10
.51

Second amendment to 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 quarter ended March 31, 2008, File No. 001-13735).10
.56

Amendment to Loan Agreement dated as of September 28, 2007 and
    Loan Agreement dated March 31, 2008, between the Company
    and M&I Marshall & Ilsley Bank (incorporated by
    reference to Registrants Form 10-Q for the quarter ended
    March 31, 2008, File No. 001-13735).10
.57

Second Amendment of Loan Agreement dated April 4, 2007, between
    the Company and M&I Marshall & Ilsley Bank
    (incorporated by reference to Registrants Form 10-Q for
    the quarter ended March 31, 2008, File No. 001-13735).*10
.59

Midwest Banc Holdings, Inc. Employee Stock Purchase Plan
    (incorporated by reference to Registrants Proxy Statement
    filed April 7, 2008, File No. 001-13735).*10
.60

Form of Waiver, executed by each of the Senior Executive
    Officers (incorporated by reference to Registrants Report
    on Form 8-K filed December 8, 2008, File No. 001-13735).*10
.61

EESA Amendment to Officer Employment Benefits executed by each
    of the Senior Executive Officers (incorporated by reference to
    Registrants Report on Form 8-K filed December 8, 2008,
    File No. 001-13735).*10
.62

Settlement Agreement between the Company and James J. Giancola
    (incorporated by reference to Registrants Form 10-K for
    the year ended December 31, 2008, File No. 001-13735).10
.63

Lease dated August 7, 2008 by and between Midwest Bank and Trust
    Company and Buckingham Master Tenant, LLC  (incorporated by
    reference to Registrants Form 10-K for the year ended
    December 31, 2008, File No. 001-13735).10
.64

Lease dated November 18, 2008 by and between Midwest Bank and
    Trust Company and Broadway 500 West Monroe Fee LLC
    (incorporated by reference to Registrants Form 10-K for
    the year ended December 31, 2008, File No. 001-13735). 112




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10
.65

Lease dated December 1, 2008 by and between Midwest Bank and
    Trust Company and 2150 I Corporation (incorporated by reference
    to Registrants Form 10-K for the year ended December 31,
    2008, File No. 001-13735).*10
.66

Letter agreement dated January 30, 2008 by and between the
    Company and the Chief Financial Officer (incorporated by
    reference to Registrants Form 10-K for the year ended
    December 31, 2008, File No. 001-13735).10
.67

M&I Marshall & Ilsley Bank Loan Agreement Covenant
    Waiver Letter dated March 4, 2009 (incorporated by reference to
    Registrants Form 10-K for the year ended December 31,
    2008, File No. 001-13735).10
.68

Short-term Revolving Line of Credit Loan Agreement dated April
    3, 2009 between the Company and M&I Marshall & Ilsley
    (incorporated by reference to Registrants Report on Form
    8-K filed April 30, 2009, File No. 001-13735).10
.69

Short-term Revolving Line of Credit Loan Agreement dated June 3,
    2009 between the Company and M&I Marshall & Ilsley.
    (incorporated by reference to Registrants Report on Form
    10-Q for the quarter ended June 30, 2009 filed August 10,
    2009, File No. 001-13735).*10
.70

Amended and Restated Midwest Banc Holdings, Inc. Severance
    Policy (incorporated by reference to Registrants Report on
    Form 8-K filed July 29, 2009, File No. 001-13735).10
.71

Forbearance Agreement dated October 22, 2009 between the Company
    and M&I Marshall & Ilsley Bank (incorporated by
    reference to Registrants Report on Form 8-K filed October
    28, 2009, File No. 001-13735).*10
.72

Employment Agreement dated May 6, 2009 by and between the
    Company and Roberto R. Herencia (incorporated by reference to
    Registrants Report on Form 8-K filed May 8, 2009, File
    No. 001-13735).*10
.73

Employment Agreement dated May 15, 2009 by and between the
    Company and J.J. Fritz (incorporated by reference to
    Registrants Report on Form 8-K filed May 21, 2009, File
    No. 001-13735).10
.74

Written Agreement dated December 18, 2009 by and among the
    Company, the Bank, the Federal Reserve Bank of Chicago, and the
    Illinois Department of Financial and Professional Regulation
    Division of Banking (incorporated by reference to
    Registrants Report on Form 8-K filed December 24,
    2009, File No. 001-13735).10
.75

Exchange Agreement dated February 25, 2010 by and between the
    Company and the United States Department of the Treasury
    (incorporated by reference to Registrants Report on Form
    8-K filed March 3, 2010, File No. 001-13735).10
.76

Letter Agreement, dated December 5, 2008, between the Company
    and United States Department of the Treasury (incorporated by
    reference to Registrants Report on Form 8-K filed December
    8, 2008, File No. 001-13735).10
.77

Prompt Corrective Action Directive issued March 29, 2010 to the
    Bank by the Board of Governors of the Federal Reserve System.*10
.78

Form of Waiver, executed by each of the Senior Executive
    Officers.12
.1

Ratios of Earnings To Fixed Charges and Preferred Stock
    Dividends.21
.1

Subsidiaries.23
.1

Consent of PricewaterhouseCoopers LLP.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
    Accounting Officer.99
.1

Certification of Chief Executive Officer Pursuant to Section
    111(B).99
.2

Certification of Chief Financial Officer Pursuant to Section
    111(B).     *
    
    Indicates management contracts or compensatory plans or
    arrangements required to be filed as an exhibit. 113




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##### Table of Contents



SIGNATURES    Midwest Banc Holdings,
    Inc.
  By:
    /s/  Roberto
    r. herencia  Roberto R. Herencia
 President and Chief Executive Officer
 (Principal Executive Officer)
      Form 10-K,
  Signature

Title

Date/s/  Percy
    L. BergerPercy
    L. Berger

Chairman of the Board, Director

March 30, 2010/s/  Roberto
    R. HerenciaRoberto
    R. Herencia

President, Chief Executive Officer, and Director (Principal
    Executive Officer)

March 30, 2010/s/  Barry
    I. ForresterBarry
    I. Forrester

Director

March 30, 2010/s/  Robert
    J. GenetskiRobert
    J. Genetski

Director

March 30, 2010/s/  Gerald
    F. HartleyGerald
    F. Hartley

Director

March 30, 2010/s/  E.V.
    SilveriE.V.
    Silveri

Director

March 30, 2010/s/  Kenneth
    VeloKenneth
    Velo

Director

March 30, 2010 114




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##### Table of Contents



Signature

Title

Date/s/  JoAnn
    Sannasardo LilekJoAnn
    Sannasardo Lilek

Executive Vice President and Chief Financial Officer (Principal
    Financial Officer)

March 30, 2010/s/  Jan
    R. ThiryJan
    R. Thiry

Senior Vice President and Chief Accounting Officer (Principal
    Accounting Officer)

March 30, 2010  115




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##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.



CONSOLIDATED
    FINANCIAL STATEMENTS



CONTENTS  FINANCIAL STATEMENTSCONSOLIDATED BALANCE SHEETS


F-2CONSOLIDATED STATEMENTS OF OPERATIONS


F-3CONSOLIDATED STATEMENTS OF STOCKHOLDERS
    EQUITY


F-4CONSOLIDATED STATEMENTS OF CASH FLOWS


F-5NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS


F-7REPORT OF INDEPENDENT REGISTERED PUBLIC
    ACCOUNTING FIRM


F-54  F-1




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##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  CONSOLIDATED BALANCE SHEETS
  December 31,2009


2008(In thousands, except share and per share data)ASSETSCash and due from banks

$
27,644


$
61,330Federal funds sold and other short-term investments


414,466



1,735Total cash and cash equivalents


442,110



63,065Securities
    available-for-sale,
    at fair value


581,474



621,949Securities
    held-to-maturity,
    at amortized cost (fair value:$30,387 at December 31, 2008)






30,267Total securities


581,474



652,216Federal Reserve Bank and Federal Home Loan Bank stock, at cost


27,652



31,698Loans


2,320,319



2,509,759Allowance for loan losses


(128,800
)


(44,432
)Net loans


2,191,519



2,465,327Cash surrender value of life insurance






84,675Premises and equipment, net


39,769



38,313Foreclosed properties


26,917



12,018Core deposit intangibles, net


12,391



14,683Goodwill


64,862



78,862Other assets


48,851



129,355Total assets

$
3,435,545


$
3,570,212LIABILITIES AND STOCKHOLDERS EQUITYLiabilitiesDepositsNoninterest-bearing

$
349,796


$
334,495Interest-bearing


2,220,315



2,078,296Total deposits


2,570,111



2,412,791Revolving note payable


8,600



8,600Securities sold under agreements to repurchase


297,650



297,650Advances from the Federal Home Loan Bank


340,000



380,000Junior subordinated debentures


60,828



60,791Subordinated debt


15,000



15,000Term note payable


55,000



55,000Total borrowings


777,078



817,041Other liabilities


31,880



34,546Total liabilities


3,379,069



3,264,378Commitments and contingencies (see note 21)Stockholders EquityPreferred stock, $0.01 par value, 1,000,000 shares
    authorized; Series A, $2,500 liquidation preference,
    17,250 shares issued and outstanding at December 31,
    2009 and 2008, Series T, $1,000 liquidation preference,
    84,784 shares issued and outstanding at December 31,
    2009 and 2008


1



1Common stock, $0.01 par value, 64,000,000 shares
    authorized; 29,847,921 shares issued and 28,121,279
    outstanding at December 31, 2009 and 29,530,878 shares
    issued and 27,892,578 outstanding at December 31, 2008


301



296Additional paid-in capital


385,616



383,491Warrant


5,229



5,229Accumulated deficit


(311,620
)


(66,325
)Accumulated other comprehensive loss


(8,298
)


(2,122
)Treasury stock, at cost (1,726,642 shares at
    December 31, 2009 and 1,638,300 shares at
    December 31, 2008)


(14,753
)


(14,736
)Total stockholders equity


56,476



305,834Total liabilities and stockholders equity

$
3,435,545


$
3,570,212    F-2




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##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  CONSOLIDATED STATEMENTS OF
    OPERATIONS
   Year Ended December 31,2009


2008


2007(In thousands, except per share data)Interest incomeLoans

$
133,180


$
151,120


$
155,044Loans held for sale










89SecuritiesTaxable


15,190



33,157



34,787Exempt from federal income taxes


986



2,316



2,269Trading securities










2Dividend income from Federal Reserve Bank and Federal Home Loan
    Bank stock


680



741



839Federal funds sold and other short-term investments


472



327



839Total interest income


150,508



187,661



193,869Interest expenseDeposits


47,208



66,025



76,692Federal funds purchased and FRB discount window advances


49



2,064



1,829Revolving note payable


448



474



186Securities sold under agreements to repurchase


12,962



13,262



11,302Advances from the Federal Home Loan Bank


12,195



11,824



14,769Junior subordinated debentures


2,290



3,696



5,275Subordinated debt


585



707



Term note payable


1,900



2,643



1,184Total interest expense


77,637



100,695



111,237Net interest income


72,871



86,966



82,632Provision for credit losses


170,203



72,642



4,891Net interest income after provision for credit losses


(97,332
)


14,324



77,741Noninterest incomeService charges on deposit accounts


7,701



7,742



6,697Net gains (losses) on securities transactions


4,798



(16,596
)


32Impairment loss on securities


(740
)


(65,387
)


(Loss) gains on sale of loans






(75
)


443Insurance and brokerage commissions


1,146



2,024



2,287Trust fees


1,221



1,623



1,857Increase in cash surrender value of life insurance


1,332



3,509



3,063Gain on sale of property






15,196



Other


1,672



1,368



1,098Total noninterest income (loss)


17,130



(50,596
)


15,477Noninterest expenseSalaries and employee benefits


40,506



50,389



42,215Occupancy and equipment


13,051



12,714



9,482Professional services


9,510



8,590



5,470Goodwill impairment


14,000



80,000



Loss on extinguishment of debt






7,121



Marketing


1,339



2,706



2,309Foreclosed properties


7,313



332



34Amortization of intangible assets


2,292



2,361



1,702Merger related






271



1,312FDIC insurance


9,296



2,603



252Other


9,608



9,987



8,619Total noninterest expense


106,915



177,074



71,395(Loss) income before income taxes


(187,117
)


(213,346
)


21,823Provision (benefit) for income taxes


55,596



(55,073
)


3,246Net (loss) income


(242,713
)


(158,273
)


18,577Preferred stock dividends and premium accretion


6,057



3,728



204Income allocated to participating securities










325Net (loss) income available to common stockholders

$
(248,770
)

$
(162,001
)

$
18,048Basic (loss) earnings per share

$
(8.89
)

$
(5.82
)

$
0.71Diluted (loss) earnings per share

$
(8.89
)

$
(5.82
)

$
0.71Cash dividends declared per common share

$



$
0.26


$
0.52    F-3




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##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  CONSOLIDATED STATEMENTS OF STOCKHOLDERS
    EQUITY


Retained


AccumulatedAdditional





Earnings


Other





TotalPreferred


Common


Paid in





(Accumulated


Comprehensive


Treasury


StockholdersStock


Stock


Capital


Warrant


Deficit)


Loss


Stock


Equity(In thousands, except share and per share data)Balance, December 31, 2006

$



$
255


$
200,797


$



$
97,807


$
(6,273
)

$
(5,344
)

$
287,242Cash dividends declared ($11.84 per share) on preferred stock


















(204
)










(204
)Cash dividends declared ($0.52 per share) on common stock


















(13,418
)










(13,418
)Issuance of 17,250 shares of preferred stock, net of
    issuance costs










41,441



















41,441Issuance of 3,680,725 shares of stock upon acquisition






37



54,953



















54,990Issuance of common stock upon exercise of 36,443 stock options,
    net of tax benefits










429



















429Purchase of 661,500 treasury shares


























(9,392
)


(9,392
)Issuance of 59,700 shares of restricted stock






1



(1
)


















Stock-based compensation expense










3,143



















3,143Comprehensive incomeNet income


















18,577











18,577Net decrease in fair value of
    available-for-sale
    securities, net of income taxes and reclassification adjustments






















(7,644
)






(7,644
)Total comprehensive income






























10,933Balance, December 31, 2007






293



300,762







102,762



(13,917
)


(14,736
)


375,164Cash dividends declared ($193.75 per share) on preferred stock


















(3,342
)










(3,342
)Cash dividends declared ($0.26 per share) on common stock


















(7,404
)










(7,404
)Issuance of 84,784 shares of preferred stock


1







79,554



















79,555Issuance of warrant to purchase 4,282,020 shares of common
    stock














5,229















5,229Issuance of common stock upon exercise of 16,500 stock options,
    net of tax benefits










178



















178Issuance of 24,168 shares of common stock to employee stock
    purchase plan










35



















35Issuance of 278,324 shares of restricted stock






3



(3
)


















Accreted discount on preferred stock










68







(68
)










Stock-based compensation expense










2,897



















2,897Comprehensive lossNet loss


















(158,273
)










(158,273
)Prior service cost, net of income taxes






















(433
)






(433
)Loss on the projected benefit obligation, net of income taxes






















(240
)






(240
)Net increase in fair value of
    available-for-sale
    securities, net of income taxes and reclassification adjustments






















12,468







12,468Total comprehensive loss






























(146,478
)Balance, December 31, 2008


1



296



383,491



5,229



(66,325
)


(2,122
)


(14,736
)


305,834Cash dividends declared ($48.4375 per share) on Series A
    preferred stock


















(836
)










(836
)Cash dividends declared ($9.72 per share) on Series T
    preferred stock


















(824
)










(824
)Issuance of 23,932 shares of common stock to employee stock
    purchase plan










15



















15Issuance of 166,568 shares of common stock to
    directors deferred compensation plan






2



113



















115Issuance of 334,882 shares of restricted stock






3



(3
)


















Accreted discount on Series T preferred stock










922







(922
)










Stock-based compensation expense










1,078



















1,078Repurchase of 10,695 shares of common stock under benefit
    plan


























(17
)


(17
)Comprehensive lossNet loss


















(242,713
)










(242,713
)Prior service cost, including income taxes adjustment






















(177
)






(177
)Gain on the projected benefit obligation, including income taxes
    adjustment






















849







849Net decrease in fair value of
    available-for-sale
    securities, including income taxes adjustment






















(6,848
)






(6,848
)Total comprehensive loss






























(248,889
)Balance, December 31, 2009

$
1


$
301


$
385,616


$
5,229


$
(311,620
)

$
(8,298
)

$
(14,753
)

$
56,476    F-4




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  CONSOLIDATED STATEMENTS OF CASH
    FLOWS
  Year Ended December 31,2009


2008


2007(In thousands)Cash flows from operating activitiesNet (loss) income

$
(242,713
)

$
(158,273
)

$
18,577Adjustments to reconcile net (loss) income to net cash provided
    by operating activitiesDepreciation


4,079



4,206



3,288Provision for credit losses


170,203



72,642



4,891Amortization of core deposit and other intangibles


1,522



989



912Goodwill impairment charge


14,000



80,000



Amortization of premiums and discounts on securities, net


723



630



819Realized (gain) loss on sales of securities


(4,798
)


16,596



(32
)Impairment loss on securities


740



65,387



Net gain on sales of mortgage loans










(443
)Originations of loans held for sale










(40,800
)Proceeds from sales of loans held for sale










43,915Net loss on sales of loans






75



Gain on sale of property






(15,196
)


Loss of early extinguishment of debt






7,121



Increase in cash surrender value of life insurance


(1,332
)


(3,509
)


(3,063
)Deferred income taxes


48,692



(43,757
)


(323
)Loss on disposition of foreclosed properties, net


211



222



12Impairment loss on foreclosed properties


4,904







Amortization of deferred stock based compensation


1,078



2,897



3,085Change in other assets


30,186



(12,122
)


7,602Change in other liabilities


(3,666
)


(892
)


(14,569
)Net cash provided by operating activities


23,829



17,016



23,871Cash flows from investing activitiesSales of securities
    available-for-sale


593,097



108,770



189,495Sales of securities held-to maturity


27,856



4,262



2,039Redemption of Federal Reserve Bank and Federal Home Loan Bank
    stock


4,046



1,000



499Maturities of securities
    available-for-sale


1,678,165



137,725



93,571Maturities of securities
    held-to-maturity










430Principal payments on securities
    available-for-sale


65,151



50,875



69,254Principal payments on securities
    held-to-maturity


2,468



2,966



5,665Purchases of securities
    available-for-sale


(2,298,598
)


(270,533
)


(428,468
)Purchases of Federal Reserve Bank and Federal Home Loan Bank
    stock






(4,974
)


(3,128
)Purchase of mortgage loans










(5,776
)Proceeds from sale of mortgages






5,789



Loan originations and principal collections, net


84,207



(103,298
)


(85,378
)Proceeds from sale of property






18,259



Cash paid, net of cash and cash equivalents in acquisition










(71,658
)Proceeds from disposition of foreclosed properties


2,311



244



225Proceeds from liquidation of bank-owned life insurance


86,008







Additions to property and equipment


(5,535
)


(3,889
)


(3,869
)Net cash provided by (used in) investing activities


239,176



(52,804
)


(237,099
) F-5




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS  (Continued)
  Year Ended December 31,2009


2008


2007(In thousands)Cash flows from financing activitiesNet increase (decrease) in deposits


157,587



(44,997
)


29,324Payments of junior subordinated debt owed to unconsolidated
    trusts










(15,000
)Proceeds from borrowings






289,600



192,500Repayments on borrowings


(40,000
)


(234,075
)


(120,000
)Preferred cash dividends paid


(1,660
)


(3,342
)


(204
)Common cash dividends paid






(11,076
)


(13,004
)Change in federal funds purchased and securities sold under
    agreements to repurchase






(66,750
)


91,151Proceeds from issuance of common stock under stock and incentive
    plan


130



35



Issuance of preferred stock and warrant






84,784



41,441Repurchase of common stock


(17
)






(9,392
)Proceeds from issuance of treasury stock under stock option plan






175



379Net cash provided by financing activities


116,040



14,354



197,195Increase (decrease) in cash and cash equivalents


379,045



(21,434
)


(16,033
)Cash and cash equivalents at beginning of year


63,065



84,499



100,532Cash and cash equivalents at end of year

$
442,110


$
63,065


$
84,499Supplemental disclosuresCash paid during the year for:Interest

$
78,163


$
103,436


$
109,483Income taxes


2,242



2,700



10,100Dividends declared not paid

$



$



$
3,672AcquisitionNoncash assets acquired

$



$



$
624,270Liabilities assumed










497,622Net noncash assets acquired

$



$



$
126,648Cash and cash equivalents acquired

$



$



$
10,066


F-6




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  Note 1 
    Nature of Operations
    Note 2 
    Regulatory Actions
         F-7




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Written
    Agreement with Regulators
  Note 3 
    Regulatory Capital
     F-8




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
         Going Concern 
  Note 4 
    Forbearance Agreement
     F-9




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
       Going Concern
  Note 5 
    Summary of Significant Accounting Policies
  Basis of Presentation:
  Going Concern:
   F-10




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Use of Estimates:
  Cash and Cash Equivalents:
  Securities: held-to-maturity available-for-sale available-for-sale held-to-maturity available-for-sale other-than-temporary Other-than-temporary Other-than-temporary other-than-temporary
  Loans:
  Deferred Loan Fees and Costs:
 F-11




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Allowance for Loan Losses:
  310-10-35).
      Cash Surrender Value of Life Insurance:
  Premises and Equipment:
  Foreclosed Properties:
  Core Deposit Intangibles:
 F-12




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Goodwill:
  Income Taxes:
  Securities Sold Under Agreements to
    Repurchase:
  Transfers of Financial Assets:
  Fair Value of Financial Instruments and
    Derivatives:
  Stock Compensation:
  Comprehensive Income: available-for-sale,
  Earnings Per Common Share:
 F-13




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Dividend Restriction:
  Reclassifications:
  Accounting Pronouncements: tm
       F-14




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  and/or
  815-40-15). fixed-for-fixed
    2010-6).
 F-15




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  other-than-temporary other-than-temporary Other-than-temporary
  2010-09, 2010-09), 2010-09
      Note 6 
    Business Combination
   F-16




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        (In thousands)Purchase price of Northwest Suburban:Market value of the Companys stock issued

$
55,137Cash paid


81,163Total consideration


136,300Capitalized costs


414Total cost

$
136,714Historical net assets of Northwest Suburban

$
52,388Fair market value adjustments:Securities
    available-for-sale


(323
)Loans


(970
)Goodwill


80,550Core deposit intangible


8,061Premises and equipment


1,726Deposits


(2,140
)Severance


(88
)Deferred taxes on purchase accounting adjustment


(2,490
)Total adjustments to record the transaction

$
136,714  F-17




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Fair MarketNorthwest


Value


AsSuburban


Adjustment


Adjusted(In thousands)Assets acquired:Cash and cash equivalents

$
10,066


$



$
10,066Securities
    available-for-sale


57,920



(323
)


57,597Federal Reserve Bank and Federal Home Loan Bank stock


1,503







1,503Loans, net


437,452



(970
)


436,482Cash value of life insurance


12,884







12,884Premises and equipment, net


17,553



1,726



19,279Core deposit intangible, net






8,061



8,061Goodwill






80,550



80,550Other assets


7,914







7,914Total assets acquired


545,292



89,044



634,336Liabilities assumed:Deposits


468,520



2,140



470,660Federal funds purchased


6,170







6,170Advances from the Federal Home Loan Bank


3,500







3,500Junior subordinated debentures


10,310







10,310Other liabilities (including severance)


4,404



2,578



6,982Total liabilities assumed


492,904



4,718



497,622Assets acquired less liabilities assumed

$
52,388


$
84,326


$
136,714     2007(In thousands, exceptper share data)Net interest income

$
96,429Net income


16,983Basic earnings per share


0.60Diluted earnings per share


0.60   change-in-control
 F-18




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 7 
    Securities
  available-for-sale held-to-maturity
  December 31, 2009Gross


GrossAmortized


Unrealized


UnrealizedCost


Gains


Losses


Fair Value(In thousands)Securities
    available-for-sale:Obligations of U.S. Treasury

$
310,954


$
6


$
(13
)

$
310,947Mortgage-backed securities:U.S. government agencies  residential(1)


259,878



219



(3,822
)


256,275U.S. government-sponsored entities  residential(2)


1,271







(12
)


1,259Equity securities of U.S. government-sponsored entities(3)


2,749



105



(582
)


2,272Corporate and other debt securities


14,920







(4,199
)


10,721Total securities
    available-for-sale

$
589,772


$
330


$
(8,628
)

$
581,474Total securities
    held-to-maturity

$



$



$



$
     (1)
    
    Includes obligations of the Government National Mortgage
    Association (GNMA).(2)
    
    Includes obligations of the Federal Home Loan Mortgage
    Corporation (FHLMC).(3)
    
    Includes issues from Federal National Mortgage Association
    (FNMA) and FHLMC.  December 31, 2008Gross


GrossAmortized


Unrealized


UnrealizedCost


Gains


Losses


Fair Value(In thousands)Securities
    available-for-sale:Obligations of U.S. Treasury and U.S. government-sponsored
    entities(1)

$
263,483


$
1,952


$



$
265,435Obligations of states and political subdivisions


57,309



241



(886
)


56,664Mortgage-backed securities(1)(2)


281,592



3,363



(1,276
)


283,679Equity securities(3)


2,749







(1,819
)


930Corporate and other debt securities


19,176







(3,935
)


15,241Total securities
    available-for-sale

$
624,309


$
5,556


$
(7,916
)

$
621,949Securities
    held-to-maturity:Obligations of states and political subdivisions

$
1,251


$
12


$



$
1,263Mortgage-backed securities(1)(2)


29,016



138



(30
)


29,124Total securities
    held-to-maturity

$
30,267


$
150


$
(30
)

$
30,387     (1)
    
    Includes obligations of the FHLMC and FNMA.(2)
    
    Includes obligations of the GNMA.(3)
    
    Includes issues from the FNMA and FHLMC. F-19




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   held-to-maturity. held-to-maturity.
  other-than-temporary
  held-to-maturity available-for-sale
  December 31, 2009Less Than 12 Months


12 Months or More


TotalFair


Unrealized


Fair


Unrealized


Fair


UnrealizedValue


Losses


Value


Losses


Value


Losses(In thousands)Securities
    available-for-sale:Obligations of U.S. Treasury

$
150,954


$
(13
)

$



$



$
150,954


$
(13
)Mortgage-backed securities:U.S. government agencies  residential(1)


204,754



(3,822
)










204,754



(3,822
)U.S. government-sponsored entities  residential(2)


1,259



(12
)










1,259



(12
)Equity securities of U.S. government-sponsored entities(3)


219



(64
)


461



(518
)


680



(582
)Corporate and other debt securities










10,721



(4,199
)


10,721



(4,199
)Total securities
    available-for-sale


357,186



(3,911
)


11,182



(4,717
)


368,368



(8,628
)Total securities
    held-to-maturity






















Total temporarily impaired securities

$
357,186


$
(3,911
)

$
11,182


$
(4,717
)

$
368,368


$
(8,628
)     (1)
    
    Includes obligations of GNMA.(2)
    
    Includes obligations of FHLMC.(3)
    
    Includes issues from FNMA and FHLMC.  F-20




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  December 31, 2008Less Than 12 Months


12 Months or More


TotalFair


Unrealized


Fair


Unrealized


Fair


UnrealizedValue


Losses


Value


Losses


Value


Losses(In thousands)Securities
    available-for-sale:Obligations of states and political subdivisions

$
34,293


$
(886
)

$



$



$
34,293


$
(886
)Mortgage-backed securities:U.S. government-sponsored entities(1)


60,117



(198
)


39,778



(1,078
)


99,895



(1,276
)Equity securities of U.S. government-sponsored entities(2)


899



(1,819
)










899



(1,819
)Corporate and other debt securities


3,746



(287
)


11,495



(3,648
)


15,241



(3,935
)Total securities
    available-for-sale


99,055



(3,190
)


51,273



(4,726
)


150,328



(7,916
)Securities
    held-to-maturity:Obligations of states and political subdivisions


250















250



Mortgage-backed securities:U.S. government-sponsored entities(1)










20,521



(30
)


20,521



(30
)Total securities
    held-to-maturity


250







20,521



(30
)


20,771



(30
)Total temporarily impaired securities

$
99,305


$
(3,190
)

$
71,794


$
(4,756
)

$
171,099


$
(7,946
)     (1)
    
    Includes obligations of GNMA.(2)
    
    Includes issues from FNMA and FHLMC.  available-for-sale other-than-temporary
  other-than-temporary other-than-temporary
   F-21




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    AmortizedCost


Fair Value(In thousands)Securities
    available-for-saleDue in one year or less

$
310,954


$
310,947Due after one year through five years






Due after five years through ten years


4,077



3,700Due after ten years


10,843



7,021325,874



321,668Mortgage-backed securitiesU.S. government agencies  residential


259,878



256,275U.S. government-sponsored entities  residential


1,271



1,259Total debt securities


261,149



257,534Equity securities of U.S. government-sponsored entities


2,749



2,272Total securities
    available-for-sale

$
589,772


$
581,474Total securities
    held-to-maturity

$



$
   available-for-sale
  Year Ended December 31,2009


2008


2007(In thousands)Proceeds from sales

$
593,097


$
108,770


$
189,495Gross realized gains

$
6,499


$
325


$
893Gross realized losses


(1,818
)


(17,111
)


(831
)Net gains (losses) on securities transactions

$
4,681


$
(16,786
)

$
62   held-to-maturity
  Year Ended December 31,2009


2008


2007(In thousands)Proceeds from sales

$
27,856


$
4,262


$
2,039Gross realized gains

$
134


$
182


$
Gross realized losses


(17
)


(31
)


(30
)Net gains (losses) on securities transactions

$
117


$
151


$
(30
)   held-to-maturity held-to-maturity
 F-22




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 8 
    Loans
    December 31,2009


2008% of Gross





% of GrossAmount


Loans


Amount


Loans(Dollars in thousands)Commercial

$
972,090



41.9
%

$
1,090,078



43.3
%Construction


293,215



12.6



366,178



14.6Commercial real estate


725,814



31.3



729,729



29.1Home equity


219,183



9.5



194,673



7.8Other consumer


5,454



0.2



6,332



0.3Residential mortgage


105,147



4.5



123,161



4.9Total loans, gross


2,320,903



100.0
%


2,510,151



100.0
%Net deferred fees


(584
)






(392
)Total loans, net

$
2,320,319






$
2,509,759     Note 9 
    Related Party Transactions
    (In thousands)Balance at December 31, 2008

$
47,375New loans


11,328Repayments


(99
)Balances of former related parties(1)


(58,530
)Balance at December 31, 2009

$
74     (1)
    
    Represents loan balances of individuals and their related
    interests that were no longer related parties at
    December 31, 2009. F-23




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 10 
    Allowance for Loan Losses
    Year Ended December 31,2009


2008


2007(In thousands)Balance at beginning of year

$
44,432


$
26,748


$
23,229Addition resulting from acquisition










2,767Provision for loan losses


167,700



71,765



4,891Loans charged off


(85,602
)


(55,849
)


(5,975
)Recoveries on loans previously charged off


2,270



1,768



1,836Net loans charged off


(83,332
)


(54,081
)


(4,139
)Balance at end of year

$
128,800


$
44,432


$
26,748     Year Ended December 31,2009


2008


2007(In thousands)Provision for loan losses

$
167,700


$
71,765


$
4,891Provision for unfunded commitment losses


2,503



877



Provision for credit losses

$
170,203


$
72,642


$
4,891     Year Ended December 31,2009


2008


2007(In thousands)Impaired loans for which no allowance for loan losses is
    allocated

$
61,456


$
21,784


$
15,490Impaired loans with an allocation of the allowance for loan
    losses


200,979



43,180



43,652Total impaired loans

$
262,435


$
64,964


$
59,142Allowance for loan losses allocated to impaired loans

$
69,494


$
4,546


$
14,029   Year Ended December 31,2009

2008

2007(In thousands)Average impaired loans

$
134,928


$
57,058


$
54,956Interest income recognized on impaired loans on a cash basis


693



836



1,432      F-24




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Note 11 
    Premises and Equipment
    December 31,2009


2008(In thousands)Land and improvements

$
14,144


$
14,456Buildings and improvements


37,941



33,992Furniture and equipment


29,009



28,696Total cost


81,094



77,144Accumulated depreciation


(41,325
)


(38,831
)Premises and equipment, net

$
39,769


$
38,313     Note 12 
    Goodwill and Core Deposit Intangibles
    December 31, 2009

December 31, 2008Gross



Net

Gross



NetCarrying

Accumulated

Carrying

Carrying

Accumulated

CarryingAmount

Amortization

Amount

Amount

Amortization

AmountAmortizing intangible assets:Core deposit intangibles

$
21,091


$
(8,700
)

$
12,391


$
21,091


$
(6,408
)

$
14,683     2010





$
2,2222011






1,9182012






1,8032013






1,6962014






1,626Thereafter






3,126  F-25




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      2009


2008Core Deposit





Core DepositGoodwill


Intangibles


Goodwill


IntangiblesBalance before impairment losses

$
158,862


$
14,683


$
160,407


$
17,044Accumulated impairment losses


(80,000
)










Balance at beginning of year


78,862



14,683



160,407



17,044Impairment


(14,000
)






(80,000
)


Amortization






(2,292
)






(2,361
)Purchase price adjustment(1)










(1,545
)


Balance before impairment losses


158,862



12,391



158,862



14,683Accumulated impairment losses


(94,000
)






(80,000
)


Balance at end of year

$
64,862


$
12,391


$
78,862


$
14,683     (1)
    
    Goodwill was reduced in the second quarter of 2008 by the
    remaining fair value adjustment of a loan accounted for under
    ASC
    310-30-05
    for which full contractual payment was received. Goodwill was
    also adjusted in the third quarter of 2008 for the final
    purchase price allocation for the Northwest Suburban acquisition.      Note 13 
    Time Deposits
   F-26




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (In thousands)2010

$
1,478,0262011


196,0682012


21,5732013


1,3392014


3,940Thereafter


$
1,700,946     Note 14 
    Securities
    Sold Under Agreements to Repurchase    2009

2008(In thousands)Outstanding at end of year

$
297,650


$
297,650Weighted average interest rate at year end


4.29
%


4.29
%Maximum amount outstanding as of any month end

$
323,033


$
394,764Average amount outstanding


299,611



311,346Approximate weighted average rate during the year


4.33
%


4.26
%     CollateralObligations of U.S. Treasury andU.S. Government AgencyMortgage-BackedSecuritiesRepurchase

Weighted Average

AmortizedOriginal Term

Liability

Interest Rate

Cost

Fair Value(In thousands)Over 3 years

$
297,650



4.29
%

$
362,207


$
359,414    F-27




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 15 
    Advances
    from the Federal Home Loan Bank    December 31, 2009WeightedAverageRate


Amount(In thousands)Advances from the Federal Home Loan Bank due2010



%

$
2011






2012






2013






2014






Thereafter


3.53



340,000Total


3.53
%

$
340,000     Note 16 
    Junior
    Subordinated Debentures     F-28




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    InitialMandatory

OptionalDecember 31,




Redemption

RedemptionIssuer

Issue Date

2009


2008


Rate

Date

Date(1)(In thousands)MBHI Capital Trust III

December 19, 2003

$
9,279


$
9,279


LIBOR+3.00%

December 30, 2033

December 30, 2008MBHI Capital Trust IV

December 19, 2003


10,310



10,310


LIBOR+2.85%

January 23, 2034

January 23, 2009MBHI Capital Trust V

June 7, 2005


20,619



20,619


LIBOR+1.77%

June 15, 2035

June 15, 2010Royal Capital Trust I

April 30, 2004


10,310



10,310


LIBOR+2.75%

July 23, 2034

July 23, 2009Northwest Suburban Capital Trust I

May 18, 2004


10,310



10,310


LIBOR+2.70%

July 23, 2034

July 23, 2009Unamortized purchase accounting adjustment








(37
)Total



$
60,828


$
60,791     (1)
    
    Redeemable at option of the Company as of the initial optional
    redemption date provided and quarterly thereafter.  Note 17 
    Credit
    Agreements           F-29




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
         Going Concern
  Note 18 
    Preferred Stock and Warrant
  Series T
    and Warrant
      Series T.
       F-30




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Warrant. 10-year
    Exchange Transaction with the
    U.S. Treasury.
  Series A
       F-31




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Note 19 
    Capital Requirements
           Going Concern
 F-32




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31,


December 31,2009


2008(In thousands)Risk-weighted assets

$
2,316,607


$
2,878,087Average assets for leverage capital purposes


3,467,651



3,464,020Capital components:Stockholders equity

$
56,476


$
305,834Plus: Guaranteed trust preferred securities


21,432



59,000Less: Core deposit and other intangibles, net


(12,391
)


(14,683
)Less: Goodwill


(64,862
)


(78,862
)Less: Disallowed deferred tax assets


(3,438
)


(32,748
)Plus: Prior service cost and decrease in projected benefit
    obligation


1



Plus: Unrealized losses on securities, net of tax


8,297



1,449Less: Unrealized losses on equity securities, net of tax


(478
)


(1,117
)Tier 1 capital


5,037



238,873Allowance for loan losses


128,800



44,432Reserve for unfunded commitments


2,217



1,068Disallowed allowance for loan losses


(100,799
)


(9,406
)Remaining trust preferred securities


37,568



Qualifying subordinated debt


2,519



15,000Tier 2 capital

$
70,305


$
51,094Allowable Tier 2 Capital

$
5,037


$
51,094Total risk-based capital

$
10,074


$
289,967     Minimum RequiredFor Capital

To Be AdequatelyActual

Adequacy Purposes

Capitalized Under Prompt Corrective Action ProvisionsAmount

Ratio

Amount

Ratio

Amount

Ratio(Dollars in thousands)As of December 31, 2009Total Capital (to risk-weighted assets)Company

$
10,074



0.4
%

$
185,329



8.0
%

$
185,329



8.0
%Bank


148,062



6.4



184,899



8.0



184,899



8.0Tier 1 Capital (to risk-weighted assets)Company


5,037



0.2



92,664



4.0



92,664



4.0Bank


117,911



5.1



92,450



4.0



92,450



4.0Tier 1 Capital (to average assets for leverage capital
    purposes)Company


5,037



0.1



138,706



4.0



138,706



4.0Bank


117,911



3.4



138,482



4.0



138,482



4.0   F-33




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Minimum RequiredFor Capital


To Be WellActual


Adequacy Purposes


Capitalized Under Prompt Corrective Action ProvisionsAmount


Ratio


Amount


Ratio


Amount


Ratio(Dollars in thousands)As of December 31, 2008Total Capital (to risk-weighted assets)Company

$
289,967



10.1
%

$
230,247



8.0
%


n/a



n/aBank


301,993



10.5



229,244



8.0


$
286,555



10.0
%Tier 1 Capital (to risk-weighted assets)Company


238,873



8.3



115,123



4.0



n/a



n/aBank


236,054



8.2



114,622



4.0



171,933



6.0Tier 1 Capital (to average assets for leverage capital
    purposes)Company


238,873



6.9



138,561



4.0



n/a



n/aBank


236,054



6.8



138,176



4.0



172,720



5.0   Note 20 
    Fair Value
    
    Level 1: Quoted prices (unadjusted) for identical
    assets or liabilities in active markets that the entity has the
    ability to access as of the measurement date.
    Level 2: Significant other observable inputs other
    than Level 1 prices, such as quoted prices for similar
    assets or liabilities, quoted prices in markets that are not
    active, and other inputs that are observable or can be
    corroborated by observable market data.
    Level 3: Significant unobservable inputs that
    reflect a companys own assumptions about the assumptions
    that market participants would use in pricing an asset or
    liability.  available-for-sale available-for-sale
 F-34




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  available-for-sale
  Quoted Prices or


Significant


SignificantIdentical Assets in


Other Observable


UnobservableTotal


Active Markets


Inputs


InputsFair Value


(Level 1)


(Level 2)


(Level 3)(In thousands)Assets at December 31, 2009:Obligations of the U.S. Treasury

$
310,947


$



$
310,947


$
Mortgage-backed securities:U.S. government agencies  residential(1)


256,275







256,275



U.S. government-sponsored entities  residential(2)


1,259







1,259



Equity securities of U.S. government-sponsored entities(3)


2,272



2,272







Corporate and other debt securities


10,721







3,700



7,021Available-for-sale
    securities

$
581,474


$
2,272


$
572,181


$
7,021Assets at December 31, 2008:Obligations of the U.S. Treasury and of U.S.
    government-sponsored entities(4)

$
265,435


$



$
265,435


$
Obligations of states and political subdivisions


56,664







56,664



Mortgage-backed securities(1)(4)


283,679







283,679



Equity securities of U.S. government-sponsored entities(3)


930



930







Corporate and other debt securities


15,241







6,808



8,433Available-for-sale
    securities

$
621,949


$
930


$
612,586


$
8,433     (1)
    
    Includes obligations of GNMA.(2)
    
    Includes obligations of FHLMC.(3)
    
    Includes issues from FNMA and FHLMC.(4)
    
    Includes obligations of FHLMC and FNMA. F-35




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   available-for-sale
  Year Ended December 31,2009


2008(In thousands)Beginning balance

$
8,433


$
10,479Paydowns received


(228
)


(35
)Total gains or losses (realized/unrealized):Included in earnings






Included in other comprehensive income


(1,184
)


(2,011
)Ending balance

$
7,021


$
8,433   310-10-35).
     F-36




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Quoted Prices or

Significant

SignificantIdentical Assets in

Other Observable

UnobservableTotal

Active Markets

Inputs

InputsFair Value

(Level 1)

(Level 2)

(Level 3)(In thousands)Assets at December 31, 2009:Assets:Impaired loans

$
131,485


$



$



$
131,485Goodwill


64,862











64,862Assets at December 31, 2008:Assets:Impaired loans

$
37,098


$



$



$
37,098Goodwill


78,862











78,862     December 31,2009


2008Carrying


Estimated


Carrying


EstimatedAmount


Fair Value


Amount


Fair Value(In thousands)Financial assetsCash and cash equivalents

$
442,110


$
442,110


$
63,065


$
63,065Securities
    available-for-sale


581,474



581,474



621,949



621,949Securities
    held-to-maturity










30,267



30,387Federal Reserve Bank and Federal Home Loan Bank stock


27,652



27,652



31,698



31,698Loans, net of allowance for loan losses


2,191,519



2,137,263



2,465,327



2,485,011Accrued interest receivable


8,584



8,584



13,302



13,302Financial liabilitiesDepositsNoninterest-bearing


349,796



349,796



334,495



334,495Interest-bearing


2,220,315



2,231,823



2,078,296



2,008,100Revolving note payable


8,600



3,947



8,600



8,600Securities sold under agreements to repurchase


297,650



329,298



297,650



369,376Advances from Federal Home Loan Bank


340,000



366,277



380,000



410,992Junior subordinated debentures


60,828



19,064



60,791



56,572Subordinated debt


15,000



6,883



15,000



15,000Term note payable


55,000



25,238



55,000



55,000Accrued interest payable


7,798



7,798



8,553



8,553      F-37




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      60-89 days
  60-89 days
     F-38




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 21 
    Off-Balance-Sheet Risk and Concentrations of Credit
    Risk
    Amount of Commitment Expiration Per PeriodWithin








After1 Year


1-3 Years


4-5 Years


5 Years


Total(In thousands)Lines of credit:Commercial real estate

$
64,539


$
3,444


$
4,268


$
4,137


$
76,388Consumer real estate


26,061



24,886



29,165



26,486



106,598Consumer














1,778



1,778Commercial


150,735



2,575



2,311



4,738



160,359Letters of credit


36,686



3,847



2,483







43,016Commitments to extend credit


7,158















7,158Total commitments

$
285,179


$
34,752


$
38,227


$
37,139


$
395,297          F-39




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 22 
    Leases
    (In thousands)2010

$
1,5192011


1,3542012


1,2932013


1,3312014


1,352Thereafter


13,850$
20,699     Note 23 
    Stock Compensation and Restricted Stock Awards
     F-40




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Weighted Average


Weighted AverageNumber of


Exercise Price


Grant-Date FairOptions


Per Share


Value Per ShareOutstanding at December 31, 2006


517,048


$
13.90


$
4.58Granted










Exercised


(36,443
)


10.38



3.19Forfeited


(1,453
)


15.21



5.57Outstanding at December 31, 2007


479,152



14.03



4.63Granted










Exercised


(16,500
)


10.61



3.01Forfeited


(83,281
)


13.56



4.17Outstanding at December 31, 2008


379,371



14.28



4.80Granted


288,693



1.15



0.66Exercised










Forfeited


(127,438
)


11.13



3.51Outstanding at December 31, 2009


540,626



8.02



2.89     Weighted AverageNumber of

Exercise PriceOptions

Per Share2007


451,652


$
13.702008


355,871



13.942009


261,413



14.26     OutstandingWeighted Average


ExercisableRemaining





Weighted AverageRange of Exercise Price

Number


Contractual Life


Number


Exercise Price$1.15-9.09


336,751



7.25



73,038


$
8.95$10.21-14.90


100,125



1.75



100,125



12.58$18.34-22.03


103,750



4.28



88,250



20.58Outstanding at year end


540,626



5.66



261,413



14.26      F-41




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2009Fair value per share

$
0.66Risk-free interest rate


2.78
%Expected option life


7.5 yearsExpected stock price volatility


52.54
%         Number of


Weighted AverageRestricted


Grant-Date Fair ValueShares


Per ShareOutstanding at December 31, 2006


480,629


$
21.59Granted


59,700



14.99Vested


(84,709
)


20.85Forfeited


(7,226
)


20.77Outstanding at December 31, 2007


448,394



20.87Granted


278,324



9.45Vested


(42,996
)


17.77Forfeited


(73,821
)


16.40Outstanding at December 31, 2008


609,901



16.42Granted


334,882



1.22Vested


(48,896
)


15.67Forfeited


(216,239
)


17.45Outstanding at December 31, 2009


679,648



8.65    F-42




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 24 
    Other Employee Benefit Plans
          (In thousands)Beginning balance

$
6,403Service cost


824Interest cost


356Benefits paid


(128
)Actuarial gain


(1,000
)Ending balance

$
6,455     (In thousands)Service cost

$
824Interest cost


356Amortization of prior service cost


95Net periodic benefit cost

$
1,275     Discount rateNet periodic pension cost


5.75
%Benefit obligation


5.78Rate of compensation increase


4.00    F-43




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      (In thousands)2010

$
2522011


3232012


4772013


5352014


730Years 2015  2019


4,325     Note 25 
    Income Taxes
    Year Ended December 31,2009


2008


2007(In thousands)CurrentFederal

$
3,923


$
(11,316
)

$
2,923State


2,989







DeferredFederal


39,714



(36,756
)


1,903State


8,970



(7,001
)


(1,580
)Total provision (benefit) for income taxes

$
55,596


$
(55,073
)

$
3,246  F-44




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year Ended December 31,2009


2008


2007(Dollars in thousands)Income taxes computed at the statutory rate

$
(65,491
)


35.0
%

$
(74,671
)


35.0
%

$
7,638



35.0
%Tax-exempt interest income on securities and loans


(455
)


0.2



(802
)


0.4



(771
)


(3.5
)General business credits


(566
)


0.3



(661
)


0.3



(643
)


(2.9
)State income taxes, net of federal tax benefit due to state
    operating loss


(6,699
)


3.6



(4,419
)


2.1



(1,027
)


(4.7
)Life insurance cash surrender value increase, net of premiums


(466
)


0.2



(1,195
)


0.6



(1,072
)


(4.9
)Liquidation of bank-owned life insurance


6,924



(3.7
)














Dividends received deduction










(642
)


0.3



(1,214
)


(5.6
)Goodwill impairment


4,900



(2.6
)


27,733



(13.0
)






Valuation allowance


116,286



(62.1
)














Annuity proceeds


















267



1.2Nondeductible costs and other, net


1,163



(0.6
)


(416
)


0.1



68



0.3Total provision (benefit) for income taxes

$
55,596



(29.7
)%

$
(55,073
)


25.8
%

$
3,246



14.9
%    F-45




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31,2009


2008(In thousands)Gross deferred tax assetsAllowance for loan losses

$
51,026


$
17,543Net operating loss carryforward


40,934



13,446Impairment charges


24,364



25,816Deferred tax credits


5,559



1,351Deferred compensation


4,720



4,675Unrealized loss on securities
    available-for-sale


3,276



911Valuation loss on foreclosed properties


1,015



Other


396



433Less: Valuation Allowance


(119,797
)


Total gross deferred tax assets


11,493



64,175Gross deferred tax liabilitiesAmortizing intangible assets


(4,153
)


(4,729
)FHLB stock dividends


(1,528
)


(1,526
)Depreciation


(973
)


(612
)Loss from partnerships


(554
)


(812
)Other






Total gross deferred tax liabilities


(7,208
)


(7,679
)Net deferred tax asset

$
4,285


$
56,496      F-46




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##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    UnrecognizedIncomeTax Benefits2009


2008(In thousands)Balance, at beginning of year

$
3,261


$
1,122Additions based on tax positions taken in current year






304Additions based on tax positions taken in prior year


2



1,835Reductions due to settlements


(2,166
)


Balance, at end of year

$
1,097


$
3,261          F-47




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##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 26 
    (Loss)/Earnings Per Share
  Year Ended December 31,2009


2008


2007(In thousands, except per share data)Net (loss) income

$
(242,713
)

$
(158,273
)

$
18,577Less:Series A preferred stock dividends


835



3,342



204Series T preferred stock dividends(1)


4,300



318



Series T discount accretion


922



68



Total preferred stock dividends and premium accretion


6,057



3,728



204Income allocated to participating securities(2)










325Net (loss) income available to common stockholders

$
(248,770
)

$
(162,001
)

$
18,048BasicWeighted average common shares outstanding


27,982



27,854



25,426Basic (loss) earnings per share(2)

$
(8.89
)

$
(5.82
)

$
0.71DilutedWeighted average common shares outstanding


27,982



27,854



25,426Dilutive effect of stock options(3)










98Dilutive effect of restricted stock(3)










56Dilutive effect of warrant(3)










Diluted average common shares


27,982



27,854



25,580Diluted (loss) earnings per share(2)

$
(8.89
)

$
(5.82
)

$
0.71     (1)
    
    Includes $824 in dividends declared and paid in first quarter of
    2009 and $3.8 million in cumulative dividends not declared
    or paid during 2009.(2)
    
    No adjustment for unvested restricted shares was included in the
    computation of income available to common stockholders for any
    period there was a loss. Prior periods with earnings were
    restated as required by the authoritative guidance for
    determining whether instruments granted in share-based payment
    transactions are participating securities (ASC 260), which was
    effective on January 1, 2009 and required retrospective
    application, to allocate earnings available to common
    stockholders to restricted shares of common stock that are
    considered participating securities.(3)
    
    No dilutive shares from stock options, restricted stock, or
    warrant were included in the computation of diluted earnings per
    share for any period there was a loss.   F-48




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##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Note 27 
    Other Comprehensive Income
    Year Ended December 31,2009


2008


2007(In thousands)Unrealized holding losses on securities
    available-for-sale

$
(1,996
)

$
(61,540
)

$
(12,221
)Reclassification adjustment for (gains) losses recognized in
    income


(4,681
)


16,747



(32
)Reclassification adjustment for impairment losses recognized in
    income


740



65,387



Accretion of unrealized gains on securities transferred from
    available-for-sale
    to
    held-to-maturity






(295
)


(7
)Net unrealized (losses) gains


(5,937
)


20,299



(12,260
)Tax effect


(911
)


(7,831
)


4,616Net (decrease) increase in fair value of securities classified
    as
    available-for-sale,
    net of income taxes and reclassification adjustments


(6,848
)


12,468



(7,644
)Prior service cost related to benefit obligation






(776
)


Amortization of prior service cost


95



71



Tax effect


(272
)


272



Prior service cost, net of tax adjustment


(177
)


(433
)


Actuarial gain (loss) related to the projected benefit obligation


1,000



(391
)


Tax effect


(151
)


151



Actuarial gain (loss) related to the projected benefit
    obligation, net of tax adjustment


849



(240
)


Other comprehensive (loss) income

$
(6,176
)

$
11,795


$
(7,644
)  F-49




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##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 28 
    Parent Company Financial Statements
    CONDENSED
    BALANCE SHEETS
  December 31,2009


2008(In thousands)ASSETSCash and cash equivalents

$
3,435


$
43,469Investment in subsidiaries


189,313



358,480Loan to subsidiary






30,000Other assets


6,719



15,820Total assets

$
199,467


$
447,769LIABILITIES AND STOCKHOLDERS EQUITYRevolving note payable

$
8,600


$
8,600Subordinated debt


15,000



15,000Term note payable


55,000



55,000Junior subordinated debentures


60,828



60,791Other liabilities


3,563



2,544Total liabilities


142,991



141,935Stockholders equity


56,476



305,834Total liabilities and stockholders equity

$
199,467


$
447,769   CONDENSED
    STATEMENTS OF OPERATIONS
  Year Ended December 31,2009


2008


2007(In thousands)Operating incomeDividends from subsidiaries

$
68


$
22,311


$
4,032Interest from subsidiaries


2,068



16



Fees from subsidiaries


2,636



1,103



1,103Noninterest income


425



(51
)


(162
)Interest expense


(5,223
)


(7,519
)


(6,645
)Noninterest expense


(5,165
)


(8,037
)


(3,330
)(Loss) income before income taxes and equity in undistributed
    (loss) income of subsidiaries


(5,191
)


7,823



(5,002
)Income tax (expense) benefit


(6,246
)


7,599



3,377Equity in undistributed (loss) income of subsidiaries


(231,276
)


(173,695
)


20,202Net (loss) income

$
(242,713
)

$
(158,273
)

$
18,577  F-50




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  CONDENSED
    STATEMENTS OF CASH FLOWS
  Year Ended December 31,2009


2008


2007(In thousands)Cash flows from operating activitiesNet (loss) income

$
(242,713
)

$
(158,273
)

$
18,577Adjustments to reconcile net (loss) income to net cash (used in)
    provided by operating activitiesEquity in undistributed loss (income) of subsidiaries


231,276



173,695



(20,202
)Depreciation


26



43



70Amortization of stock-based compensation


244



899



22Amortization of intangibles


37



67



67Change in other assets


9,020



(5,794
)


2,971Change in other liabilities


1,124



1,039



(3,766
)Net cash (used in) provided by operating activities


(986
)


11,676



(2,261
)Cash flows from investing activitiesCash paid, net of cash and cash equivalents in acquisition










(67,557
)Investment in subsidiaries


(67,500
)


(17,000
)


(20,000
)Loan advances to subsidiary


(21,000
)


(30,000
)


Repayment of advances to subsidiary


51,000







Property and equipment expenditures


(1
)






(75
)Net cash used in investing activities


(37,501
)


(47,000
)


(87,632
)Cash flows from financing activitiesPayments of junior subordinated debentures










(15,000
)Proceeds from revolving note payable






24,600



75,000Proceeds from term note payable










17,500Repayments on revolving note payable






(18,500
)


(15,000
)Repayments on term note payable










(5,000
)Cash common dividends paid






(11,076
)


(13,003
)Cash preferred dividends paid


(1,660
)


(3,342
)


(204
)Issuance of common stock


130



35



Issuance of preferred stock and warrant






84,784



41,441Repurchase of common stock


(17
)






(9,392
)Proceeds from issuance of common and treasury stock under stock
    option plan






174



378Net cash (used in) provided by financing activities


(1,547
)


76,675



(76,720
)(Decrease) increase in cash and cash equivalents


(40,034
)


41,351



(13,173
)Cash and cash equivalents at beginning of year


43,469



2,118



15,291Cash and cash equivalents at end of year

$
3,435


$
43,469


$
2,118  F-51




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##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 29 
    Quarterly Results of Operations (Unaudited)
  Three Months Ended,


Year Ended,2009

March 31


June 30


September 30


December 31


December 31(In thousands, except per share data)Interest income

$
42,266


$
40,662


$
35,135


$
32,445


$
150,508Interest expense


21,164



19,607



19,193



17,673



77,637Net interest income


21,102



21,055



15,942



14,772



72,871Provision for credit losses


13,253



20,750



37,450



98,750



170,203Noninterest income


3,343



7,295



3,657



2,835



17,130Noninterest expense


21,508



24,420



22,450



38,537



106,915Loss before income taxes


(10,316
)


(16,820
)


(40,301
)


(119,680
)


(187,117
)(Benefit) provision for income taxes


(4,996
)


59,647



966



(21
)


55,596Net loss


(5,320
)


(76,467
)


(41,267
)


(119,659
)


(242,713
)Preferred stock dividends and premium accretion


2,123



1,290



1,289



1,355



6,057Income allocated to participating securities(a)


















Net loss available to common stockholders

$
(7,443
)

$
(77,757
)

$
(42,556
)

$
(121,014
)

$
(248,770
)Loss per common share(b)Basic

$
(0.27
)

$
(2.78
)

$
(1.52
)

$
(4.30
)

$
(8.89
)Diluted


(0.27
)


(2.78
)


(1.52
)


(4.30
)


(8.89
)   Three Months Ended,


Year Ended,2008

March 31


June 30


September 30


December 31


December 31(In thousands, except per share data)Interest income

$
50,795


$
47,244


$
45,888


$
43,734


$
187,661Interest expense


28,579



24,479



23,735



23,902



100,695Net interest income


22,216



22,765



22,153



19,832



86,966Provision for credit losses


5,752



4,415



42,200



20,275



72,642Noninterest income (loss)


1,790



4,394



(60,512
)


3,732



(50,596
)Noninterest expense


28,257



20,368



103,046



25,403



177,074(Loss) income before income taxes


(10,003
)


2,376



(183,605
)


(22,114
)


(213,346
)Benefit for income taxes


(4,587
)


(52
)


(23,891
)


(26,543
)


(55,073
)Net (loss) income


(5,416
)


2,428



(159,714
)


4,429



(158,273
)Preferred stock dividends and premium accretion


835



836



835



1,222



3,728Income allocated to participating securities(a)






35







69



Net (loss) income available to common stockholders

$
(6,251
)

$
1,557


$
(160,549
)

$
3,138


$
(162,001
)(Loss) earnings per common share(b)Basic

$
(0.22
)

$
0.06


$
(5.76
)

$
0.11


$
(5.82
)Diluted


(0.22
)


0.06



(5.76
)


0.11



(5.82
)  F-52




---



##### Table of Contents



MIDWEST
    BANC HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (a)
    
    No adjustment for unvested restricted shares was included in the
    computation of income available to common stockholders for any
    period there was a loss. Prior periods with earnings were
    restated as required by the authoritative guidance for
    determining whether instruments granted in share-based payment
    transactions are participating securities (ASC 260), which was
    effective on January 1, 2009 and required retrospective
    application, to allocate earnings available to common
    stockholders to restricted shares of common stock that are
    considered participating securities.(b)
    
    Earnings per share for the quarters and fiscal years have been
    calculated separately. Accordingly, the total of the quarterly
    amounts may not equal the annual amounts because of differences
    in the average common shares outstanding during each period.      other-than-temporary
    Note 30 
    Subsequent Events
  Form 10-K,
 F-53




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##### Table of Contents



Report of
    Independent Registered Public Accounting Firm    Internal Control  Integrated Framework
             F-54